NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Amounts)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
– Cabela’s Incorporated is a retailer of hunting, fishing, and outdoor gear, offering products through its retail stores, websites in the United States and Canada, and regular and specialty catalog mailings. Cabela’s Incorporated operates
85
retail stores,
74
located in
36
states and
11
located in six Canadian provinces. World’s Foremost Bank (“WFB,” “Financial Services segment,” or “Cabela’s CLUB”), a Nebraska banking corporation and a wholly-owned bank subsidiary of Cabela’s Incorporated, is a limited purpose bank formed under the Competitive Equality Banking Act of 1987. The lending activities of WFB are limited to credit card lending and its deposit issuance is limited to time deposits of at least one hundred thousand dollars.
Principles of Consolidation
– The consolidated financial statements include the accounts of Cabela’s Incorporated and its wholly-owned subsidiaries (“Cabela’s,” “Company,” “we,” or “our”). All intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications were made to the previously reported 2015 consolidated financial statements to conform to the 2016 presentation. WFB is the primary beneficiary of the Cabela’s Master Credit Card Trust and related entities (collectively referred to as the “Trust”) under the guidance of Accounting Standards Codification (“ASC”) Topics 810,
Consolidations
, and 860,
Transfers and Servicing.
Accordingly, the Trust was consolidated for all reporting periods of Cabela’s in this report. As the servicer and the holder of retained interests in the Trust, WFB has the powers to direct the activities that most significantly impact the Trust’s economic performance and the right to receive significant benefits or obligations to absorb significant losses of the Trust. The credit card loans of the Trust are recorded as restricted credit card loans and the liabilities of the Trust are recorded as secured obligations.
Reporting Year –
The Company follows a 52/53 week fiscal year-end cycle. Unless otherwise stated, the fiscal years referred to in the notes to these consolidated financial statements are the 52 weeks ended
December 31, 2016
(“
2016
” or “
year ended 2016
”), the 53 weeks ended
January 2, 2016
(“
2015
” or “
year ended 2015
”), and the 52 weeks ended
December 27, 2014
(“
2014
” or “
year ended 2014
”). WFB follows a calendar fiscal period so each fiscal year ends on December 31st. The effect of the extra week in
2015
on total revenue was an increase of
$84 million
.
Use of Estimates
– The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Segment Reporting
– Effective the beginning of fiscal year 2016, the Company realigned its organizational structure and updated its reportable operating segments. The Company now accounts for its operations as two operating segments: Merchandising and Financial Services. For more information on this change in segments see Note 23 “Segment Reporting” of the Notes to Consolidated Financial Statements.
Revenue Recognition
– Revenue is recognized for retail store sales at the time of the sale in the store and for Internet and catalog sales when the merchandise is delivered to the customer. The Company recognizes a reserve for estimated product returns based on its historical returns experience. Shipping fees charged to customers are included in merchandise sales and shipping costs are included in merchandise costs.
Revenue from the sale of gift certificates and gift cards (“gift instruments”) is recognized in revenue when the gift instruments are redeemed for merchandise or services. The Company records gift instrument breakage as revenue when the probability of redemption is remote. The Company recognizes breakage on gift instruments four years after issuance based on historical redemption rates. Total gift instrument breakage was
$11 million
,
$10 million
, and
$9 million
for
2016
,
2015
, and
2014
, respectively. Cabela’s gift instrument liability at the end of
2016
and
2015
was
$195 million
and
$184 million
, respectively.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
The dollar amount of related points associated with the Company’s loyalty rewards programs for Cabela’s CLUB issued credit cards are accrued as earned by the cardholder, principally from transactions with unrelated parties, and recorded as a reduction in Financial Services segment revenue. When these points are accrued as earned by the cardholder, the Company estimates the cost of such points with the difference between the value of the unredeemed points earned and the estimated cost of the points included in other revenue (recognized in the Merchandising segment). The net amount related to points in other revenue totaled
$7 million
,
$8 million
, and
$8 million
for
2016
,
2015
, and
2014
, respectively. Redemption of these points was recognized as revenue in merchandise sales at fair value, along with the related cost of sales. Merchandise sales recognized from the redemption of points was
$233 million
,
$219 million
, and
$201 million
for
2016
,
2015
, and
2014
, respectively. Costs incurred under our loyalty rewards programs recognized as a reduction in Financial Services segment revenue was
$233 million
,
$222 million
, and
$210 million
for
2016
,
2015
, and
2014
, respectively.
Financial Services revenue includes credit card interest and fees relating to late payments and cash advance transactions. Interest and fees are accrued in accordance with the terms of the applicable cardholder agreements on credit card loans until the date of charge-off unless placed on non-accrual and fixed payment plans. Interchange income is earned when a charge is made to a customer’s account.
Cost of Revenue and Selling, Distribution, and Administrative Expenses
– The Company’s cost of revenue primarily consists of merchandise acquisition costs, including freight-in costs, as well as shipping costs. Selling, distribution, and administrative (“SD&A”) expenses consist of the costs associated with selling, marketing, warehousing, retail store replenishment, and other operating expense activities. All depreciation and amortization expense is associated with selling, distribution, and administrative activities, and accordingly, is included in this category in the consolidated statements of operations.
Cash and Cash Equivalents
– Cash equivalents include credit card and debit card receivables from other banks, which settle within one to four business days. Receivables from other banks totaled
$23 million
and
$24 million
at the end of
2016
and
2015
, respectively. Unpresented checks, net of available cash bank balances, are classified as current liabilities. Cash and cash equivalents of the Financial Services segment were
$150 million
and
$157 million
at the end of
2016
and
2015
, respectively. Due to regulatory restrictions on WFB, the Company cannot use WFB’s cash for non-banking operations.
Credit Card Loans
– The Financial Services segment grants individual credit card loans to its customers and is diversified in its lending with borrowers throughout the United States. Credit card loans are reported at their principal amounts outstanding plus deferred credit card origination costs, less the allowance for loan losses. As part of collection efforts, a credit card loan may be closed and placed on non-accrual or restructured in a fixed payment plan prior to charge-off. The fixed payment plans require payment of the loan within 60 months and consist of a lower interest rate, reduced minimum payment, and elimination of fees. Loans on fixed payment plans include loans in which the customer has engaged a consumer credit counseling agency to assist them in managing their debt. Customers who miss two consecutive payments once placed on a payment plan or non-accrual will resume accruing interest at the rate they had accrued at before they were placed on a plan. Payments received on non-accrual loans are applied to principal. The Financial Services segment does not record any liabilities for off-balance sheet risk of unfunded commitments through the origination of unsecured credit card loans, as it has the right to refuse or cancel these available lines of credit at any time.
The direct credit card account origination costs associated with costs of successful credit card originations incurred in transactions with independent third parties, and certain other costs incurred in connection with credit card approvals, are deferred credit card origination costs included in credit card loans and are amortized on a straight-line basis over 12 months. Other account solicitation costs, including printing, list processing, and postage are expensed as solicitation occurs.
Allowance for Loan Losses
– The allowance for loan losses represents management’s estimate of probable losses inherent in the credit card loan portfolio. The allowance for loan losses is established through a charge to the provision for loan losses and is evaluated by management for adequacy. Loans on a payment plan or non-accrual are segmented from the rest of the credit card loan portfolio into a restructured credit card loans segment before establishing an allowance for loan losses as these loans have a higher probability of loss.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
Management estimates losses inherent in the credit card loans segment based on models which track historical loss experience on delinquent accounts, bankruptcies, death, and charge-offs, net of estimated recoveries. The Financial Services segment uses a migration analysis and historical bankruptcy and death rates to estimate the likelihood that a credit card loan in the credit card loan segment will progress through the various stages of delinquency and to charge-off. This analysis estimates the gross amount of principal that will be charged off over the next 12 months, net of recoveries.
Management estimates losses from the restructured credit card loans segment based on a discounted cash flow model, which uses remaining balances and projected charge-offs, recoveries, and payments to calculate future cash flows. The allowance for loan losses is determined as the difference between the balance of the restructured credit card loans segment and the related discounted present value of the future cash flows.
In addition to these methods of measurement, management also considers other factors such as general economic and business conditions affecting key lending areas, credit concentration, changes in origination and portfolio management, and credit quality trends. Since the evaluation of the inherent loss with respect to these factors is subject to a high degree of uncertainty, the measurement of the overall allowance is subject to estimation risk, and the amount of actual losses can vary significantly from the estimated amounts.
Credit card loans that have been modified through a fixed payment plan or placed on non-accrual are considered impaired and are collectively evaluated for impairment. The Financial Services segment charges off credit card loans and restructured credit card loans on a daily basis after an account becomes at a minimum 130 days contractually delinquent. Accounts relating to cardholder bankruptcies, cardholder deaths, and fraudulent transactions are charged off earlier. The Financial Services segment recognizes charged-off cardholder fees and accrued interest receivable in interest and fee income that is included in Financial Services revenue.
Inventories
– Inventories are stated at the lower of average cost or market. All inventories are finished goods. The reserve for inventory shrinkage, estimated based on cycle and physical counts, was
$20 million
and
$11 million
at the end of
2016
and
2015
, respectively. The reserves for returns of damaged goods, obsolescence, and slow-moving items, estimated based upon historical experience, inventory aging, and specific identification, were
$12 million
and
$10 million
at the end of
2016
and
2015
, respectively.
Vendor Allowances
– Vendor allowances include price allowances, volume rebates, store opening costs reimbursements, marketing participation, and advertising reimbursements received from vendors under vendor contracts. Vendor merchandise allowances are recognized as a reduction of the costs of merchandise as sold. Vendor reimbursements of costs are recorded as a reduction to expense in the period the related cost is incurred based on actual costs incurred. Any cost reimbursements exceeding expenses incurred are recognized as a reduction of the cost of merchandise sold. Volume allowances may be estimated based on historical purchases and estimates of projected purchases.
Advertising
and Deferred Catalog Costs
– Advertising production costs are expensed as the advertising occurs except for catalog costs which are amortized over the expected period of benefit estimated at three to 12 months after mailing. Advertising expense, including direct marketing costs (website marketing paid search fees and amortization of catalog costs), was
$229 million
,
$235 million
, and
$236 million
for
2016
,
2015
, and
2014
, respectively. Advertising vendor reimbursements, netted in advertising expense, totaled
$1 million
,
$4 million
, and
$4 million
for
2016
,
2015
, and
2014
, respectively. Unamortized catalog costs totaled
$1 million
and
$2 million
at the end of
2016
and
2015
, respectively.
Store Pre-opening Expenses
– Non-capital costs associated with the opening of new stores are expensed as incurred. Retail store pre-opening costs totaled
$7 million
,
$23 million
, and
$24 million
for
2016
,
2015
, and
2014
, respectively.
Leases
– The Company leases certain retail locations, distribution centers, office space, equipment, and land. Assets held under capital lease are included in property and equipment. Operating lease rentals are expensed on a straight-line basis over the life of the lease. At the inception of a lease, the Company determines the lease term by assuming the exercise of those renewal options that are reasonably assured because of the significant economic penalty that exists for not exercising those options. The exercise of lease renewal options is at the Company’s sole discretion. The expected lease term is used to determine whether a lease is capital or operating and is used to calculate straight-line rent expense. Additionally, the depreciable life of buildings and leasehold improvements is limited by the expected lease term.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
Property and Equipment
– Property and equipment are stated at cost. Depreciation and amortization are provided over the estimated useful lives of the assets, including assets held under capital leases, on a straight-line basis. Leasehold improvements are amortized over the lease term or, if shorter, the useful lives of the improvements. Assets held under capital lease agreements are amortized using the straight-line method over the shorter of the estimated useful lives of the assets or the lease term. When property is fully depreciated, retired, or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the consolidated statements of income. The costs of major improvements that extend the useful life of an asset are capitalized. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Capitalized interest on projects during the construction period totaled
$3 million
,
$10 million
, and
$8 million
for
2016
,
2015
, and
2014
, respectively. Costs related to internally developed software are capitalized and amortized on a straight-line basis over their estimated useful lives.
Intangible Assets
– The net unamortized balance of intangible assets consists primarily of goodwill and is recorded in other assets. At the end of both
2016
and
2015
, goodwill and intangible assets totaled
$3 million
, net of accumulated amortization of
$3 million
and
$2 million
at the end of
2016
and
2015
, respectively. During the fourth quarter of
2016
,
2015
, and
2014
, we completed impairment analyses of our goodwill and other intangible assets. We did not recognize any impairments on intangible assets in
2016
,
2015
, or
2014
.
Other Property
– Other property primarily consists of unimproved land not used in our merchandising business and is recorded at the lower of cost or estimated fair value less estimated selling costs. Proceeds from the sale of other property are recognized in other revenue and the corresponding costs of other property sold are recognized in costs of other revenue. Other property with a carrying value of
$23 million
and
$31 million
at the end of
2016
and
2015
, respectively, was included in other assets in the consolidated balance sheets. We intend to sell our other property as soon as any such sale could be economically feasible, and we continue to monitor such property for impairment.
Government Economic Assistance
and Economic Development Bonds (“EDBs”)
– When we construct a new retail store or retail development, we may receive economic assistance from local governments to fund a portion or all of the Company’s associated construction costs which helps to improve the return on investment of our new retail stores. This assistance typically comes in the form of cash grants, land grants, the recapture of incremental sales, property, or other taxes, and/or proceeds from the sale of EDBs funded by the local government. The Company has historically purchased the majority of the bonds associated with its developments. EDBs are typically repaid through sales and/or property taxes generated by the retail store and/or within a designated development area. Cash and land grants are made available to fund land, retail store construction, and/or development infrastructure costs and are recognized as deferred grant income as a reduction to the costs, or recognized fair value in the case of land grants, of the associated property and equipment. Property and equipment was reduced by deferred grant income of
$301 million
and
$306 million
at the end of
2016
and
2015
, respectively. Deferred grant income is amortized to earnings, as a reduction of depreciation expense, over the average estimated useful life of the associated assets. Deferred grant income on land grants is recognized as a reduction to depreciation expense over the estimated life of the related assets of the developments. The Company did not receive any land grants in
2016
,
2015
, or
2014
.
