Cabela's 2006 Annual Report Download - page 85

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81
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Amounts)
11. COMMITMENTS AND CONTINGENCIES
The Company leases various buildings, computer equipment, signs and storage space under operating leases,
which expire on various dates through 2026. Rent expense on these leases as well as other month to month rentals
was $8,896, $6,793 and $5,360 for fiscal 2006, 2005 and 2004, respectively. The following is a schedule of future
minimum annual rental payments under operating leases at fiscal 2006:
2007 ...................................... $ 5,089
2008 ...................................... 3,092
2009 ...................................... 2,320
2010 ...................................... 1,976
2011 ...................................... 1,997
Thereafter ................................. 29,504
$43,978
The Company has entered into certain lease agreements for retail locations. In 2006, the Company entered
into four leases. The terms of these leases vary. One of these leases has been determined to be a capital lease and
will be recorded as such when the lease commences, which will not occur until a future period. Three of these
leases include tenant allowances that will be amortized over the life of the lease. The Company expects to receive
tenant allowances approximating $15,000 and $25,700 in 2007 and 2008, respectively. Certain of these leases require
the Company to pay contingent rental amounts based on a percentage of sales, in addition to real estates taxes,
insurance, maintenance and other operating expenses associated with the leased premises. 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.
The Company has entered into real estate purchase, construction and/or economic development agreements for
various future destination retail store site locations. At December 30, 2006, the Company had cash commitments
totaling approximately $6,700 for fiscal 2006, $195,000 for fiscal 2007 and $97,000 for fiscal 2008 for estimated
capital expenditures and the purchase of future economic development bonds in connection with the construction and
development of new destination retail stores. In addition, the Company is obligated to fund the remaining $1,809 of
economic development bonds and construction costs related to the expansion of the distribution center in Wheeling,
West Virginia. The funds are designated for use of construction of additional distribution center facilities within the
Company’s development district. Construction and funding of the bonds will take place in 2007.
The Company is also committed to fund $3,565 of economic development bonds related to our retail stores that
opened in fiscal 2005. When the bonds are funded, we will be reimbursed for the qualifying construction costs we
have incurred.
Under various grant programs, state or local governments provide funding for certain costs associated with
developing and opening a new destination retail store. The Company generally receives grant funding in exchange
for commitments, such as assurance of agreed employment and wage levels at the destination retail store or that
the destination retail store will remain open, made by the Company to the state or local government providing
the funding. The commitments typically phase out over approximately five to ten years. If the Company fails to
maintain the commitments during the applicable period, the funds received may have to be repaid or other adverse
consequences may arise, which could affect the Company’s cash flows and profitability. As of December 30, 2006,
the total amount of grant funding subject to a specific contractual remedy was $14,398.
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 the Company’s destination retail stores. Generally, the Company has been the sole purchaser of
these bonds. The bond proceeds that are received by the governmental entity are then used to fund the construction