Cabela's 2004 Annual Report Download - page 70

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tornado or any other calamity could damage a signiÑcant portion of our inventory, and materially impair
our ability to adequately stock our destination retail stores, deliver merchandise to customers and process
returns to vendors and could result in lost revenues, increased costs and reduced proÑts.
We are planning substantial systems changes in support of our direct business and destination retail
store expansion that might disrupt our supply chain operations.
Our success depends on our ability to source merchandise eÇciently through appropriate management
information and operational systems and procedures. We are planning modiÑcations to our technology that
will involve updating or replacing our systems with successor systems during the course of several years,
including changes to the sortation systems at our distribution centers, updating of the space planning and
labor scheduling software for our destination retail stores and improvements to our customer relationship
management system. There are inherent risks associated with replacing or modifying these systems,
including supply chain disruptions that could aÅect our ability to deliver products to our stores and our
customers. We may be unable to successfully launch these new systems, the launch of these new systems
could result in supply chain disruptions or the actual cost may exceed the estimated cost of these new
systems, each of which could have an adverse eÅect on our revenues and proÑtability.
Our failure to obtain or negotiate economic development packages with local and state governments
could cause us to signiÑcantly alter our destination retail store strategy or format and/or delay the
construction of one or more of our destination retail stores and could adversely aÅect our revenues, cash
Öows and proÑtability.
We have received economic development packages from many of the local and state governments
where our destination retail stores are located. In some locations, we have experienced an increased
amount of government and citizen resistance and critical review of pending and existing economic
development packages. This resistance and critical review may cause local and state government oÇcials in
future locations to deny or limit economic development packages that might otherwise be available to us.
The failure to obtain similar economic development packages in the future for any of these reasons could
cause us to signiÑcantly alter our destination retail store strategy or format. As a result, we could be forced
to invest less capital in our stores which could have an adverse eÅect on our ability to construct the stores
as attractive tourist and entertainment shopping destinations, possibly leading to a decrease in revenues or
revenue growth. In addition, the failure to obtain similar economic development packages for stores built
in the future would have an adverse impact on our cash Öows and on the return on investment in these
stores.
The failure of properties to generate suÇcient 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 Öows and
proÑtability.
We often purchase economic development bonds issued by state or local governmental entities in
connection with the development of our destination retail stores. The proceeds of these bonds are then
used to fund the construction and equipping of new destination 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 destination 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 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. At the
time we purchase these bonds, we make estimates of the discounted future cash Öow streams they are
expected to generate in the form of interest and principal payments. Because these cash Öows are based
primarily on future property or sales tax collections at our destination 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 suÇcient tax revenue
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