We have also received grant funding in exchange for commitments made by us to the state or local government providing the funding. The grant commitments contain covenants we are required to comply with regarding minimum employment levels, maintaining retail stores in certain locations, and maintaining office facilities in certain locations. For these grants we recognize grant revenue as the milestones associated with the grant are met. The commitments typically phase out over approximately five to 10 years. If we fail to maintain the commitments during the applicable period, the funds we received may have to be repaid or other adverse consequences may arise, which could affect our cash flows and profitability.
No
grant funding subject to contractual remedy was received in
2016
,
2015
, or
2014
. For
2016
,
2015
, and
2014
, the Company was in compliance with the requirements under these grants.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
Deferred grant income estimates, and their associated present value, are updated whenever events or changes in circumstances indicate that their recorded amounts may not be recovered. These estimates are determined when estimation of the fair value of associated EDBs are performed if there are related bond investments. If it is determined that the Company will not receive the full amount remaining from the bonds, we will adjust the deferred grant income to appropriately reflect the change in estimate and, at that time, will record a cumulative additional depreciation charge that would be recognized to date as expense in the absence of the grant income. In the fourth quarter of 2016, we identified three EDBs where the actual tax revenues associated with these properties were lower than previously projected. Therefore, we determined that the fair value of these EDBs were below their respective carrying values, with the declines in fair value deemed to be other than temporary, which resulted in a fair value adjustment totaling
$6 million
. Accordingly, deferred grant income was reduced by
$6 million
due to other than temporary impairment loss of the same amount that was recognized on the EDBs. This reduction in deferred grant income resulted in increases in depreciation expense of
$2 million
which was included in impairment and restructuring charges in the consolidated statements of income. There were
no
other than temporary fair value adjustments of EDBs and no adjustments of deferred grant income related to EDBs in
2015
and
2014
.
At
December 31, 2016
, and
January 2, 2016
, EDBs totaled
$70 million
and
$84 million
, respectively, and are included in other assets in our consolidated balance sheets. EDBs are related to our government economic assistance arrangements relating to the construction of new retail stores or retail development. EDBs issued by state and local municipalities are classified as available-for-sale and recorded at their fair value. The payments of principal and interest on the bonds are typically tied to sales, property, or lodging taxes generated from the store and, in some cases, from businesses in the surrounding area, over periods which range between 15 and 30 years. Declines in the fair value of EDBs below cost that are deemed to be other than temporary are reflected in earnings. The Company may agree to guarantee deficiencies in tax collections which fund the repayment of EDBs. We did not guarantee any EDBs that we owned at the end of
2016
,
2015
, or
2014
.
On a quarterly basis, we perform various procedures to analyze the amounts and timing of projected cash flows to be received from its EDBs. We revalue each EDB using discounted cash flow models based on available market interest rates (Level 2 inputs) and management estimates, including the estimated amounts and timing of expected future tax payments (Level 3 inputs) to be received by the municipalities under tax increment financing districts. Projected cash flows are derived from sales and property taxes. Due to the seasonal nature of our business, fourth quarter sales are significant to projecting future cash flows under the EDBs. We evaluate the impact of bond payments that have been received since the most recent quarterly evaluation, including those subsequent to the end of the quarter. Typically, bond payments are received twice annually. The payments received around the end of the fourth quarter provide the Company with additional facts for its fourth quarter projections. We make inquiries of local governments and/or economic development authorities for information on any anticipated third-party development, specifically on land owned by the Company, but also on land not owned by the Company in the tax increment financing development district, and to assess any current and potential development where cash flows under the bonds may be impacted by additional development and the anticipated development is material to the estimated and recorded carrying value based on projected cash flows. We make revisions to the cash flow estimates of each bond based on the information obtained. In those instances where the expected cash flows are insufficient to recover the current carrying value of the bond, we adjust the carrying value of the individual bonds to their revised estimated fair value. The governmental entity from which we purchase 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 EDBs carried on our consolidated balance sheet, 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
$193 million
and
$181 million
at the end of
2016
and
2015
, respectively, and the Cabela’s CLUB points issued never expire.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
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 and amortized on a straight-line basis over the requisite service period. Costs associated with awards are included in compensation expense as a component of SD&A 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
$29 million
and
$21 million
invested in overnight funds at the end of
2016
and
2015
, 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 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.
Comprehensive Income
– Comprehensive income consists of net income, foreign currency translation adjustments, and unrealized gains and losses on available-for-sale EDBs, net of related income taxes.
Foreign Currency Translation –
Assets and liabilities of Cabela’s Canadian operations are translated into United States dollars at currency exchange rates in effect at the end of a reporting period. Gains and losses from translation into United States dollars are included in accumulated other comprehensive income (loss) in our consolidated balance sheets. Revenues and expenses are translated at average monthly currency exchange rates.
Earnings Per Share
– Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the sum of the weighted average number of shares outstanding plus all additional common shares that would have been outstanding if potentially dilutive common share equivalents had been issued.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
Adoption of New Accounting Principles
– In the first quarter of
2016
we adopted the guidance of Accounting Standards Update (“ASU”) 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” which required that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The following table summarizes the effects of this new guidance on amounts previously reported in our consolidated balance sheet for the
year ended 2015
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Reported
|
|
Adjustment
|
|
As Adjusted
|
|
|
|
|
|
|
Other assets (including economic development bonds)
|
$
|
148,214
|
|
|
$
|
(9,499
|
)
|
|
$
|
138,715
|
|
Total assets
|
8,472,503
|
|
|
(9,499
|
)
|
|
8,463,004
|
|
Current maturities of secured long-term obligations of the Trust
|
510,000
|
|
|
(327
|
)
|
|
509,673
|
|
Total current liabilities
|
2,475,903
|
|
|
(327
|
)
|
|
2,475,576
|
|
Secured long-term obligations of the Trust, less current maturities
|
2,728,500
|
|
|
(7,241
|
)
|
|
2,721,259
|
|
Long-term debt, less current maturities
|
637,829
|
|
|
(1,931
|
)
|
|
635,898
|
|
Total liabilities and stockholders’ equity
|
8,472,503
|
|
|
(9,499
|
)
|
|
8,463,004
|
|
2.
MERGER AGREEMENT
On October 3, 2016, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among Bass Pro Group, LLC, a Delaware limited liability company (“Bass Pro Group”), Prairie Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Bass Pro Group (“Sub”) and the Company. The Merger Agreement and the consummation of the transactions contemplated by the Merger Agreement have been unanimously approved by the Company’s board of directors. The Merger Agreement provides for the merger of Sub with and into the Company, on the terms and subject to the conditions set forth in the Merger Agreement (the “Merger”), with the Company continuing as the surviving corporation in the Merger. As a result of the Merger, the Company would become a wholly owned subsidiary of Bass Pro Group.
Pursuant to the Merger Agreement, at the effective time of the Merger, each share of Class A common stock (as defined in the Merger Agreement), par value
$0.01
per share, of the Company issued and outstanding immediately prior to the Effective Time will be cancelled and automatically converted into the right to receive
$65.50
in cash, without interest thereon.
The consummation of the Merger is subject to the satisfaction or waiver of specified closing conditions, including (i) the affirmative vote in favor of the adoption of the Merger Agreement by the holders of a majority of the outstanding shares of Company Common Stock entitled to vote thereon, (ii) the consummation of the purchase and sale of the banking business of WFB, in accordance with the Bank Purchase Agreement (as defined below) or an alternative agreement in accordance with the Merger Agreement and merger of WFB into the Company or another subsidiary of the Company and termination of its bank charter, (iii) any applicable waiting periods (or extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 having expired or been terminated, (iv) the absence of any order by any governmental entity rendering the Merger illegal, or prohibiting, enjoining or otherwise preventing the Merger, and (v) other customary closing conditions.
Additionally, in connection with the Merger Agreement, the Company entered into a Sale and Purchase Agreement, dated as of October 3, 2016 (the “Bank Purchase Agreement”), by and among the Company, WFB, and Capital One, National Association (“Capital One”). The Bank Purchase Agreement provides for, in connection with the closing of the Merger, the sale to Capital One of the business of WFB, which includes the credit card program operated by the Company, using WFB as the issuer. Pursuant to the Bank Purchase Agreement, WFB has agreed to sell to Capital One, and Capital One has agreed to purchase from WFB, substantially all of the assets of WFB, including the Cabela’s Club credit card co-branded accounts and WFB’s equity interests in the securitization funding vehicles WFB Funding, LLC and WFB Funding Corporation. Pursuant to the Bank Purchase Agreement, Capital One has also agreed to assume certain liabilities of WFB. The consummation of the transaction contemplated by the Bank Purchase Agreement is subject to the satisfaction or waiver of various specified closing conditions.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
The Merger Agreement also contains certain termination rights for both the Company and Bass Pro Group, and in certain specified circumstances upon termination of the Merger Agreement the Company would be required to pay Bass Pro Group a termination fee of
$126 million
. The Bank Purchase Agreement also contains certain termination rights for both the Company and Capital One, and in certain circumstances the Company would be required to pay Capital One a termination fee of
$14 million
.
There can be no assurance that the requisite closing conditions will be satisfied in a timely manner, or at all, or if the Merger will close.
3. CABELA’S MASTER CREDIT CARD TRUST
The Financial Services segment utilizes the Trust for the purpose of routinely securitizing credit card loans and issuing beneficial interest to investors. The Trust issues variable funding facilities and long-term notes (collectively referred to herein as “secured obligations of the Trust”), each of which has an undivided interest in the assets of the Trust. The Financial Services segment owns notes issued by the Trust from some of the securitizations, which in some cases may be subordinated to other notes issued.
The following table presents the components of the consolidated assets and liabilities of the Trust at the years ended:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Consolidated assets:
|
|
|
|
Restricted credit card loans, net of allowance of $117,860 and $75,450
|
$
|
5,543,241
|
|
|
$
|
4,991,210
|
|
Restricted cash
|
48,697
|
|
|
40,983
|
|
Total
|
$
|
5,591,938
|
|
|
$
|
5,032,193
|
|
|
|
|
|
|
Consolidated liabilities:
|
|
|
|
|
Secured variable funding obligations
|
$
|
420,000
|
|
|
$
|
655,000
|
|
Secured long-term obligations, net of unamortized debt issuance costs of $7,239 and $7,568 (1)
|
3,571,261
|
|
|
3,230,932
|
|
Interest due to third party investors
|
3,826
|
|
|
2,682
|
|
Total
|
$
|
3,995,087
|
|
|
$
|
3,888,614
|
|
|
|
|
|
|
|
(1)
|
The 2015 balance was revised to reflect the effects of adopting the guidance of ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs” in 2016.
|
4. CREDIT CARD LOANS AND ALLOWANCE FOR LOAN LOSSES
The following table reflects the composition of the credit card loans at the years ended:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
Restricted credit card loans of the Trust (restricted for repayment of secured obligations of the Trust)
|
$
|
5,661,101
|
|
|
$
|
5,066,660
|
|
Unrestricted credit card loans
|
31,270
|
|
|
38,278
|
|
Total credit card loans
|
5,692,371
|
|
|
5,104,938
|
|
Allowance for loan losses
|
(118,343
|
)
|
|
(75,911
|
)
|
Deferred credit card origination costs
|
5,547
|
|
|
6,240
|
|
Credit card loans, net
|
$
|
5,579,575
|
|
|
$
|
5,035,267
|
|
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
Allowance for Loan Losses:
The following table reflects the activity in the allowance for loan losses by credit card segment for the years ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
|
|
2015
|
|
|
|
Credit Card Loans
|
|
Restructured Credit Card Loans
|
|
Total Credit Card Loans
|
|
Credit Card Loans
|
|
Restructured Credit Card Loans
|
|
Total Credit Card Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
$
|
67,653
|
|
|
$
|
8,258
|
|
|
$
|
75,911
|
|
|
$
|
48,832
|
|
|
$
|
7,740
|
|
|
$
|
56,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
140,829
|
|
|
6,832
|
|
|
147,661
|
|
|
76,622
|
|
|
8,498
|
|
|
85,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
|
(120,696
|
)
|
|
(9,854
|
)
|
|
(130,550
|
)
|
|
(78,313
|
)
|
|
(12,883
|
)
|
|
(91,196
|
)
|
Recoveries
|
22,117
|
|
|
3,204
|
|
|
25,321
|
|
|
20,512
|
|
|
4,903
|
|
|
25,415
|
|
Net charge-offs
|
(98,579
|
)
|
|
(6,650
|
)
|
|
(105,229
|
)
|
|
(57,801
|
)
|
|
(7,980
|
)
|
|
(65,781
|
)
|
Balance, end of year
|
$
|
109,903
|
|
|
$
|
8,440
|
|
|
$
|
118,343
|
|
|
$
|
67,653
|
|
|
$
|
8,258
|
|
|
$
|
75,911
|
|
Credit Quality Indicators, Delinquent, and Non-Accrual Loans:
The loan portfolio is segregated into loans that have been restructured and other credit card loans in order to facilitate the estimation of the losses inherent in the portfolio as of the reporting date. The Financial Services segment uses the scores of Fair Isaac Corporation (“FICO”), a widely-used financial metric for assessing an individual’s credit rating, as the primary credit quality indicator for non-restructured loans, with the risk of loss increasing as an individual’s FICO score decreases.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
The table below provides information on current, non-accrual, past due, and restructured credit card loans by class using the respective fourth quarter FICO score at the years ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FICO Score of Credit Card Loans Segment
|
|
Restructured Credit Card Loans Segment (1)
|
|
|
December 31, 2016:
|
691 and Below
|
|
692-758
|
|
759 and Above
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Credit card loan status:
|
|
Current
|
$
|
945,494
|
|
|
$
|
1,916,307
|
|
|
$
|
2,665,307
|
|
|
$
|
29,495
|
|
|
$
|
5,556,603
|
|
1 to 29 days past due
|
39,394
|
|
|
21,520
|
|
|
16,731
|
|
|
2,940
|
|
|
80,585
|
|
30 to 59 days past due
|
16,339
|
|
|
2,291
|
|
|
466
|
|
|
1,675
|
|
|
20,771
|
|
60 or more days past due
|
31,315
|
|
|
391
|
|
|
92
|
|
|
2,614
|
|
|
34,412
|
|
Total past due
|
87,048
|
|
|
24,202
|
|
|
17,289
|
|
|
7,229
|
|
|
135,768
|
|
Total credit card loans
|
$
|
1,032,542
|
|
|
$
|
1,940,509
|
|
|
$
|
2,682,596
|
|
|
$
|
36,724
|
|
|
$
|
5,692,371
|
|
|
|
|
|
|
|
|
|
|
|
90 days or more past due and still accruing
|
$
|
16,730
|
|
|
$
|
98
|
|
|
$
|
43
|
|
|
$
|
1,254
|
|
|
$
|
18,125
|
|
Non-accrual
|
—
|
|
|
—
|
|
|
—
|
|
|
6,281
|
|
|
6,281
|
|
|
|
|
|
|
|
|
|
|
|
|
FICO Score of Credit Card Loans Segment
|
|
Restructured Credit Card Loans Segment (1)
|
|
|
January 2, 2016:
|
691 and Below
|
|
692-758
|
|
759 and Above
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Credit card loan status:
|
|
Current
|
$
|
782,885
|
|
|
$
|
1,676,541
|
|
|
$
|
2,516,420
|
|
|
$
|
28,322
|
|
|
$
|
5,004,168
|
|
1 to 29 days past due
|
28,472
|
|
|
16,245
|
|
|
14,229
|
|
|
2,820
|
|
|
61,766
|
|
30 to 59 days past due
|
10,931
|
|
|
1,713
|
|
|
506
|
|
|
1,716
|
|
|
14,866
|
|
60 or more days past due
|
20,307
|
|
|
536
|
|
|
111
|
|
|
3,184
|
|
|
24,138
|
|
Total past due
|
59,710
|
|
|
18,494
|
|
|
14,846
|
|
|
7,720
|
|
|
100,770
|
|
Total credit card loans
|
$
|
842,595
|
|
|
$
|
1,695,035
|
|
|
$
|
2,531,266
|
|
|
$
|
36,042
|
|
|
$
|
5,104,938
|
|
|
|
|
|
|
|
|
|
|
|
90 days or more past due and still accruing
|
$
|
10,292
|
|
|
$
|
111
|
|
|
$
|
34
|
|
|
$
|
1,217
|
|
|
$
|
11,654
|
|
Non-accrual
|
—
|
|
|
—
|
|
|
—
|
|
|
7,059
|
|
|
7,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Included in the allowance for loan losses were specific allowances for loan losses of
$8 million
at both
December 31, 2016
and
January 2, 2016
.
