Cabela's 2010 Annual Report Download - page 29

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selling season. The extended lead times for many of our purchases may make it difficult for us to respond rapidly
to new or changing product trends or changes in prices. If we misjudge either the market for our merchandise or
our customers’ purchasing habits, our revenue may decline significantly and we may not have sufficient quantities
of merchandise to satisfy customer demand or we may be required to mark down excess inventory, either of which
would result in lower profit margins. In addition, as we implement our retail store expansion strategy, we will need
to construct additional distribution centers or expand the size of our existing distribution centers to support our
growing number of retail stores. If we are unable to find suitable locations for new distribution centers or to timely
integrate new or expanded distribution centers into our inventory control process, we may not be able to deliver
inventory to our retail stores in a timely manner, which could have an adverse effect on the revenue and cash flows
of our Retail business.
The failure of properties to generate sufficient taxes to amortize economic development bonds owned
by us that relate to the development of such properties would have an adverse impact on our cash flows and
profitability.
We own economic development bonds issued by state or local governmental entities in connection with the
development of some of our retail stores. The proceeds of these bonds were used to fund the construction and
equipping of new retail stores and related infrastructure development. The repayments of principal and interest
on these bonds are typically tied to sales, property, or lodging taxes generated from the related retail store and, in
some cases, from other businesses in the surrounding area, over periods which range between 20 and 30 years.
However, the governmental entity from which we purchased the bonds is not otherwise liable for repayment of
principal and interest on the bonds to the extent that the associated taxes are insufficient to pay the bonds. We make
estimates of the discounted future cash flow streams these bonds are expected to generate in the form of interest
and principal payments. Because these cash flows are based primarily on future property or sales tax collections at
our retail stores and other facilities (which in many cases may not be operating at the time we make our estimates),
these estimates are inherently subjective and the probability of ultimate realization is highly uncertain. If sufficient
tax revenue is not generated by the subject properties, we will not receive the full amount of the expected payments
due under the bonds, which would have an adverse impact on our cash flows and profitability.
Our failure to comply with the terms of current economic development agreements could result in our
repayment of grant money or other adverse consequences that would affect our cash flows and profitability.
The economic development packages which we have received in connection with the construction of some of
our current retail stores have, in some instances, contained forfeiture provisions and other remedies in the event we do
not fully comply with the terms of the economic development agreements. Among the terms which could trigger these
remedies are the failure to maintain certain employment and wage levels and failure to keep a retail store open. At
January 1, 2011, the total amount of grant funding subject to repayment pursuant to a specific contractual remedy was
approximately $13 million. Another remedy that has been included in some economic development agreements is loss
of priority to tax payments supporting the repayment of bonds held by us. Where specific remedies are not set forth,
the local governments would be entitled to pursue general contract remedies. A default by us under these economic
development agreements could have an adverse effect on our cash flows and profitability.
We may incur costs from litigation or increased regulation relating to products that we sell,
particularly tree stands and firearms, which could adversely affect our revenue and profitability.
We may incur damages due to lawsuits relating to products we sell. We are currently a defendant in certain
product liability lawsuits, including lawsuits relating to tree stands. We may incur losses due to lawsuits, including
potential class actions, relating to our performance of background checks on firearms purchases and compliance
with other sales laws as mandated by state and federal law. We may also incur losses from lawsuits relating to the
improper use of firearms or ammunition sold by us, including lawsuits by municipalities or other organizations
attempting to recover costs from manufacturers and retailers of firearms and ammunition. Our insurance coverage
and the insurance provided by our vendors for certain products they sell to us may be inadequate to cover claims
and liabilities related to products that we sell. In addition, claims or lawsuits related to products that we sell, or
the unavailability of insurance for product liability claims, could result in the elimination of these products from