Cabela's 2008 Annual Report Download - page 56

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For 2007, WFB used cash for credit card originations (net of cash received from collections, proceeds from new
securitizations, and changes in retained interests) of $53 million compared to $71 million in 2006. We received $17
million in tenant allowances during 2007, which accounts for most of the net increase of $19 million in other long-
term liabilities; and the liability for gift certificates and credit card reward points increased $17 million over 2006
from increased sales of gift cards. In addition, depreciation and amortization increased $14 million offsetting cash
used in operating activities.
Investing Activities – Cash used in investing activities increased $187 million for 2007 compared to 2006. This
net increase was primarily due to expenditures related to the development and construction of new retail stores in
2007. For 2007, cash paid for property and equipment additions totaled $336 million. Economic development bonds
totaling $1 million relating to our Lehi, Utah, retail store were redeemed in 2007. In addition, economic development
bonds totaling $43 million and $53 million relating to our Wheeling, West Virginia, retail store and distribution
center were retired during 2007 and 2006, respectively.
Financing Activities – Cash provided by financing activities increased $82 million for 2007 compared to
2006. This net increase from financing activities comparing periods was due to a net increase of $66 million in time
deposits, with WFB increasing its short-term borrowings to $100 million to fund its credit card operations, and a
net increase of $35 million in borrowings primarily on lines of credit related to new stores which opened in 2007. In
addition, unpresented checks net of bank balance increased $33 million due to timing of when checks cleared our
bank. Partially offsetting these increases was a net decrease of $152 million in long-term debt ($215 million borrowed
in 2006) used to support our retail store expansion.
Grants and Economic Development Bonds
In the past, we have negotiated economic development arrangements relating to the construction of a number
of our new 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 retail
stores to provide exciting tourist and entertainment shopping experiences for the entire family. Our 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 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.
Grants – We generally have received grant funding in exchange for commitments made by us to the state or
local government providing the funding. The commitments, such as assurance of agreed employment and wage levels
at our retail stores or that the retail store will remain open, typically phase out over approximately five to ten years.
If we fail to maintain the commitments during the applicable period, the funds we received may have to be repaid or
other adverse consequences may arise, which could affect our cash flows and profitability. As of December 27, 2008,
the total amount of grant funding subject to a specific contractual remedy was $11 million.
Economic Development Bonds – 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 our retail stores. In the past, we have primarily been the sole
purchaser of these bonds. The bond proceeds that are received by the governmental entity are then used to fund
the construction and equipping of new retail stores and related infrastructure development. While purchasing these
bonds involves an initial cash outlay by us in connection with a new store, some or all of these costs can be recaptured
through the repayments of the bonds. The payments of principal and interest on the bonds are typically tied to
sales, property, or lodging taxes generated from the store and, in some cases, from businesses in the surrounding
area, over periods which range between 20 and 30 years. In addition, some of the bonds that we have purchased
may be repurchased for par value by the governmental entity prior to the maturity date of the bonds. 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 insufficient to pay the bonds.