|
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at the years ended:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciable Life in Years
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
Land and improvements
|
Up to 20
|
|
$
|
364,694
|
|
|
$
|
325,576
|
|
Buildings and improvements
|
7 to 40
|
|
1,311,941
|
|
|
1,181,704
|
|
Furniture, fixtures, and equipment
|
3 to 15
|
|
905,739
|
|
|
834,656
|
|
Assets held under capital lease
|
Up to 30
|
|
12,979
|
|
|
12,979
|
|
Property and equipment
|
|
|
2,595,353
|
|
|
2,354,915
|
|
Less accumulated depreciation and amortization
|
|
|
(833,956
|
)
|
|
(707,183
|
)
|
|
|
|
1,761,397
|
|
|
1,647,732
|
|
Construction in progress
|
|
|
45,812
|
|
|
163,570
|
|
|
|
|
$
|
1,807,209
|
|
|
$
|
1,811,302
|
|
6. SECURITIES
EDBs, which are classified as available-for-sale, are included in other assets in our consolidated balance sheets and consisted of the following at the years ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
|
|
Amortized Cost
|
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
$
|
56,695
|
|
|
$
|
13,262
|
|
|
$
|
(21
|
)
|
|
$
|
69,936
|
|
|
|
|
|
|
|
|
|
January 2, 2016
|
$
|
67,482
|
|
|
$
|
16,285
|
|
|
$
|
—
|
|
|
$
|
83,767
|
|
Estimated maturities based on expected future cash flows for the EDBs at the end of
2016
were as follows:
|
|
|
|
|
|
|
|
|
|
Amortized Cost
|
|
Fair Value
|
|
|
For the fiscal years ending:
|
|
|
|
2017
|
$
|
2,479
|
|
|
$
|
3,237
|
|
2018
|
3,110
|
|
|
4,042
|
|
2019
|
3,601
|
|
|
4,652
|
|
2020
|
4,835
|
|
|
5,981
|
|
2021
|
4,563
|
|
|
5,734
|
|
2022 - 2026
|
23,082
|
|
|
29,616
|
|
2027 and thereafter
|
15,025
|
|
|
16,674
|
|
|
$
|
56,695
|
|
|
$
|
69,936
|
|
Interest earned on the securities totaled
$4 million
for each of the years ended
2016
,
2015
, and
2014
. There were
no
realized gains or losses on these securities in
2016
,
2015
, or
2014
.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
7. PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets (current and long-term) consisted of the following at the years ended:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Prepaid expenses and other current assets:
|
|
|
|
Accrued interest and other receivables - Financial Services segment
|
$
|
72,994
|
|
|
$
|
65,878
|
|
Other
|
59,256
|
|
|
51,452
|
|
|
$
|
132,250
|
|
|
$
|
117,330
|
|
Other assets:
|
|
|
|
Economic development bonds
|
$
|
69,936
|
|
|
$
|
83,767
|
|
Other property
|
22,920
|
|
|
31,183
|
|
Long-term receivables
|
17,476
|
|
|
12,415
|
|
Other
|
16,705
|
|
|
11,350
|
|
|
$
|
127,037
|
|
|
$
|
138,715
|
|
8. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consisted of the following at the years ended:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
Accrued employee compensation and benefits
|
$
|
39,433
|
|
|
$
|
55,368
|
|
Accrued property, sales, and other taxes
|
45,188
|
|
|
47,219
|
|
Deferred revenue and accrued sales returns
|
34,100
|
|
|
41,122
|
|
Accrued professional fees and legal judgment liability
|
5,079
|
|
|
17,629
|
|
Accrued interest
|
12,038
|
|
|
15,212
|
|
Other
|
36,906
|
|
|
48,183
|
|
|
$
|
172,744
|
|
|
$
|
224,733
|
|
9. OTHER LONG-TERM LIABILITIES
Other long-term liabilities consisted of the following at the years ended:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
Unrecognized tax benefits and accrued interest
|
$
|
74,737
|
|
|
$
|
80,153
|
|
Deferred rent expense and tenant allowances
|
44,694
|
|
|
44,634
|
|
Deferred revenue
|
12,377
|
|
|
11,312
|
|
Other long-term liabilities
|
432
|
|
|
936
|
|
|
$
|
132,240
|
|
|
$
|
137,035
|
|
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
10. TIME DEPOSITS
The Financial Services segment accepts time deposits only in amounts of at least one hundred thousand dollars. All time deposits are interest bearing. The aggregate amount of time deposits, net of brokered fees, by maturity was as follows at the years ended:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
2016
|
$
|
—
|
|
|
$
|
215,306
|
|
2017
|
177,015
|
|
|
26,103
|
|
2018
|
320,373
|
|
|
195,143
|
|
2019
|
154,739
|
|
|
37,254
|
|
2020
|
175,305
|
|
|
175,217
|
|
2021
|
111,868
|
|
|
—
|
|
Thereafter
|
229,557
|
|
|
230,876
|
|
|
1,168,857
|
|
|
879,899
|
|
Less current maturities
|
(177,015
|
)
|
|
(215,306
|
)
|
Deposits classified as non-current liabilities
|
$
|
991,842
|
|
|
$
|
664,593
|
|
Time deposits include only brokered institutional certificates of deposit, net of fees, at the end of
2016
and
2015
.
11. BORROWINGS OF FINANCIAL SERVICES SEGMENT
The Trust issues fixed and floating (variable) rate term securitizations, which are considered secured obligations backed by restricted credit card loans. A summary of the secured fixed and variable rate obligations of the Trust by series, the expected maturity dates, and the respective weighted average interest rates are presented in the following tables at the years ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
|
|
Expected
Maturity Date
|
|
Fixed Rate Obligations
|
|
Interest Rate
|
|
Variable Rate Obligations
|
|
Interest Rate
|
|
Total Obligations
|
|
Interest Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2012-I (1)
|
|
February 2017
|
|
$
|
275,000
|
|
|
1.63
|
%
|
|
$
|
150,000
|
|
|
1.23
|
%
|
|
$
|
425,000
|
|
|
1.49
|
%
|
Series 2012-II
|
|
June 2017
|
|
300,000
|
|
|
1.45
|
|
|
125,000
|
|
|
1.18
|
|
|
425,000
|
|
|
1.37
|
|
Series 2013-I
|
|
February 2023
|
|
327,250
|
|
|
2.71
|
|
|
—
|
|
|
—
|
|
|
327,250
|
|
|
2.71
|
|
Series 2013-II
|
|
August 2018
|
|
100,000
|
|
|
2.17
|
|
|
197,500
|
|
|
1.35
|
|
|
297,500
|
|
|
1.63
|
|
Series 2014-I
|
|
March 2017
|
|
—
|
|
|
—
|
|
|
255,000
|
|
|
1.05
|
|
|
255,000
|
|
|
1.05
|
|
Series 2014-II
|
|
July 2019
|
|
—
|
|
|
—
|
|
|
340,000
|
|
|
1.15
|
|
|
340,000
|
|
|
1.15
|
|
Series 2015-I
|
|
March 2020
|
|
218,750
|
|
|
2.26
|
|
|
100,000
|
|
|
1.24
|
|
|
318,750
|
|
|
1.94
|
|
Series 2015-II
|
|
July 2020
|
|
240,000
|
|
|
2.25
|
|
|
100,000
|
|
|
1.37
|
|
|
340,000
|
|
|
1.99
|
|
Series 2016-I
|
|
June 2019
|
|
570,000
|
|
|
1.78
|
|
|
280,000
|
|
|
1.55
|
|
|
850,000
|
|
|
1.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured obligations of the Trust
|
|
2,031,000
|
|
|
|
|
1,547,500
|
|
|
|
|
3,578,500
|
|
|
|
Less unamortized debt issuance costs
|
|
(4,594
|
)
|
|
|
|
(2,645
|
)
|
|
|
|
(7,239
|
)
|
|
|
Secured obligations of the Trust, net
|
|
2,026,406
|
|
|
|
|
1,544,855
|
|
|
|
|
3,571,261
|
|
|
|
Less current maturities of secured long-term obligations of the Trust, net
|
|
(574,829
|
)
|
|
|
|
(529,856
|
)
|
|
|
|
(1,104,685
|
)
|
|
|
Secured long-term obligations of the Trust, less current maturities, net
|
|
$
|
1,451,577
|
|
|
|
|
$
|
1,014,999
|
|
|
|
|
$
|
2,466,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
On February 15, 2017, the Series 2012-I notes totaling
$425 million
were repaid in full using restricted cash of the Trust.
|
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
|
|
Expected
Maturity Date
|
|
Fixed Rate Obligations
|
|
Interest Rate
|
|
Variable Rate Obligations
|
|
Interest Rate
|
|
Total Obligations
|
|
Interest Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 2011-II
|
|
June 2016
|
|
$
|
155,000
|
|
|
2.39
|
%
|
|
$
|
100,000
|
|
|
0.93
|
%
|
|
$
|
255,000
|
|
|
1.82
|
%
|
Series 2011-IV
|
|
October 2016
|
|
165,000
|
|
|
1.90
|
|
|
90,000
|
|
|
0.88
|
|
|
255,000
|
|
|
1.54
|
|
Series 2012-I
|
|
February 2017
|
|
275,000
|
|
|
1.63
|
|
|
150,000
|
|
|
0.86
|
|
|
425,000
|
|
|
1.36
|
|
Series 2012-II
|
|
June 2017
|
|
300,000
|
|
|
1.45
|
|
|
125,000
|
|
|
0.81
|
|
|
425,000
|
|
|
1.26
|
|
Series 2013-I
|
|
February 2023
|
|
327,250
|
|
|
2.71
|
|
|
—
|
|
|
—
|
|
|
327,250
|
|
|
2.71
|
|
Series 2013-II
|
|
August 2018
|
|
100,000
|
|
|
2.17
|
|
|
197,500
|
|
|
0.98
|
|
|
297,500
|
|
|
1.38
|
|
Series 2014-I
|
|
March 2017
|
|
—
|
|
|
—
|
|
|
255,000
|
|
|
0.68
|
|
|
255,000
|
|
|
0.68
|
|
Series 2014-II
|
|
July 2019
|
|
—
|
|
|
—
|
|
|
340,000
|
|
|
0.78
|
|
|
340,000
|
|
|
0.78
|
|
Series 2015-I
|
|
March 2020
|
|
218,750
|
|
|
2.26
|
|
|
100,000
|
|
|
0.87
|
|
|
318,750
|
|
|
1.82
|
|
Series 2015-II
|
|
July 2020
|
|
240,000
|
|
|
2.25
|
|
|
100,000
|
|
|
1.00
|
|
|
340,000
|
|
|
1.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured obligations of the Trust
|
|
1,781,000
|
|
|
|
|
|
1,457,500
|
|
|
|
|
|
3,238,500
|
|
|
|
|
Less unamortized debt issuance costs
|
|
(4,317
|
)
|
|
|
|
(3,251
|
)
|
|
|
|
(7,568
|
)
|
|
|
Secured obligations of the Trust, net
|
|
1,776,683
|
|
|
|
|
1,454,249
|
|
|
|
|
3,230,932
|
|
|
|
Less current maturities of secured long-term obligations of the Trust, net
|
|
(319,793
|
)
|
|
|
|
(189,880
|
)
|
|
|
|
(509,673
|
)
|
|
|
Secured long-term obligations of the Trust, less current maturities, net
|
|
$
|
1,456,890
|
|
|
|
|
$
|
1,264,369
|
|
|
|
|
$
|
2,721,259
|
|
|
|
The Trust sold asset-backed notes of
$1 billion
(“Series 2016-I”) on June 29, 2016. The Series 2016-I securitization transaction included the issuance of
$570 million
of Class A-1 notes, which accrue interest at a fixed rate of
1.78%
per year,
$280 million
of Class A-2 notes, which accrue interest at a floating rate equal to the one-month London Interbank Offered Rate (“LIBOR”) plus
0.85%
per year and three subordinated classes of notes in the aggregate principal amount of
$150 million
.
