Cabela's 2006 Annual Report Download - page 50

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Cash used in investing activities was $80.6 million in fiscal 2005 as compared with $171.1 million in fiscal
2004. The decrease in cash used was primarily due to a reduction in purchases of short-term investments of $135.8
million and an increase in sales of short-term investments of $32.8 million. In addition, local governments retired the
bonds we owned related to our Kansas City, Kansas store and bonds related to our Prairie Du Chien, Wisconsin store
for $60.1 million in principal. The cash provided by these investing activities was offset by an increase in capital
expenditures of $142.1 million due to our retail expansion efforts.
Cash provided by financing activities totaled $175.7 million in fiscal 2006 compared with cash used of $29.0
million in fiscal 2005. This net increase in cash was primarily due to the debt issuance of $215.0 million in February
2006 to support our destination retail store expansion and the net increase of $13.9 million in short-term borrowings
and inventory financing. Partially offsetting this increase were decreases in time deposits of $16.1 million and
change in unpresented checks net of bank balance of $8.7 million due to timing of when checks cleared our bank.
Cash used in financing activities was $29.0 million in fiscal 2005 as compared with cash provided of $135.8
million in fiscal 2004. The difference in cash used was primarily the proceeds from our initial public offering, which
raised net proceeds of $114.2 million in fiscal 2004. In fiscal 2005, our first principal installment of $25.0 million
was due on our private placement of debt that was issued in 2002. The change in unpresented checks net of bank
balance used cash of $10.9 million due to timing of when checks cleared our bank. The change in bank time deposits
also used cash of $10.1 million as we had more time deposits mature than in fiscal 2004.
Retail Store Expansion
Significant amounts of cash will be needed in order to open new destination retail stores and implement our
retail growth strategy. Depending upon the location and a variety of other factors, including store size and the amount
of public improvements necessary, and based upon our prior experience, opening a single destination retail store may
require expenditures of $30 million to $50 million. This amount includes the cost of real estate, site work, public
improvements such as utilities and roads, buildings, equipment, fixtures (including taxidermy) and inventory.
Historically, we have been able to negotiate economic development arrangements relating to the construction of
a number of our new destination retail stores, including free land, monetary grants and the recapture of incremental
sales, property or other taxes through economic development bonds, with many local and state governments. We
design our destination retail stores to provide exciting tourist and entertainment shopping experiences for the entire
family. Our destination retail stores also employ many people from the local community, draw customer traffic from
a broad geographic range and serve as a catalyst for the opening of additional retail businesses such as restaurants,
hotels and gas stations in the surrounding areas. We believe these factors increase the revenue for the state and the
local municipality where the destination retail store is located, making us a compelling partner for community
development and expansion. Where appropriate, we intend to continue to utilize economic development arrangements
with state and local governments to offset some of the construction costs and improve the return on investment of
our new retail stores. The stores we opened in 2005 and 2006 are located closer to larger populations. We believe this
strategy will make our stores more convenient for our customers and will increase our market share.
We successfully opened four destination retail stores in 2006, increasing our total retail square footage by
607,537 feet or 29%. Our four destination retail stores opened in 2006 are located in Glendale, Arizona, Boise,
Idaho, Richfield, Wisconsin and LaVista, Nebraska. We have also announced plans for destination retail stores in
Reno, Nevada: Hazelwood, Missouri; East Hartford, Connecticut; Hoffman Estates, Illinois; Lacey, Washington;
Gonzales, Louisiana; Hammond, Indiana; Post Falls, Idaho; Adairsville, Georgia; Montreal, Canada; Wheat Ridge,
Colorado and East Rutherford, New Jersey.
In addition to the cash commitments for capital expenditures and economic development bonds as discussed in
the analysis of cash flows section, we have entered into certain lease agreements for retail locations. We have entered
into four leases as of December 30, 2006. One of these leases is a capital lease and is anticipated to be recorded
in fiscal 2007 when the lease commences. The other three leases are operating leases. In fiscal 2006, we began
recognizing rent expense for two of these leases, which is included in selling, general and administrative expenses.
Certain of these leases include tenant allowances that will be amortized over the life of the lease. We will receive
tenant allowances in the amounts of $15.0 million and $25.7 million 2007 and 2008, respectively. These long-term
leases include options to renew with total terms, including extensions, varying from 10 to 70 years. Some of these
leases for constructed assets contain customary conditions of performance by other parties.