Cabela's 2004 Annual Report Download - page 54

consequences that would aÅect our cash Öows and proÑtability. As of January 1, 2005 and January 3,
2004, the total amount of grant funding subject to a speciÑc contractual remedy was $17.7 million and
$18.5 million respectively. Portions of three of our destination retail stores, such as wildlife displays and
museums, are subject to forfeiture provisions. In addition, there are 35.2 acres of undeveloped property
subject to forfeiture.
Economic Development Bonds. Through economic development bonds, the state or local government
sells bonds to provide funding for land acquisition, readying the site, building infrastructure and related
eligible expenses associated with the construction and equipping of our destination retail stores. We
typically have been the sole purchaser of these bonds. The bond proceeds that are received by the
governmental entity are then used to fund the construction and equipping of new destination retail stores
and related infrastructure development. While purchasing these bonds involves an initial cash outlay by us
in connection with a new store, some or all of these costs can be recaptured through the repayments of the
bonds. 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 20 and 30 years. In addition, some the bonds that we have purchased may be
repurchased for par value by the governmental entity prior to the maturity date of the bonds. However, the
governmental entity from which we purchase the bonds is not otherwise liable for repayment of principal
and interest on the bonds to the extent that the associated taxes are insuÇcient to pay the bonds. In one
location, the bonds will become subordinated to other bonds associated with the development if we fail to
continue to operate the store over a prescribed period. After purchasing the bonds, we typically carry them
on our balance sheet as ""available for sale'' marketable securities and value them based upon
management's projections of the amount of tax revenue that will be generated to support principal and
interest payments on the bonds. We have limited experience in valuing these bonds and, because of the
unique features of each project, there is no independent market data for valuation of these types of bonds.
If suÇcient tax revenue is not generated by the subject properties, we will not receive scheduled payments
and will be unable to realize the full value of the bonds carried on our balance sheet. See ""Ì Critical
Accounting Policies and Use of Estimates Ì Economic Development Bonds and Factors AÅecting Future
Results Ì Risks Related to our Merchandising Business Ì The failure of properties to generate suÇcient
taxes to amortize the economic development bonds owned by us that relate to the development of such
properties would have an adverse impact on our cash Öows and proÑtability.'' As of January 1, 2005 and
January 3, 2004, we carried $144.6 million and $71.6 million, respectively, of economic development bond
receivables on our balance sheet.
The negotiation of these economic development arrangements has been important to our destination
retail store expansion in the past, and we believe it will continue to be an important factor to our ability to
execute our destination retail store expansion strategy because we believe they will allow us to avoid or
recapture a portion of the costs involved with opening a new store. If similar packages are unavailable in
the future or the terms are not as favorable to us, our return on investment in new stores would be
adversely aÅected and we may choose to signiÑcantly alter our destination retail store expansion strategy.
Credit Card Loan Receivable Securitizations
Our Financial Services segment historically has funded most of its growth in credit card receivables
through an asset securitization program. Asset securitization is a practice commonly used by credit card
issuers to fund credit card receivables at attractive rates. The bank enters into asset securitization
transactions, which involve the two-tier sale of a pool of credit card receivables from the bank to a wholly
owned special purpose entity, and from that wholly owned special purpose entity to a second special
purpose entity that is organized as a trust. The trust is administered by an independent trustee. Because
the trust qualiÑes as a ""qualiÑed special purpose entity'' within the meaning of Statement of Financial
Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities (""SFAS 140''), its assets and liabilities are not consolidated in our balance
sheet in accordance with SFAS 140.
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