The Financial Services segment retained each of the subordinated classes of notes which were eliminated in the preparation of our consolidated financial statements. Each class of notes issued in the Series 2016-I securitization transaction has an expected life of approximately three years and a contractual maturity of approximately six years. In 2016, this securitization transaction funded the growth in credit card loans, maturities of time deposits, and maturities of securitizations. Series 2016-I notes and the variable funding facilities are expected to fund such growth and maturities in 2017 as well as future obligations of the Trust. In addition, the Series 2011-II and Series 2011-IV notes for
$255 million
each matured and were repaid in full using restricted cash of the Trust on
June 15, 2016
, and October 17, 2016, respectively.
The Trust also issues variable funding facilities which are considered secured obligations backed by restricted credit card loans. At
December 31, 2016
, and
January 2, 2016
, the Trust had three variable funding facilities with total capacity of
$3 billion
and
$1 billion
, respectively, and with outstanding balances of
$420 million
and
$655 million
, respectively. These outstanding balances were classified as current maturities of secured variable funding obligations of the Trust on the consolidated balance sheets since the Company’s intent is to repay these obligations in full within the next 12 months. During
2016
, the Financial Services segment increased the three variable funding facilities and extended the maturity dates as follows:
|
|
•
|
the Series 2008-III facility from
$300 million
due March 2018 to
$500 million
total capacity, with
$200 million
due October 2017 and
$300 million
due March 2018,
|
|
|
•
|
the Series 2011-I facility from
$300 million
due March 2016 to
$1.3 billion
total capacity, with
$800 million
due March 2018 and
$500 million
due March 2019, and
|
|
|
•
|
the Series 2011-III facility from
$500 million
due March 2017 to
$1.2 billion
total capacity, with
$700 million
due March 2018 and
$500 million
due September 2019.
|
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
Each of these variable funding facilities includes an option to renew subject to certain terms and conditions. Variable rate note interest is priced at a benchmark rate, LIBOR, or commercial paper rate, plus a spread, which ranges from
0.80%
to
0.90%
. The variable rate notes provide for a fee ranging from
0.45%
to
0.50%
on the unused portion of the facilities. During
2016
and
2015
, the daily average balance outstanding on these notes was
$205 million
and
$107 million
, with a weighted average interest rate of
1.30%
and
0.89%
, respectively.
The Financial Services segment has unsecured federal funds purchase agreements with two financial institutions with
$100 million
the maximum amount that can be borrowed. There were
no
amounts outstanding on these agreements at
December 31, 2016
, or
January 2, 2016
.
12. REVOLVING CREDIT FACILITIES
The Company’s credit agreement provides for an unsecured
$775 million
revolving credit facility and permits the issuance of letters of credit up to
$75 million
and swing line loans up to
$30 million
. The credit facility may be increased to
$800 million
subject to certain terms and conditions. The term of the credit facility expires on June 18, 2019.
There was
$115 million
outstanding under our credit agreement at
December 31, 2016
, and
no
amount outstanding at
January 2, 2016
. During
2016
and
2015
, the daily average principal balance outstanding on the line of credit was
$266 million
and
$419 million
, respectively, and the weighted average interest rate was
1.86%
and
1.11%
, respectively. Letters of credit and standby letters of credit totaling
$19 million
and
$20 million
, respectively, were outstanding at the end of
2016
and
2015
. The daily average outstanding amount of total letters of credit during
2016
and
2015
was
$13 million
and
$19 million
, respectively.
During the term of the
$775 million
revolving credit facility, the Company is required to pay a quarterly commitment fee, which ranges from
0.15%
to
0.25%
of the average daily unused principal balance on the line of credit. Interest on each base rate advance is equal to the alternate base rate, as defined, plus the applicable margin; and interest on each Eurocurrency advance is equal to the Eurocurrency base rate, as defined, plus the applicable margin. The applicable margin for both base rate and Eurocurrency advances is the percentage rate that is applicable at such time with respect to advances as set forth in the pricing schedule, a stratified interest rate schedule based on the Company’s leverage ratio, as defined.
The credit agreement requires that we comply with certain financial and other customary covenants, including:
|
|
•
|
a fixed charge coverage ratio (as defined) of no less than 2.00 to 1 as of the last day of any fiscal quarter for the most recently ended four fiscal quarters (as defined);
|
|
|
•
|
a leverage ratio (as defined) of no more than 3.00 to 1 as of the last day of any fiscal quarter; and
|
|
|
•
|
a minimum consolidated net worth standard (as defined) as of the last day of each fiscal quarter.
|
At
December 31, 2016
, the Company was in compliance with the financial covenant requirements of its
$775 million
credit agreement with a fixed charge coverage ratio of
7.62
to
1
, a leverage ratio of
1.79
to
1
, and a consolidated net worth that was
$659 million
in excess of the minimum.
The credit agreement includes a dividend provision limiting the amount that we could pay to stockholders, which at
December 31, 2016
, was not in excess of
$215 million
. The credit agreement also has a provision permitting acceleration by the lenders in the event there is a change in control, as defined. In addition, the credit agreement contains cross default provisions to other outstanding debt. In the event that the Company fails to comply with these covenants, a default is triggered. In the event of default, all outstanding letters of credit and all principal and outstanding interest would immediately become due and payable. The Company was in compliance with all financial covenants under its credit agreements at
December 31, 2016
, and
January 2, 2016
. We anticipate that we will continue to be in compliance with all financial covenants under our credit agreements through at least the next 12 months. On August 4, 2015, in connection with the
$550 million
note purchase agreement described in more detail in Note 13 “Long-Term Debt and Capital Leases” herein, the Company entered into a credit agreement amendment primarily to permit the issuance and sale of the unsecured notes, to place a floor of zero under LIBOR, and to revise certain definitions in the credit agreement.
Advances made pursuant to the
$775 million
credit agreement are classified as long-term debt. This agreement does not contain requirements regarding the pay down of revolving loans advanced; therefore, advances made prior to June 18, 2018, pursuant to this agreement are considered long-term in nature.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
The Company also has an unsecured
$20 million
Canadian (“CAD”) revolving credit facility for its operations in Canada. Borrowings are payable on demand with interest payable monthly. This credit facility permits the issuance of letters of credit up to
$10 million
CAD in the aggregate, which reduces the overall available credit limit. There were
no
amounts outstanding at
December 31, 2016
, or
January 2, 2016
.
13. LONG-TERM DEBT AND CAPITAL LEASES
Long-term debt and capital leases consisted of the following at the years ended:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
Unsecured $775 million revolving credit facility
|
$
|
115,000
|
|
|
$
|
—
|
|
Unsecured notes due 2016 with interest at 5.99%
|
—
|
|
|
215,000
|
|
Unsecured senior notes due 2017 with interest at 6.08%
|
60,000
|
|
|
60,000
|
|
Unsecured senior notes due 2016-2018 with interest at 7.20%
|
16,286
|
|
|
24,428
|
|
Unsecured senior notes due 2020, 2022 and 2025; various interest rates
|
550,000
|
|
|
550,000
|
|
Capital lease obligation
|
11,544
|
|
|
11,853
|
|
Total debt
|
752,830
|
|
|
861,281
|
|
Less current portion of long-term debt, net of unamortized debt issuance costs
|
(79,677
|
)
|
|
(223,452
|
)
|
Less long-term portion of unamortized debt issuance costs
|
(1,644
|
)
|
|
(1,931
|
)
|
Long-term debt, less current maturities, net
|
$
|
671,509
|
|
|
$
|
635,898
|
|
Long-term debt and capital leases, classified by maturity date as of
December 31, 2016
, and excluding the impact of unamortized debt issuance costs, are presented in the following table. Advances made under the
$775 million
credit agreement are classified as long-term debt. At
December 31, 2016
, we had a lease agreement, accounted for as a capital lease, for our distribution facility in Wheeling, West Virginia, with a lease term through June 2036. On January 31, 2017, this capital lease obligation was paid in full, so at
December 31, 2016
, the total balance outstanding was classified as current portion of long-term debt in our consolidated balance sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Revolving Credit Facility
|
|
Unsecured Senior Notes due 2017
|
|
Unsecured Senior Notes, final maturity 2018
|
|
Unsecured Senior Notes, final maturity 2025
|
|
Capital Lease Obligation
|
|
Total Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
$
|
—
|
|
|
$
|
60,000
|
|
|
$
|
8,143
|
|
|
$
|
—
|
|
|
$
|
11,544
|
|
|
$
|
79,687
|
|
2018
|
|
—
|
|
|
—
|
|
|
8,143
|
|
|
—
|
|
|
—
|
|
|
8,143
|
|
2019
|
|
115,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
115,000
|
|
2020
|
|
—
|
|
|
—
|
|
|
—
|
|
|
100,000
|
|
|
—
|
|
|
100,000
|
|
2021
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
2022 and thereafter
|
|
—
|
|
|
—
|
|
|
—
|
|
|
450,000
|
|
|
—
|
|
|
450,000
|
|
Total debt
|
|
$
|
115,000
|
|
|
$
|
60,000
|
|
|
$
|
16,286
|
|
|
$
|
550,000
|
|
|
$
|
11,544
|
|
|
$
|
752,830
|
|
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
During 2015, the Company entered into a note purchase agreement with various purchasers allowing the Company to issue and sell an aggregate of
$550 million
principal amount of senior unsecured notes in a private placement to certain accredited investors with aggregate principal amounts, interest rates, and maturity dates as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Tranche
|
|
Principal
|
|
Interest Rate
|
|
Date Issued
|
|
Maturity Date
|
|
|
|
|
|
|
|
|
|
A
|
|
$
|
100,000
|
|
|
3.23
|
%
|
|
August 4, 2015
|
|
August 4, 2020
|
B
|
|
122,000
|
|
|
3.70
|
|
|
August 4, 2015
|
|
August 4, 2022
|
C
|
|
128,000
|
|
|
3.82
|
|
|
December 3, 2015
|
|
December 3, 2022
|
D
|
|
28,000
|
|
|
4.01
|
|
|
August 4, 2015
|
|
August 4, 2025
|
E
|
|
172,000
|
|
|
4.11
|
|
|
December 3, 2015
|
|
December 3, 2025
|
|
|
$
|
550,000
|
|
|
|
|
|
|
|
Interest on these notes is payable semi-annually. The Company used the proceeds from this sale for general corporate purposes and to repay its unsecured notes for
$215 million
on February 27, 2016. The note purchase agreement contains customary default provisions, as well as certain restrictive covenants, including limitations on indebtedness and financial covenants relating to debt ratios, net worth, and fixed charges. In connection with the note purchase agreement, on August 4, 2015, the Company also entered into a credit agreement amendment primarily to permit the issuance and sale of the unsecured notes, to place a floor of zero under LIBOR, and to revise certain definitions in the credit agreement.
Certain of the long-term debt agreements contain various covenants and restrictions such as the maintenance of minimum debt coverage, net worth, and financial ratios. The significant financial ratios and net worth requirements in the long-term debt agreements are (i) a limitation of funded debt to be less than
60%
of consolidated total capitalization; (ii) cash flow fixed charge coverage ratio, as defined, of no less than
2.0
to
1
as of the last day of any quarter; and (iii) a minimum consolidated adjusted net worth, as defined.
In addition, the debt agreements contain cross default provisions to our outstanding credit facilities. In the event that the Company failed to comply with these covenants, a default would trigger and all principal and outstanding interest would immediately be due and payable. At
December 31, 2016
, and
January 2, 2016
, the Company was in compliance with all financial covenants under its unsecured notes. We anticipate that we will continue to be in compliance with all financial covenants under our unsecured notes through at least the next 12 months.
14. IMPAIRMENT AND RESTRUCTURING CHARGES
Impairment and restructuring charges consisted of the following for the years ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Impairment losses relating to:
|
|
|
|
|
|
Property, equipment, and other assets
|
$
|
7,310
|
|
|
$
|
3,874
|
|
|
$
|
—
|
|
Other property
|
557
|
|
|
5,901
|
|
|
—
|
|
Accumulated amortization of deferred grant income
|
2,252
|
|
|
—
|
|
|
—
|
|
|
10,119
|
|
|
9,775
|
|
|
—
|
|
Restructuring charges for severance and related benefits
|
4,003
|
|
|
5,556
|
|
|
641
|
|
Total
|
$
|
14,122
|
|
|
$
|
15,331
|
|
|
$
|
641
|
|
Impairment
– Long-lived assets of the Company are evaluated for possible impairment (i) whenever events or changes in circumstances may indicate that the carrying value of an asset may not be recoverable and (ii) at least annually for recurring fair value measurements and for those assets not subject to amortization. In
2016
,
2015
, and
2014
, we evaluated the recoverability of our EDBs, property (including existing store locations and future retail store sites), equipment, goodwill, other property, and other intangible assets. We intend to sell our other property as soon as any such sale could be economically feasible, and we continue to monitor such property for impairment.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
The following impairment losses were recognized in
2016
:
|
|
•
|
A loss of
$1 million
was recognized primarily relating to the write-off of costs pertaining to store sites we had previously identified as future retail store locations but in
2016
decided not to develop.
|
|
|
•
|
A loss of
$5 million
was recognized on a property based on its fair value using discounted cash flow projection estimates (Level 3 inputs). After the impairment loss was recognized, the carrying value of this property was
$4 million
.
|
|
|
•
|
Losses totaling
$1 million
were recognized on seven parcels of land based on sales contracts for six properties and an appraisal for one property where, after the impairment losses were recognized, the total carrying value of these seven properties approximated
$15 million
.
|
|
|
•
|
In the fourth quarter of
2016
, we received information on three EDBs that indicated the actual tax revenues associated with these properties would be lower than previously projected. For one bond, a significant retail development was no longer proceeding forward; for a second bond, the assessed tax values of properties had decreased; and for a third bond, actual tax revenues of the related properties were lower than estimated. Therefore, the related discounted cash flows (Level 3 inputs) indicated that the fair values of these three EDBs were below their respective carrying values, with the decline in fair values deemed to be other than temporary. This resulted in fair value adjustments totaling
$6 million
that reduced the carrying values of these EDBs. Accordingly, deferred grant income was also reduced by
$6 million
due to the other than temporary impairment losses recognized on these bonds. The reduction in deferred grant income resulted in an increase in depreciation expense of
$2 million
which was included in impairment and restructuring charges in the consolidated statements of income for
2016
.
|
The following impairment losses were recognized in
2015
:
|
|
•
|
A loss of
$4 million
was recognized relating to the write-off of costs pertaining to store sites we had previously identified as future retail store locations but in
2015
decided not to develop based on the Company’s plans to scale back retail store growth for 2016 and 2017.
|
|
|
•
|
A loss of
$2 million
was recognized on improved land for a housing development project based on its fair value using discounted cash flow projection estimates (Level 3 inputs). After the impairment loss was recognized, the carrying value of this property was
$0.3 million
.
|
|
|
•
|
Losses totaling
$3 million
were recognized on two parcels of unimproved land based on appraisals. After the impairment losses were recognized, the carrying value of these two properties was
$3 million
.
|
All impairment losses in
2016
and
2015
were recognized in the Merchandising segment. There were no impairment losses in
2014
. Local economic trends, government regulations, and other restrictions where we own properties may impact management projections that could change undiscounted cash flows in future periods and which could trigger possible future write downs.
