Cabela's 2006 Annual Report Download - page 72

68
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Amounts)
The Company generally agrees to purchase these economic development bonds in order to facilitate the
transaction. In one such transaction, the Company agreed to guarantee any deficiency of an economic development
bond through October 2014 which is the term of the bond. Each period the Company estimates the remaining amount
of the governmental grant to be received associated with the project. If it is determined that the Company will
not receive the full amount remaining, the Company will adjust the deferred grant income to appropriately reflect
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. At fiscal 2006 and 2005, the Company
guaranteed total outstanding economic development bonds of $3,960 and $4,205, respectively. As of December 30,
2006, 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 financial position, results of operations or liquidity.
Additionally, in connection with these arrangements, local governments may 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 classified as a reduction to the basis of the land. The deferred grant income is
recognized as revenue (grant income) over the estimated life of the related assets constructed on the land. As parcels
of land are sold any appreciation or decline in the value of the land is recognized at the time of sale. The Company
did not receive any land under government economic assistance for fiscal 2006 and 2005. During fiscal 2004, the
Company received land with a fair value of $14,384 under these arrangements.
In certain cases, the Company has agreed to guarantee any deficiency in tax proceeds that are used for debt
service of the economic development bonds. In those situations, the Company records the obligation as debt on its
balance sheet in accordance with Emerging Issues Task Force (“EITF”) No. 91-10, Accounting for Special Assessments
and Tax Increment Financing Entities. Such amounts are recorded in long-term debt.
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 office facilities in certain locations. For these types of grants, the Company records the
grants as a component of deferred grant income, and recognizes related revenue as the milestones associated with
the grant are met. The Company was in compliance with all material requirements of these grants at fiscal 2006 and
2005.
Credit Card Rewards Program — Every Cabela’s CLUB Visa cardholder receives Cabela’s points based on
the dollar amount transacted through WFB issued “Classic” or “Gold” credit cards. These points can be redeemed
for products and services of Cabela’s through the Company’s direct business and destination retail stores. Classic
cardholders receive 1% in points for every dollar spent and 2% in points for purchases at Cabela’s. Gold cardholders
receive 1% in points for every dollar spent and 3% in points for purchases at Cabela’s. There is no limit on points
that can be earned by a cardholder and no expiration period on the points. Points are accrued and expensed as the
cardholder earns them. The expense is shown as a reduction of Financial Services revenue in the consolidated
statements of income. The amount of unredeemed credit card points was $57,159 and $47,938 at fiscal years ended
2006 and 2005, respectively. WFB also utilizes points for acquisition, activation and retention programs. Promotional
event offers may also be utilized by cardholders in addition to credit card points. All of these items are part of the
customer rewards program. The amount of credit card rewards expensed as an offset to Financial Services revenue
was $90,096, $72,992 and $61,983 in fiscal 2006, 2005 and 2004, respectively.
Income Taxes — The Company files consolidated federal and state income tax returns with its wholly-owned
subsidiaries. The consolidated group follows a policy of requiring each entity to provide for income taxes in an
amount equal to the income taxes that would have been incurred if each were filing separately. The Company’s tax
year-end is changing from the Saturday closest to September 30 to the Saturday nearest to January 1. This change
is effective December 30, 2006.