Cabela's 2004 Annual Report Download - page 87

CABELA'S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
(Dollar Amounts in Thousands Except Share and Per Share Amounts)
Wolf Lodge, LLC, and recorded a gain in other income of $2,532. The Company reÖected its 17.5%
investment in Great Wolf Lodge, LLC at cost due to the preferred nature of its investment, which did not
provide for sharing in the earnings and losses, and was adjusted only for other-than-temporary declines in
fair value. Distributions received in excess of earnings, subsequent to the date of investment were
considered a return on investment and is recorded as a reduction of the cost of the investment.
Distributions received from Great Wolf Lodge, LLC were $995, $182 and $0 for the Ñscal years ended
2004, 2003 and 2002, respectively.
Government Economic Assistance Ì In conjunction with the Company's expansion into new
communities, the Company often receives economic assistance from the local governmental unit in order
to encourage economic expansion in the local government's area. This assistance typically comes through
the use of proceeds from the sale of economic development bonds and grants. The bond proceeds and
grants are made available to fund the purchase of land (where not donated), construction of the retail
facility and infrastructure improvements. The economic development bonds issued to fund the project, in
certain cases, will be repaid by sales taxes generated by the Company's facilities, while in other cases the
economic development bonds are repaid through property taxes generated within a designated tax area.
The government grants have been recorded as deferred grant income and have been classiÑed as a
reduction to the cost basis of the applicable property and equipment. The deferred grant income is
amortized to earnings, as a reduction of depreciation expense over the average useful life of the project.
In order to facilitate the transaction, the Company generally agrees to purchase these economic
development bonds, and in one case, has agreed to guarantee any deÑciency. In the one case the Company
has agreed to guarantee the deÑciency of an economic development bond, the term of the bond and the
guarantee is through October, 2014. Each period the Company estimates the remaining amount of the
governmental grant to be received associated with the project. If it is determined that Company will not
receive the full amount remaining, the Company will adjust the deferred grant income to appropriately
reÖect the change in estimate and the Company will immediately record a cumulative additional
depreciation charge that would have been recognized to date as expense, in the absence of the grant.
Additionally, in connection with these arrangements, local governments at times donate land to the
Company. Land grants typically include the land where the retail store is constructed as well as other land
which is divided into parcels for future sale and development. The Company records the fair value of the
land granted with a corresponding credit to deferred grant income that is classiÑed as a reduction to the
basis of the land. The deferred grant income is recognized as grant income over the life of the related
assets constructed upon it. As parcels of land are sold any appreciation or decline in the value of the land
is recognized at the time of sale. Land received by the Company under government economic assistance
totaled $14,384, $1,201 and $6,400 for the Ñscal years ended 2004, 2003 and 2002, respectively.
In certain cases, the Company has agreed to guarantee any deÑciency in tax proceeds that are used
for debt service of the economic development bonds. In those situations in which the Company guarantees
the economic development bonds, the Company records the obligation as debt on its balance sheet in
accordance with EITF 91-10, Accounting for Special Assessments and Tax Increment Financing Entities.
Such amounts are recorded in long-term debt (See Note 8). As of the Ñscal years ended 2004 and 2003,
the Company has guaranteed total outstanding economic development bonds of $4,430 and $4,635,
respectively. As of January 1, 2005, it does not appear that any payments which might be required by the
Company under these guarantees, would have a material impact on the Company's Ñnancial position.
As a condition of the receipt of certain grants, the Company is required to comply with certain
covenants. The most restrictive of these covenants are to maintain certain employment levels, maintain
retail stores in certain locations or to maintain oÇce facilities in certain locations. For these types of
grants, the Company records the grants as a component of deferred grant income, and recognizes them as
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