Restructuring Charges
– In
2016
and
2015
, we incurred charges totaling
$4 million
and
$6 million
, respectively, for severance and related benefits primarily attributable to our corporate restructure and reduction in the number of personnel. In
2014
, we transitioned to a third-party logistics provider for our distribution needs in Canada and closed our distribution center in Winnipeg, Manitoba. Accordingly, we recognized a restructuring charge totaling
$1 million
in
2014
related to employee severance agreements and termination benefits. These restructuring charges for all three years were recognized in the Merchandising segment.
The activity relating to the liability for these severance benefits, which was included in accrued expenses and other liabilities in our consolidated balance sheets, is summarized in the following table for the years presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
|
|
|
Balance, beginning of period
|
$
|
2,799
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Charges for severance and related benefits
|
4,003
|
|
|
5,556
|
|
|
641
|
|
Payments
|
(5,759
|
)
|
|
(2,757
|
)
|
|
(641
|
)
|
Balance, end of period
|
$
|
1,043
|
|
|
$
|
2,799
|
|
|
$
|
—
|
|
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
15. INTEREST (EXPENSE) INCOME, NET
Interest expense, net of interest income, consisted of the following for the years ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
|
|
|
Interest expense
|
$
|
(34,627
|
)
|
|
$
|
(33,390
|
)
|
|
$
|
(29,648
|
)
|
Capitalized interest
|
3,132
|
|
|
10,499
|
|
|
7,788
|
|
Interest expense, net
|
(31,495
|
)
|
|
(22,891
|
)
|
|
(21,860
|
)
|
Interest income
|
14
|
|
|
9
|
|
|
18
|
|
|
$
|
(31,481
|
)
|
|
$
|
(22,882
|
)
|
|
$
|
(21,842
|
)
|
16. INCOME TAXES
For financial reporting purposes, income before taxes includes the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
|
|
|
Federal
|
$
|
247,894
|
|
|
$
|
276,650
|
|
|
$
|
276,041
|
|
Foreign
|
(294
|
)
|
|
17,977
|
|
|
42,436
|
|
|
$
|
247,600
|
|
|
$
|
294,627
|
|
|
$
|
318,477
|
|
The provision for income taxes consisted of the following for the years ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Current:
|
|
|
|
|
|
Federal
|
$
|
55,444
|
|
|
$
|
100,501
|
|
|
$
|
114,420
|
|
State
|
6,470
|
|
|
19,894
|
|
|
7,032
|
|
Foreign
|
2,358
|
|
|
5,090
|
|
|
6,872
|
|
|
64,272
|
|
|
125,485
|
|
|
128,324
|
|
Deferred:
|
|
|
|
|
|
Federal
|
30,224
|
|
|
(12,589
|
)
|
|
(14,024
|
)
|
State
|
6,068
|
|
|
(7,724
|
)
|
|
2,477
|
|
Foreign
|
89
|
|
|
125
|
|
|
(15
|
)
|
|
36,381
|
|
|
(20,188
|
)
|
|
(11,562
|
)
|
|
$
|
100,653
|
|
|
$
|
105,297
|
|
|
$
|
116,762
|
|
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
A reconciliation of the statutory federal income tax rate to the effective income tax rate follows for the years ended:
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
|
|
|
Statutory federal rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State income taxes, net of federal tax benefit
|
2.7
|
|
|
2.4
|
|
|
2.2
|
|
Foreign tax rate differential
|
0.2
|
|
|
(1.1
|
)
|
|
1.0
|
|
Nondeductible/nontaxable items
|
2.1
|
|
|
(0.5
|
)
|
|
(0.7
|
)
|
Change in unrecognized tax benefits
|
(0.1
|
)
|
|
1.1
|
|
|
(1.7
|
)
|
Net operating loss valuation allowance
|
1.3
|
|
|
1.4
|
|
|
0.5
|
|
Tax credits
|
(0.4
|
)
|
|
(1.0
|
)
|
|
(0.2
|
)
|
Other, net
|
(0.1
|
)
|
|
(1.6
|
)
|
|
0.6
|
|
Effective income tax rate
|
40.7
|
%
|
|
35.7
|
%
|
|
36.7
|
%
|
Deferred tax assets and liabilities consisted of the following for the years ended:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Deferred tax assets:
|
|
|
|
Deferred compensation
|
$
|
17,931
|
|
|
$
|
16,612
|
|
Deferred revenue
|
6,231
|
|
|
4,452
|
|
Reserve for returns
|
6,396
|
|
|
8,412
|
|
Accrued expenses and other liabilities
|
7,932
|
|
|
18,575
|
|
Gift certificates liability
|
13,283
|
|
|
11,775
|
|
Allowance for loans losses and doubtful accounts
|
46,378
|
|
|
29,078
|
|
Loyalty rewards programs
|
71,477
|
|
|
68,608
|
|
Economic development bonds
|
26,069
|
|
|
25,769
|
|
Inventories
|
2,899
|
|
|
—
|
|
Other
|
21,437
|
|
|
19,382
|
|
Total deferred tax assets
|
220,033
|
|
|
202,663
|
|
Valuation allowance
|
(8,465
|
)
|
|
(5,165
|
)
|
Deferred tax assets, net of valuation allowance
|
211,568
|
|
|
197,498
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
Prepaid expenses
|
15,983
|
|
|
14,498
|
|
Property and equipment
|
149,318
|
|
|
106,435
|
|
Inventories
|
—
|
|
|
3,080
|
|
Credit card loan fee deferral
|
53,555
|
|
|
45,443
|
|
Total deferred tax liabilities
|
218,856
|
|
|
169,456
|
|
Long-term deferred income tax liability (asset)
|
$
|
7,288
|
|
|
$
|
(28,042
|
)
|
The Company has not provided United States income taxes and foreign withholding taxes on all of the undistributed earnings of foreign subsidiaries that the Company considers to be indefinitely reinvested outside of the United States as of the end of
2016
. 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
2016
, the cumulative amount of earnings upon which United States income taxes have not been provided was approximately
$194 million
. If those earnings were not considered indefinitely reinvested, the Company estimates that an additional income tax expense of approximately
$45 million
would be recorded.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
As of
December 31, 2016
, cash and cash equivalents held by our foreign subsidiaries totaled
$103 million
. 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 31, 2016
, our foreign subsidiary in Canada had a net operating loss carry forward of
$34 million
with a related tax benefit of
$9 million
that expires between 2033 and 2035. Due to the uncertainty of the ultimate realization of this net operating loss, the subsidiary’s benefits and associated deferred tax liabilities of
$8 million
have been fully offset by a valuation allowance of
$8 million
.
At
December 31, 2016
, the balance in deposits paid for federal taxes related to prior period uncertain tax positions totaled
$66 million
and was classified as a current asset included in income taxes receivable in the consolidated balance sheets. At
January 2, 2016
, this balance totaled
$103 million
. The change in the deposit balance comparing the respective years was attributed to the payment in
2016
of the taxes associated with the settlement of the 2007 and 2008 Internal Revenue Service (“IRS”) examinations.
The reconciliation of unrecognized tax benefits was as follows for the years ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
|
|
|
Unrecognized tax benefits, beginning of year
|
$
|
73,122
|
|
|
$
|
101,879
|
|
|
$
|
64,800
|
|
Gross decreases related to prior period tax positions
|
(11,468
|
)
|
|
(2,301
|
)
|
|
(4,686
|
)
|
Gross increases related to prior period tax positions
|
2,709
|
|
|
20,507
|
|
|
29,281
|
|
Gross increases related to current period tax positions
|
3,486
|
|
|
6,268
|
|
|
12,501
|
|
Gross decreases related to current period tax positions
|
—
|
|
|
—
|
|
|
(17
|
)
|
Gross decreases related to settlements with taxing authorities
|
—
|
|
|
(53,231
|
)
|
|
—
|
|
Unrecognized tax benefits, end of year
|
$
|
67,849
|
|
|
$
|
73,122
|
|
|
$
|
101,879
|
|
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
$2 million
and
$5 million
in
2015
and
2014
, respectively, and no adjustment in
2016
. No penalties were accrued. The liability for estimated interest on unrecognized tax benefits included in other long-term liabilities totaled
$7 million
at the end of both
2016
and
2015
. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was
$26 million
.
At
December 31, 2016
, unrecognized tax benefits totaling
$68 million
were included in other long-term liabilities in our consolidated balance sheets compared to
$73 million
at
January 2, 2016
. The year over year change in unrecognized tax benefits was due primarily to our assessments of uncertain tax positions related to prior period tax positions and settlement of our 2007 and 2008 IRS examinations. Since the Company is routinely under audit by various taxing authorities, it is reasonably possible that the amount of unrecognized tax benefits will change during the next 12 months. However, we do not expect the change, if any, to have a material effect on the Company’s consolidated financial condition or results of operations within the next 12 months.
The Company’s tax years 2009 through 2011 are under examination by the IRS. We do not expect the examination and possible related appeal for these tax years to be completed within the next 12 months. We have reserved for potential adjustments for income taxes that may result from examinations by the tax authorities, and we believe that the final outcome of these examinations or agreements will not have a material effect on the Company’s financial condition, results of operations, or cash flows.
The Company files income tax returns in the United States, Canada, Hong Kong, and various states. The tax years 2009 through 2016 remain open to examination by major taxing jurisdictions to which Cabela’s is subject.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
17. COMMITMENTS AND CONTINGENCIES
The Company leases various buildings, computer and other equipment, and storage space under operating leases which expire on various dates through January 2041. Rent expense on these leases, as well as other month to month rentals, was
$22 million
,
$24 million
, and
$20 million
for
2016
,
2015
, and
2014
, respectively.
The following is a schedule of future minimum rental payments under operating leases at
December 31, 2016
:
|
|
|
|
|
For the fiscal years ending:
|
|
2017
|
$
|
23,791
|
|
2018
|
23,768
|
|
2019
|
23,267
|
|
2020
|
22,602
|
|
2021
|
22,091
|
|
Thereafter
|
279,401
|
|
Total
|
$
|
394,920
|
|
The Company leases seven retail stores and owns 24 stores subject to ground leases. Certain of these leases include tenant allowances that are amortized over the life of the lease.
No
tenant allowances were received in
2016
or
2015
. Certain leases require the Company to pay contingent rental amounts based on a percentage of sales, in addition to real estate taxes, insurance, maintenance, and other operating expenses associated with the leased premises. These leases have terms which include renewal options ranging from 10 to 70 years.
We have entered into real estate purchase, construction, and/or economic incentive agreements for various new retail store site locations. At
December 31, 2016
, we estimated we had total cash commitments of approximately
$95 million
outstanding for projected expenditures related to the development, construction, and completion of new retail stores. This amount excludes any estimated costs associated with new stores where the Company does not have a commitment as of
December 31, 2016
. We expect to fund these estimated capital expenditures over the next 12 months with funds from operations and borrowings.
Under various grant programs, state or local governments provide funding for certain costs associated with developing and opening a new retail store. In the past, we have received grant funding in exchange for commitments, such as assurance of agreed employment and wage levels at the retail store or that the retail store will remain open, made by us to the state or local government providing the funding. If we failed to maintain the commitments during the applicable period, the funds received may have to be repaid or other adverse consequences may arise, which could affect the Company’s cash flows and profitability. The commitments typically phase out over approximately five to 10 years.
No
grant funding subject to contractual remedy was received in
2016
or
2015
. The total amount of grant funding subject to a specific contractual remedy was
$26 million
and
$43 million
at
December 31, 2016
, and
January 2, 2016
, respectively. We had recorded
$1 million
(classified as long-term liabilities in the consolidated balance sheets) at
December 31, 2016
, and
$17 million
(
$16 million
in current liabilities and
$1 million
in long-term liabilities) at
January 2, 2016
, relating to these grants. In October 2016, we paid
$16 million
to satisfy in full a liability judgment entered against the Company in February 2014 related to a radius restriction of a retail store and associated incentives and value of real property that had been recognized as a liability in the Company’s consolidated balance sheets.
The Company operates an open account document instructions program, which provides for Cabela’s-issued letters of credit. We had obligations to pay participating vendors
$49 million
and
$34 million
at
December 31, 2016
, and
January 2, 2016
, respectively.
The Financial Services segment enters into financial instruments with off-balance sheet risk in the normal course of business through the origination of unsecured credit card loans. Unsecured credit card accounts are commitments to extend credit and totaled
$36 billion
and
$35 billion
at
December 31, 2016
, and
January 2, 2016
, respectively. These commitments are in addition to any current outstanding balances of a cardholder. Unsecured credit card loans involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The principal amounts of these instruments reflect the Financial Services segment’s maximum related exposure. The Financial Services segment has the right to reduce or cancel the available lines of credit at any time, and has not experienced, and does not anticipate, that all customers will exercise the entire available line of credit at any given point in time.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
Litigation and Claims
– The Company is party to various legal proceedings arising in the ordinary course of business. These actions include commercial, intellectual property, employment, regulatory, and product liability claims. Some of these actions involve complex factual and legal issues and are subject to uncertainties. The activities of WFB are subject to complex federal and state laws and regulations. WFB’s regulators are authorized to conduct compliance examinations and impose penalties for violations of these laws and regulations and, in some cases, to order WFB to pay restitution. The Company cannot predict with assurance the outcome of the actions brought against it. Accordingly, adverse developments, settlements, or resolutions may occur and have a material effect on the Company’s results of operations for the period in which such development, settlement, or resolution occurs. However, the Company does not believe that the outcome of any current legal proceedings will have a material effect on its results of operations, cash flows, or financial position taken as a whole.
In April 2016, the Securities and Exchange Commission (“SEC”) announced a settlement with the Company and its Executive Vice President and Chief Financial Officer, Mr. Ralph Castner, that resolves the previously disclosed SEC investigation into certain disclosures, reserves, and accruals from fiscal year 2012. As part of the settlement, the SEC entered an administrative cease-and-desist order that directs the Company and Mr. Castner to comply with the disclosure, books and records, and internal control provisions of the federal securities laws going forward. The Company and Mr. Castner neither admitted nor denied the allegations related to the settlement. The penalty of
$1 million
associated with the Company’s settlement was recognized as a liability that was accrued for and expensed by the Company in the third quarter of
2015
. This
$1 million
charge was included in SD&A expenses in the consolidated statements of income and was recognized in the Merchandising segment in
2015
.
The Company is party to a lawsuit in California state court alleging that the Company violated the California Invasion of Privacy Act by recording various telephone calls from California consumers without their consent. The Company reached a settlement in this lawsuit and recognized a liability of
$3.85 million
in the three months ended April 2, 2016. On February 8, 2017, the court granted final approval of the settlement and entered judgment accordingly.
The Company is party to a putative class action lawsuit in the United States District Court for the Western District of Kentucky alleging that the Company violated the Telephone Consumer Protection Act by placing calls using an automatic telephone dialing system to cellular telephones without first obtaining consent due to reassignment of the number or revocation of prior consent. At the present time, the Company cannot reasonably estimate any loss or range of loss that may arise from this matter. Accordingly, the Company has not accrued a liability related to this matter.
Self-Insurance
– The Company is self-insured for health claims and workers’ compensation claims up to a certain stop loss amount per individual. We recognized a liability for health claims incurred prior to year end but not yet reported totaling
$4 million
at the end of
2016
and
2015
, respectively. We also recognized a liability for workers’ compensation claims incurred prior to year end but not yet reported totaling
$4 million
at the end of
2016
and
2015
, respectively. These reserves are included in accrued expenses and other liabilities in the consolidated balance sheets.
The liabilities for health and workers’ compensation claims incurred but not reported are based upon internally developed calculations. These estimates are regularly evaluated for adequacy based on the most current information available, including historical claim payments, expected trends, and industry factors.
18. REGULATORY CAPITAL REQUIREMENTS
WFB is subject to various regulatory capital requirements administered by the Federal Deposit Insurance Corporation (“FDIC”) and the Nebraska State Department of Banking and Finance to ensure capital adequacy. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, WFB must meet specific capital guidelines that involve quantitative measures of WFB’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. WFB’s capital amounts and classification are also subject to qualitative judgment by the regulators with respect to components, risk weightings, and other factors.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
As of December 31,
2016
and
2015
, the most recent notification from the FDIC categorized WFB as “well-capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well-capitalized” WFB must maintain certain amounts and ratios (defined in the regulations) as set forth in the following table. There are no conditions or events since that notification that management believes have changed WFB’s category.
In addition, effective January 2015, WFB was subject to the interim final rules and the joint final rules adopted by the FDIC in July 2013 pertaining to the implementation of regulatory capital reforms recommended by the Basel Committee on Banking Supervision in December 2010 (referred to as “Basel III”), and capital reforms required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Accordingly, these interim final rules and the joint final rules revise the agencies’ prompt corrective action framework by introducing a “common equity tier 1 capital” requirement and a higher “minimum tier 1 capital” requirement, both of which are presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
Capital Requirements to be Classified Adequately-Capitalized
|
|
Capital Requirements to be Classified Well-Capitalized
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
2016:
|
|
|
|
|
|
|
|
|
|
|
|
Common Equity Tier 1 Capital
|
$
|
620,209
|
|
|
10.7
|
%
|
|
$
|
261,941
|
|
|
4.5
|
%
|
|
$
|
378,359
|
|
|
6.5
|
%
|
Total Capital to Risk-Weighted Assets
|
693,533
|
|
|
11.9
|
|
|
465,673
|
|
|
8.0
|
|
|
582,091
|
|
|
10.0
|
|
Tier I Capital to Risk-Weighted Assets
|
620,209
|
|
|
10.7
|
|
|
349,255
|
|
|
6.0
|
|
|
465,673
|
|
|
8.0
|
|
Tier I Capital to Average Assets
|
620,209
|
|
|
11.0
|
|
|
226,154
|
|
|
4.0
|
|
|
282,693
|
|
|
5.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015:
|
|
|
|
|
|
|
|
|
|
|
|
Common Equity Tier 1 Capital
|
$
|
532,110
|
|
|
10.0
|
%
|
|
$
|
238,282
|
|
|
4.5
|
%
|
|
$
|
344,185
|
|
|
6.5
|
%
|
Total Capital to Risk-Weighted Assets
|
598,419
|
|
|
11.3
|
|
|
423,612
|
|
|
8.0
|
|
|
529,515
|
|
|
10.0
|
|
Tier I Capital to Risk-Weighted Assets
|
532,110
|
|
|
10.0
|
|
|
317,709
|
|
|
6.0
|
|
|
423,612
|
|
|
8.0
|
|
Tier I Capital to Average Assets
|
532,110
|
|
|
10.6
|
|
|
200,755
|
|
|
4.0
|
|
|
250,944
|
|
|
5.0
|
|
19. STOCK BASED COMPENSATION PLANS AND EMPLOYEE BENEFIT PLANS
Stock-Based Compensation
– The Company recognized total stock-based compensation expense of
$25 million
,
$22 million
, and
$17 million
in
2016
,
2015
, and
2014
, respectively. Compensation expense related to the Company’s stock-based payment awards is recognized in SD&A expenses in the consolidated statements of income. Compensation cost for awards is recognized using a straight-line amortization method over the vesting period. At
December 31, 2016
, the total unrecognized deferred stock-based compensation balance for all equity awards issued, net of expected forfeitures, was
$27 million
, net of tax, which is expected to be amortized over a weighted average period of
2.4
years.
The fair value of options granted was estimated on the date of the grant using the Black-Scholes option pricing model. The expected volatility for
2016
,
2015
, and
2014
was based on the historical volatility of the Company's common stock. The fair value of options in the years presented was estimated using the Black-Scholes model with the following weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
|
|
|
Risk-free interest rate based on the U.S. Treasury yield curve
|
1.33
|
%
|
|
1.55
|
%
|
|
1.52
|
%
|
Dividend yield
|
—
|
|
|
—
|
|
|
—
|
|
Expected volatility
|
44
|
%
|
|
45
|
%
|
|
46
|
%
|
Weighted average expected life (in years)
|
5.1
|
|
|
5.5
|
|
|
5.9
|
|
Weighted average grant date fair value of options granted
|
$
|
18.81
|
|
|
$
|
22.53
|
|
|
$
|
27.83
|
|
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
Employee Stock Plans
– The Cabela’s Incorporated 2013 Stock Plan (the “2013 Stock Plan”), which replaced the Company’s 2004 Stock Plan, provides for the grant of incentive stock options, non-statutory stock options (“NSOs”), stock appreciation rights, performance stock, performance units, restricted stock, and restricted stock units to employees and consultants. Non-employee directors are eligible to receive any type of award offered under the 2013 Stock Plan except incentive stock options. Awards granted under the 2013 Stock Plan have a term of no greater than 10 years from the grant date and become exercisable under the vesting schedule determined at the time of grant. As of
December 31, 2016
, the maximum number of shares available for awards under the 2013 Stock Plan was
2,016,182
. As of
December 31, 2016
, there were
1,710,676
awards outstanding under the 2013 Stock Plan and
1,077,049
awards outstanding under the 2004 Stock Plan. To the extent available, we will issue treasury shares for the exercise of stock options before issuing new shares. Pursuant to the terms of the Merger Agreement, without the prior written consent of Bass Pro Group, no option awards or stock unit awards may be granted under the 2013 Stock Plan beginning on or after October 3, 2016.
Awards Granted
– The following awards were granted in 2016:
•
163,000
NSOs granted to employees at an exercise price of
$48.40
per share;
•
25,112
NSOs granted to non-employee directors at an exercise price of
$50.45
per share;
•
64,000
premium-priced NSOs to the Chief Executive Officer at an exercise price of
$55.66
per share, which was equal
to 115% of the closing price of the Company’s common stock on the New York Stock Exchange on March 2, 2016;
•
425,962
units of nonvested stock issued to employees at a weighted average fair value of
$47.35
per unit;
•
12,885
units of nonvested stock issued to non-employee directors at a fair value of
$50.45
per unit; and
•
92,500
units of performance-based restricted stock units to certain executives at a fair value of
$48.40
per unit.
The options have an eight-year term and vest over four years for employees and over one year for non-employee directors. The premium-priced NSOs vest in three equal annual installments beginning on March 2, 2017, and expire on March 2, 2024. The nonvested stock awards vest evenly over four years on the grant date anniversary based on the passage of time for employees and over one year for non-employee directors. The performance-based restricted stock units will begin vesting in four equal annual installments on March 2, 2017, since the performance criterion was achieved.
The following table summarizes award activity during
2016
for the Company’s two stock plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Awards
|
|
Non-Vested Awards
|
|
Awards Available for Grant
|
|
|
|
Weighted Average Exercise Price
|
|
|
|
Weighted Average Grant Date Fair Value
|
|
|
Number of Awards
|
|
|
Number of Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, beginning of year
|
2,705,252
|
|
|
2,938,166
|
|
|
$
|
25.87
|
|
|
1,582,054
|
|
|
$
|
54.44
|
|
Granted
|
(783,459
|
)
|
|
783,459
|
|
|
16.23
|
|
|
783,459
|
|
|
38.34
|
|
Vested
|
—
|
|
|
(333,718
|
)
|
|
|
|
(545,873
|
)
|
|
51.22
|
|
Exercised
|
—
|
|
|
(488,519
|
)
|
|
16.38
|
|
|
|
|
|
Forfeited (1)
|
90,445
|
|
|
(100,053
|
)
|
|
3.47
|
|
|
(100,125
|
)
|
|
51.67
|
|
Expired/Cancelled
|
3,944
|
|
|
(11,610
|
)
|
|
40.35
|
|
|
|
|
|
Outstanding, end of year (2)
|
2,016,182
|
|
|
2,787,725
|
|
|
28.65
|
|
|
1,719,515
|
|
|
38.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Options forfeited under the 2013 Stock Plan are immediately available for grant.
|
(2)
At the end of
2016
, total awards outstanding were comprised of the following under the Company’s two stock plans:
|
|
|
|
|
Type of Award
|
|
Number of Awards
|
|
|
|
Non-statutory stock options
|
|
1,848,964
|
|
Nonvested stock units
|
|
777,190
|
|
Performance based restricted stock units
|
|
161,571
|
|
Total
|
|
2,787,725
|
|
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
The following table provides information relating to the Company’s equity share-based payment awards at
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Remaining Contractual Life (in Years)
|
|
|
|
Weighted Average Exercise Price
|
|
Weighted Average Fair Value
|
|
Aggregate Intrinsic Value
|
|
|
Number of Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and exercisable
|
1,068,210
|
|
|
$
|
33.72
|
|
|
$
|
14.66
|
|
|
$
|
27,573
|
|
|
3.76
|
Non-vested
|
1,719,515
|
|
|
25.50
|
|
|
38.16
|
|
|
58,944
|
|
|
6.40
|
Total outstanding
|
2,787,725
|
|
|
28.65
|
|
|
29.16
|
|
|
$
|
86,517
|
|
|
5.64
|
Vested and expected to vest, December 31, 2016
|
2,722,630
|
|
|
29.25
|
|
|
|
|
|
$
|
82,951
|
|
|
5.34
|
The aggregate intrinsic value of awards exercised was
$17 million
,
$39 million
, and
$41 million
during
2016
,
2015
, and
2014
, respectively. The total fair value of shares vested was
$17 million
,
$14 million
, and
$16 million
in
2016
,
2015
, and
2014
, respectively. Based on the Company’s closing stock price of
$58.55
as of
December 31, 2016
, the total number of in-the-money awards exercisable as of
December 31, 2016
, was
913,432
.
The equity share-based payment awards outstanding and exercisable as of
December 31, 2016
, were in the following exercise price ranges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards Outstanding
|
|
Awards Exercisable
|
|
|
|
|
|
|
Weighted Average Remaining Contractual Life (in Years)
|
|
|
|
|
|
|
|
|
Weighted Average Exercise Price
|
|
|
|
|
Weighted Average Exercise Price
|
|
|
|
|
|
|
|
|
Exercise Price
|
|
Number
|
|
|
|
Number
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.00 (1)
|
|
938,761
|
|
|
$
|
—
|
|
|
8.23
|
|
—
|
|
|
$
|
—
|
|
$7.16 to $8.01
|
|
153,855
|
|
|
8.01
|
|
|
0.17
|
|
153,855
|
|
|
8.01
|
|
$11.49 to $15.25
|
|
11,500
|
|
|
12.31
|
|
|
0.36
|
|
11,500
|
|
|
12.31
|
|
$16.18 to $19.47
|
|
204,850
|
|
|
16.48
|
|
|
1.18
|
|
204,850
|
|
|
16.48
|
|
$22.32 to $40.45
|
|
403,844
|
|
|
32.60
|
|
|
2.76
|
|
339,844
|
|
|
31.13
|
|
$44.70 to $58.55
|
|
708,349
|
|
|
52.69
|
|
|
6.59
|
|
203,383
|
|
|
52.02
|
|
$61.23 to $76.27
|
|
366,566
|
|
|
67.20
|
|
|
5.30
|
|
154,778
|
|
|
65.35
|
|
|
|
2,787,725
|
|
|
28.65
|
|
|
5.64
|
|
1,068,210
|
|
|
33.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents nonvested stock units and performance based restricted stock units granted under the Company’s two stock plans. All other amounts in their respective exercise price ranges are for non-statutory stock options.
|
Employee Stock Purchase Plan
– During
2016
, there were
74,069
shares issued under the Cabela’s Incorporated 2013 Employee Stock Purchase Plan with
1,738,226
shares of common stock authorized and available for issuance at
December 31, 2016
. Pursuant to the terms of the Merger Agreement, no shares may be purchased under the Employee Stock Purchase Plan with respect to offering periods beginning on or after October 3, 2016.
401(k) Savings Plan
– All employees are eligible to defer up to
80%
of their wages in Cabela’s 401(k) savings plan, subject to certain limitations. The Company matches
100%
of eligible employee deferrals up to
4%
of eligible wages. Total expense for employer contributions was
$9 million
,
$10 million
, and
$8 million
in
2016
,
2015
, and
2014
, respectively.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
20. STOCKHOLDERS’ EQUITY AND DIVIDEND RESTRICTIONS
Preferred Stock
– The Company is authorized to issue
10,000,000
shares of preferred stock having a par value of
$0.01
per share. None of the shares of the authorized preferred stock have been issued. The board of directors is authorized to issue these shares of preferred stock without stockholder approval in different classes and series and, with respect to each class or series, to determine the dividend rate, the redemption provisions, conversion provisions, liquidation preference, and other rights, privileges, and restrictions. The issuance of any preferred stock could have the effect of diluting the voting power of the holders of common stock, restricting dividends on the common stock, impairing the liquidation rights of the common stock, or delaying or preventing a change in control without further action by the stockholders.
Class A Voting Common Stock
– The holders of Cabela’s Class A common stock are entitled to receive ratably dividends, if any, the board of directors may declare from time to time from funds legally available therefore, subject to the preferential rights of the holders of any shares of preferred stock that the Company may issue in the future. The holders of Cabela’s Class A common stock are entitled to one vote per share on any matter to be voted upon by stockholders.
Upon any voluntary or involuntary liquidation, dissolution, or winding up of company affairs, the holders of Cabela’s Class A common stock are entitled to all assets remaining after payment to creditors and subject to prior distribution rights of any shares of preferred stock that the Company may issue in the future. All of the outstanding shares of Class A common stock are fully paid and non-assessable.
Retained Earnings
– The most significant restrictions on the payment of dividends by the Company to stockholders are contained within the covenants under its revolving credit and unsecured senior notes purchase agreements. Also, Nebraska banking laws govern the amount of dividends that WFB can pay to Cabela’s. In 2016 and 2015, WFB paid dividends to Cabela’s of
$40 million
and
$50 million
, respectively. At
December 31, 2016
, the Company had unrestricted retained earnings of
$215 million
available for dividends. However, the Company has never declared or paid any cash dividends on its common stock.
Pursuant to the terms of the Merger Agreement, the Company is also prohibited from declaring or paying any dividends or other distributions on its common stock. The Company does not anticipate paying any dividends or other distributions on its common stock in the foreseeable future.
Accumulated Other Comprehensive Loss
– The components of accumulated other comprehensive loss, net of related taxes, are as follows for the years ended:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
Accumulated net unrealized holding gains on economic development bonds
|
$
|
8,103
|
|
|
$
|
10,097
|
|
Cumulative foreign currency translation adjustments
|
(54,025
|
)
|
|
(61,011
|
)
|
Total accumulated other comprehensive loss
|
$
|
(45,922
|
)
|
|
$
|
(50,914
|
)
|
Treasury Stock
– The Company’s Board of Directors authorized a share repurchase program on August 23, 2011, that provides for share repurchases on an ongoing basis to offset dilution resulting from equity awards under the Company’s current or future equity compensation plans. These shares can be repurchased from time to time in open market transactions or privately negotiated transactions at the Company’s discretion, subject to market conditions, customary blackout periods, and other factors. The share repurchase program does not obligate the Company to repurchase any outstanding shares of its common stock, and the program may be limited or terminated at any time.
Pursuant to the terms of the Merger Agreement, the Company generally may not repurchase shares of its common stock, except in connection with the exercise of outstanding stock options or the settlement of restricted stock unit awards. As a result, the Company does not anticipate repurchasing any further shares under this program.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
On September 1, 2015, we announced that our Board of Directors approved a share repurchase program authorizing the Company to repurchase up to
$500 million
of its common stock over a two-year period. This authorization was in addition to the standing annual authorization to repurchase shares to offset dilution resulting from equity-based awards issued under the Company’s equity compensation plans. The total amount of share repurchases that the Company can make in a year is limited to 75% of its prior year consolidated earnings before interest, taxes, depreciation and amortization, as defined, pursuant to a covenant requirement of its credit agreement. We did not engage in any stock repurchase activity in
2016
. As of
December 31, 2016
, up to
$426 million
of authorization to repurchase our common stock remained under this program. Under this authorization, we repurchased
1,989,305
shares of our common stock at a total cost of
$74 million
in
2015
. In 2015, we also repurchased
2,000,000
shares of our common stock in open market transactions at a cost of
$100 million
under the share repurchase program to offset dilution resulting from equity awards granted under the Company’s equity compensation plans.
The following table reconciles the Company’s treasury stock activity for the years ended:
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
Balance, beginning of year
|
3,776,305
|
|
|
—
|
|
Total common stock repurchased at a total cost of $174,124 for 2015
|
—
|
|
|
3,989,305
|
|
Treasury shares issued on exercise of stock options and share-based payment awards
|
(683,541
|
)
|
|
(213,000
|
)
|
Balance, end of year
|
3,092,764
|
|
|
3,776,305
|
|
21. EARNINGS PER SHARE
The following table reconciles the weighted average number of shares utilized in the earnings per share calculations for the years ended:
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
|
|
|
Common shares – basic
|
68,323,540
|
|
|
70,102,715
|
|
|
70,987,168
|
|
Effect of incremental dilutive securities:
|
|
|
|
|
|
Stock options and nonvested stock units
|
673,124
|
|
|
866,198
|
|
|
890,688
|
|
Common shares – diluted
|
68,996,664
|
|
|
70,968,913
|
|
|
71,877,856
|
|
Stock options outstanding considered anti-dilutive excluded from calculation
|
1,108,446
|
|
|
1,283,148
|
|
|
389,080
|
|
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
22. SUPPLEMENTAL CASH FLOW INFORMATION
The following table sets forth non-cash financing and investing activities and other cash flow information for the years ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Non-cash financing and investing activities:
|
|
|
|
|
|
Accrued property and equipment additions (1)
|
$
|
7,188
|
|
|
$
|
13,538
|
|
|
$
|
40,255
|
|
Depreciation adjustment reducing deferred grant income
|
(2,252
|
)
|
|
—
|
|
|
(831
|
)
|
|
|
|
|
|
|
Other cash flow information:
|
|
|
|
|
|
Interest paid (2)
|
$
|
129,103
|
|
|
$
|
86,194
|
|
|
$
|
80,311
|
|
Capitalized interest
|
(3,132
|
)
|
|
(10,499
|
)
|
|
(7,788
|
)
|
Interest paid, net of capitalized interest
|
$
|
125,971
|
|
|
$
|
75,695
|
|
|
$
|
72,523
|
|
Income taxes, net of refunds
|
$
|
60,810
|
|
|
$
|
107,792
|
|
|
$
|
145,196
|
|
|
|
|
|
|
|
|
|
(1)
|
Accrued property and equipment additions are recognized in the consolidated statements of cash flows in the year they are paid.
|
|
|
(2)
|
Includes interest paid by the Financial Services segment totaling
$84 million
,
$68 million
, and
$64 million
for
2016
,
2015
, and
2014
, respectively.
|
23. SEGMENT REPORTING
Guidance under ASC Topic 280, “Segment Reporting,” requires companies to evaluate their reportable operating segments periodically and when certain events occur. Changes in the first quarter of 2016 in our executive management structure and responsibilities resulted in a change in the Company’s chief operating decision maker function. As a result of these changes, as well as the finalization and implementation of our Vision 2020 strategic plan at the beginning of fiscal year 2016, and operational changes in our organizational structure, the Company updated its reportable segments effective the beginning of fiscal year 2016. The Company now accounts for its operations as two reportable segments: Merchandising and Financial Services. Prior to the beginning of fiscal year 2016, we had four reportable segments: Retail, Direct, Financial Services, and Corporate Overhead and Other.
The Merchandising segment sells products and services through the Company’s retail stores, our e-commerce websites (Cabelas.com and Cabelas.ca), and our catalogs. The United States merchandising and Canada merchandising operating segments have been aggregated into our reportable Merchandising segment. We are an omni-channel retailer with capabilities that allow a customer to use more than one channel when making a purchase, including retail stores, online, and mobile channels, and have it fulfilled, in most cases, either through in-store customer pickup or by direct shipment to the customer from one of our distribution centers, retail stores, or vendor drop-ship. Other non-merchandise revenue included in our Merchandising segment primarily includes the value of unredeemed points earned that are associated with the Company’s loyalty rewards programs for Cabela’s CLUB issued credit cards, net of the estimated costs of the points; real estate rental income; and real estate land sales.
The Financial Services segment issues co-branded credit cards which are available through all of our channels. Our Cabela’s CLUB cardholders also earn points from our loyalty rewards programs that can be redeemed through all of our customer shopping channels.
Results for years ended 2015 and 2014, presented in the tables below and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
– “2016 Compared to 2015” and “2015 Compared to 2014,” presented herein, have been recast to reflect these new segments.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
Primary operating costs by segment are summarized below.
Merchandising Segment:
|
|
•
|
Employee compensation and benefits, advertising and marketing costs, depreciation, and retail store related occupancy costs.
|
|
|
•
|
Costs relating to receiving, distribution, and storage of inventory; and merchandising, order processing, and quality assurance costs.
|
|
|
•
|
Corporate headquarters occupancy costs, other general and administrative costs, and costs relating to operations of various ancillary subsidiaries such as real estate.
|
|
|
•
|
Consulting fees and other expenses associated with the Company’s corporate restructuring initiatives incurred in 2016 and 2015 and the review of strategic alternatives incurred in 2016.
|
Financial Services Segment:
|
|
•
|
Advertising and promotion, license fees, third party services for processing credit card transactions, employee compensation and benefits, and other general and administrative costs.
|
Segment assets are those directly used in each operating segment’s operations. Depreciation, amortization, and property and equipment expenditures are recognized as directly expensed and used in each respective segment. Major assets by segment are summarized below.
Merchandising Segment:
|
|
•
|
Land, buildings, fixtures, and leasehold improvements, including corporate headquarters and facilities.
|
|
|
•
|
In-store inventory, receivables, and prepaid expenses.
|
|
|
•
|
Merchandise distribution inventory, technology infrastructure and related information technology systems, corporate cash and cash equivalents, EDBs, deferred income taxes, and other corporate long-lived assets.
|
Financial Services Segment:
|
|
•
|
Cash, credit card loans, restricted cash, receivables, property and equipment, and other assets.
|
Under an Intercompany Agreement, the Financial Services segment pays to the Merchandising segment a fixed license fee that includes 70 basis points on all originated charge volume of the Cabela’s CLUB Visa credit card portfolio. Among other items, the agreement also requires the Financial Services segment to reimburse the Merchandising segment 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 Merchandising segment. In addition, 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 Merchandising segment equal to 50% of the amount that the total risk-based capital ratio exceeds 13%. The total risk-based capital ratio of WFB exceeded this 13% threshold at March 31, 2014, so an additional license fee of
$11 million
was paid in April 2014 by the Financial Services segment to the Merchandising segment and was classified in SD&A expenses.
No
additional license fee was paid in the remainder of 2014, and none in 2015 or 2016.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
Financial information by segment is presented in the following table for the years presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Services
|
|
|
Fiscal Year 2016:
|
Merchandising
|
|
|
Total
|
|
|
|
|
|
|
Merchandise sales
|
$
|
3,558,019
|
|
|
$
|
—
|
|
|
$
|
3,558,019
|
|
Non-merchandise revenue:
|
|
|
|
|
|
Financial Services
|
—
|
|
|
521,795
|
|
|
521,795
|
|
Other
|
28,279
|
|
|
—
|
|
|
28,279
|
|
Total revenue before intersegment eliminations
|
3,586,298
|
|
|
521,795
|
|
|
4,108,093
|
|
Intersegment revenue eliminated in consolidation
|
—
|
|
|
21,266
|
|
|
21,266
|
|
Total revenue as reported
|
$
|
3,586,298
|
|
|
$
|
543,061
|
|
|
$
|
4,129,359
|
|
|
|
|
|
|
|
Operating income
|
$
|
73,494
|
|
|
$
|
200,446
|
|
|
$
|
273,940
|
|
Operating income as a percentage of revenue
|
2.0
|
%
|
|
38.4
|
%
|
|
6.6
|
%
|
Depreciation and amortization
|
$
|
144,553
|
|
|
$
|
5,610
|
|
|
$
|
150,163
|
|
Assets
|
3,075,258
|
|
|
5,895,566
|
|
|
8,970,824
|
|
Property and equipment additions including accrued amounts
|
150,885
|
|
|
1,238
|
|
|
152,123
|
|
|
|
|
|
|
|
Fiscal Year 2015:
|
|
|
|
|
|
|
|
|
|
|
|
Merchandise sales
|
$
|
3,481,375
|
|
|
$
|
—
|
|
|
$
|
3,481,375
|
|
Non-merchandise revenue:
|
|
|
|
|
|
Financial Services
|
—
|
|
|
482,329
|
|
|
482,329
|
|
Other
|
13,784
|
|
|
—
|
|
|
13,784
|
|
Total revenue before intersegment eliminations
|
3,495,159
|
|
|
482,329
|
|
|
3,977,488
|
|
Intersegment revenue eliminated in consolidation
|
—
|
|
|
20,214
|
|
|
20,214
|
|
Total revenue as reported
|
$
|
3,495,159
|
|
|
$
|
502,543
|
|
|
$
|
3,997,702
|
|
|
|
|
|
|
|
Operating income
|
$
|
134,804
|
|
|
$
|
172,988
|
|
|
$
|
307,792
|
|
Operating income as a percentage of revenue
|
3.9
|
%
|
|
35.9
|
%
|
|
7.7
|
%
|
Depreciation and amortization
|
$
|
130,856
|
|
|
$
|
1,716
|
|
|
$
|
132,572
|
|
Assets
|
3,090,825
|
|
|
5,372,179
|
|
|
8,463,004
|
|
Property and equipment additions including accrued amounts
|
358,953
|
|
|
2,233
|
|
|
361,186
|
|
|
|
|
|
|
|
Fiscal Year 2014:
|
|
|
|
|
|
|
|
|
|
|
|
Merchandise sales
|
$
|
3,200,219
|
|
|
$
|
—
|
|
|
$
|
3,200,219
|
|
Non-merchandise revenue:
|
|
|
|
|
|
Financial Services
|
—
|
|
|
415,574
|
|
|
415,574
|
|
Other
|
17,046
|
|
|
—
|
|
|
17,046
|
|
Total revenue before intersegment eliminations
|
3,217,265
|
|
|
415,574
|
|
|
3,632,839
|
|
Intersegment revenue eliminated in consolidation
|
—
|
|
|
14,811
|
|
|
14,811
|
|
Total revenue as reported
|
$
|
3,217,265
|
|
|
$
|
430,385
|
|
|
$
|
3,647,650
|
|
|
|
|
|
|
|
Operating income
|
$
|
223,745
|
|
|
$
|
111,650
|
|
|
$
|
335,395
|
|
Operating income as a percentage of revenue
|
7.0
|
%
|
|
26.9
|
%
|
|
9.2
|
%
|
Depreciation and amortization
|
$
|
111,543
|
|
|
$
|
1,554
|
|
|
$
|
113,097
|
|
Assets
|
2,762,826
|
|
|
4,912,491
|
|
|
7,675,317
|
|
Property and equipment additions including accrued amounts
|
433,672
|
|
|
1,964
|
|
|
435,636
|
|
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
The components and amounts of total revenue for the Financial Services segment were as follows for the years ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
|
|
|
Interest and fee income
|
$
|
597,709
|
|
|
$
|
481,731
|
|
|
$
|
400,948
|
|
Interest expense
|
(88,177
|
)
|
|
(68,827
|
)
|
|
(64,167
|
)
|
Provision for loan losses
|
(147,661
|
)
|
|
(85,120
|
)
|
|
(61,922
|
)
|
Net interest income, net of provision for loan losses
|
361,871
|
|
|
327,784
|
|
|
274,859
|
|
Non-interest income:
|
|
|
|
|
|
Interchange income
|
410,718
|
|
|
394,037
|
|
|
366,633
|
|
Other non-interest income
|
3,333
|
|
|
2,990
|
|
|
3,338
|
|
Total non-interest income
|
414,051
|
|
|
397,027
|
|
|
369,971
|
|
Less: Customer rewards costs
|
(232,861
|
)
|
|
(222,268
|
)
|
|
(214,445
|
)
|
Financial Services revenue
|
$
|
543,061
|
|
|
$
|
502,543
|
|
|
$
|
430,385
|
|
Our products are principally marketed to individuals within the United States. Net sales generated in other geographic markets, primarily Canada, have collectively been less than
5%
of consolidated net merchandise sales in each year. No single customer accounted for
10%
or more of consolidated net sales. No single product or service accounted for a significant percentage of the Company’s consolidated revenue.
The following table sets forth the percentage of our merchandise revenue contributed by major product categories for our Merchandising segment for the last three years.
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
|
|
|
Hunting Equipment
|
48.1
|
%
|
|
45.5
|
%
|
|
44.3
|
%
|
General Outdoors
|
30.9
|
|
|
31.2
|
|
|
30.3
|
|
Clothing and Footwear
|
21.0
|
|
|
23.3
|
|
|
25.4
|
|
Total
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
24. FAIR VALUE MEASUREMENTS
Fair value represents the estimated price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. In determining fair value of financial instruments, the Company uses various methods, including discounted cash flow projections based on available market interest rates and data, and management estimates of future cash payments. Judgment is required in interpreting certain market data to develop the estimates of fair value and, accordingly, any changes in assumptions or methods may affect the fair value estimates. Financial instrument assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories:
|
|
•
|
Level 1 – Quoted market prices in active markets for identical assets or liabilities.
|
|
|
•
|
Level 2 – Observable inputs other than quoted market prices.
|
|
|
•
|
Level 3 – Unobservable inputs corroborated by little, if any, market data.
|
Level 3 is comprised of financial instruments whose fair value is estimated based on internally developed models or methodologies utilizing significant inputs that are primarily unobservable from objective sources. At
December 31, 2016
, the financial instruments carried on our consolidated balance sheets subject to fair value measurements consisted of EDBs (included in other assets) and were classified as Level 3 for valuation purposes. There were no transfers in or out of Levels 1, 2, or 3 for
2016
,
2015
, or
2014
.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
The table below presents changes in fair value of the EDBs measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
|
|
|
Balance, beginning of year
|
$
|
83,767
|
|
|
$
|
82,074
|
|
|
$
|
78,504
|
|
Total gains or losses:
|
|
|
|
|
|
Included in earnings - realized
|
—
|
|
|
—
|
|
|
—
|
|
Included in accumulated other comprehensive income (loss) - unrealized
|
(3,045
|
)
|
|
1,076
|
|
|
7,777
|
|
Valuation adjustments
|
(6,395
|
)
|
|
—
|
|
|
—
|
|
Purchases, issuances, and settlements:
|
|
|
|
|
|
Purchases
|
—
|
|
|
4,780
|
|
|
558
|
|
Issuances
|
—
|
|
|
—
|
|
|
—
|
|
Settlements
|
(4,391
|
)
|
|
(4,163
|
)
|
|
(4,765
|
)
|
Total
|
(4,391
|
)
|
|
617
|
|
|
(4,207
|
)
|
Balance, end of year
|
$
|
69,936
|
|
|
$
|
83,767
|
|
|
$
|
82,074
|
|
Fair values of our EDBs were estimated using discounted cash flow projection estimates. These estimates are based on available market interest rates and the estimated amounts and timing of expected future payments to be received from municipalities under tax development zones, which we consider to be unobservable inputs (Level 3). In the fourth quarter of 2016, we determined that the fair value of three bonds were below their carrying value which resulted in a fair value adjustment totaling
$6 million
. Accordingly, deferred grant income was reduced by
$6 million
due to the other than temporary impairment loss that was recognized on the EDBs. The reduction in deferred grant income resulted in an increase in depreciation expense of
$2 million
which was included in impairment and restructuring charges in the consolidated statements of income. There were
no
other than temporary fair value adjustments of EDBs and
no
adjustments of deferred grant income related to EDBs in
2015
or
2014
.
On a quarterly basis, we perform various procedures to analyze the amounts and timing of projected cash flows to be received from our EDBs. Refer to Note 1 “Nature of Business and Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements under the section entitled “Government Economic Assistance and Economic Development Bonds” for information on our procedures used to analyze the amounts and timing of projected cash flows to be received from our EDBs.
We evaluate the recoverability of property and equipment, goodwill, other property, and other intangibles whenever indicators of impairment exist using significant unobservable inputs. This evaluation included existing store locations and future retail store sites. Impairment losses consisted of the following for the years ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
|
|
|
Carrying value of property and equipment, other property, and other assets
|
$
|
27,364
|
|
|
$
|
25,541
|
|
|
$
|
—
|
|
Less: Fair value of related assets
|
19,497
|
|
|
15,766
|
|
|
—
|
|
Impairment losses
|
$
|
7,867
|
|
|
$
|
9,775
|
|
|
$
|
—
|
|
The impairment losses we incurred in
2016
and
2015
were recognized in the Merchandising segment. Refer to Note 14 “Impairment and Restructuring Charges” of the Notes to Consolidated Financial Statements under the section entitled “Impairment” for additional information on these impairment losses. Local economic trends, government regulations, and other restrictions where we own properties may impact management projections that could change undiscounted cash flows in future periods which could trigger possible future write downs.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
The carrying amounts of cash and cash equivalents, accounts receivable, restricted cash, accounts payable, gift instruments (including credit card and loyalty rewards programs), accrued expenses and other liabilities, and income taxes receivable and payable included in the consolidated balance sheets approximate fair value given the short-term nature of these financial instruments.
The table below presents the estimated fair values of the Company’s financial instruments that are not carried at fair value on our consolidated balance sheets for the years indicated. The fair values of all financial instruments listed below were estimated based on internally developed models or methodologies utilizing observable inputs (Level 2).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
Carrying Value
|
|
Estimated Fair Value
|
|
Carrying Value
|
|
Estimated Fair Value
|
|
|
|
|
Financial Assets:
|
|
|
|
|
|
|
|
Credit card loans, net
|
$
|
5,579,575
|
|
|
$
|
5,579,575
|
|
|
$
|
5,035,267
|
|
|
$
|
5,035,267
|
|
|
|
|
|
|
|
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
Time deposits
|
1,168,857
|
|
|
1,171,001
|
|
|
879,899
|
|
|
879,197
|
|
Secured variable funding obligations of the Trust
|
420,000
|
|
|
420,000
|
|
|
655,000
|
|
|
655,000
|
|
Secured obligations of the Trust (1)
|
3,578,500
|
|
|
3,559,438
|
|
|
3,238,500
|
|
|
3,178,028
|
|
Long-term debt (1)
|
752,830
|
|
|
772,311
|
|
|
861,281
|
|
|
892,425
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Balances do not include related debt issuance costs as a direct deduction from such balances.
|
Credit Card Loans –
Credit card loans 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. This valuation does not include the value that relates to estimated cash flows generated from new loans over the life of the cardholder relationship. Accordingly, the aggregate fair value of the credit card loans does not represent the underlying value of the established cardholder relationship.
Time Deposits –
Time deposits 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. For both years presented, we have consistently applied our discounting methodologies to estimated future cash flows in determining estimated fair value for time deposits.
Obligations of the Trust –
The secured variable funding obligations of the Trust, which include variable rates of interest that adjust daily, can fluctuate daily based on the short-term operational needs of the Financial Services segment with advances and pay downs at par value. Therefore, the carrying value of the secured variable funding obligations of the Trust approximates fair value.
The estimated fair value of secured 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 of comparable maturity. For both years presented, we have consistently applied our discounting methodologies to estimated future cash flows in determining estimated fair value for secured obligations of the Trust.
Long-Term Debt –
The estimated fair value of long-term debt is based on future cash flows associated with each type of debt discounted using current borrowing rates for similar types of debt of comparable maturity. For both years presented, we have consistently applied our discounting methodologies to estimated future cash flows in determining estimated fair value for long-term debt.
25. ACCOUNTING PRONOUNCEMENTS
The following accounting standards are grouped by their effective date applicable to the Company:
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
Effective the first quarter of fiscal year 2017:
In July 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory” (“ASU 2015-11”). Under this standard, inventory will be measured at the “lower of cost and net realizable value” and options that currently exist for “market value” will be eliminated. ASU 2015-11 defines net realizable value as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.”
In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). This standard is intended to simplify several aspects of the accounting for share-based payment award transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, and classifications in the statement of cash flows.
We have evaluated the provisions of these two statements and do not believe that the adoption of either statement will have a material effect on the Company’s consolidated financial position or results of operations.
Effective the first quarter of fiscal year 2018:
In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which has been further clarified and amended in 2015 and 2016. ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. Early adoption is permitted. We are evaluating the provisions of this statement, which we do not intend to early adopt, and have not determined what impact such adoption will have on the Company’s consolidated financial position or results of operations.
In November 2016, the FASB issued ASU 2016-18 “Statement of Cash Flows - Restricted Cash” (“ASU 2016-18”). This standard requires entities to show the changes in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the statement of cash flows. Early adoption is permitted and must be adopted retrospectively. We do not intend to early adopt the provisions of this statement and do not believe that adoption will have a material effect on the Company’s consolidated financial position or results of operations since the provisions of this statement are only of a disclosure nature.
Effective the first quarter of fiscal year 2019:
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). Under this standard, operating and finance leases with a lease term of more than 12 months will be recorded in the balance sheet as right-of-use assets with offsetting lease liabilities based on the present value of future lease payments. The standard also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. Early adoption is permitted and requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. We are evaluating the provisions of this statement, including which period to adopt, and have not determined what impact the adoption of ASU 2016-02 will have on the Company’s consolidated results of operations or financial position except that leased assets (as defined), total assets, related lease liabilities, and total liabilities will significantly increase.
Effective the first quarter of fiscal year 2020:
In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 will change the accounting for credit impairment by adding an impairment model that is based on expected losses rather than incurred losses. Under this standard, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. Early adoption is permitted beginning January 1, 2019. We are evaluating the provisions of this statement, including which period to adopt, and have not determined what impact the adoption of ASU 2016-13 will have on the Company’s consolidated financial position or results of operations.
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Tables are in Thousands Except Share and Per Share Amounts)
26. QUARTERLY FINANCIAL INFORMATION (Unaudited)
The following table sets forth unaudited financial and operating data in each quarter for years
2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 by Quarter
|
|
2015 by Quarter
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
$
|
864,662
|
|
|
$
|
929,897
|
|
|
$
|
996,495
|
|
|
$
|
1,338,305
|
|
|
$
|
827,076
|
|
|
$
|
836,276
|
|
|
$
|
926,523
|
|
|
$
|
1,407,827
|
|
Operating income (1)
|
44,356
|
|
|
67,709
|
|
|
49,231
|
|
|
112,644
|
|
|
44,533
|
|
|
63,390
|
|
|
72,945
|
|
|
126,924
|
|
Net income
|
22,889
|
|
|
37,759
|
|
|
28,240
|
|
|
58,059
|
|
|
26,774
|
|
|
40,057
|
|
|
43,708
|
|
|
78,791
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (2)
|
0.34
|
|
|
0.55
|
|
|
0.41
|
|
|
0.85
|
|
|
0.38
|
|
|
0.56
|
|
|
0.63
|
|
|
1.15
|
|
Diluted (2)
|
0.33
|
|
|
0.55
|
|
|
0.41
|
|
|
0.84
|
|
|
0.37
|
|
|
0.56
|
|
|
0.62
|
|
|
1.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes impairment and restructuring charges recognized by quarter as follows:
|
$
|
2,972
|
|
|
$
|
959
|
|
|
$
|
1,454
|
|
|
$
|
8,737
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,587
|
|
|
$
|
9,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Basic and diluted earnings per share are computed independently for each of the quarters presented and, therefore, may not sum to the totals for the year.
|
Revenue is typically higher in the Company’s third and fourth quarters than in the first and second quarters due to holiday buying patterns and the opening of hunting seasons across the United States. The Company’s quarterly operating results may fluctuate significantly as a result of these events and a variety of other factors, and operating results for any quarter are not necessarily indicative of results for a full year.
27. SUBSEQUENT EVENT
On February 15, 2017, the Series 2012-I notes of the Trust totaling
$425 million
were repaid in full using restricted cash of the Trust.