Cabela's 2008 Annual Report Download - page 75

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70
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Amounts)
Intangible assets, excluding goodwill, are amortized over three to five years. Amortization expense for these
intangible assets for the next five years is estimated to approximate $725 (2009), $715 (2010), $644 (2011), $459
(2012), and $139 (2013).
On September 27, 2007, we purchased the net assets, and assumed certain liabilities, of an outdoors specialty
retailer located in Winnipeg, Manitoba, totaling $11,162. The purchase price has been allocated to tangible and
identifiable assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition.
The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill of $3,505.
We recorded goodwill related to this acquisition based on expected future economic benefits as this acquisition will
serve as our platform for expansion into Canada. Results of operations for this acquisition for the last three months
of 2007 and for fiscal year 2008 are included in our consolidated income statement.
Restructuring and Impairment Charges – After completing a review of our organizational structure, in
October 2008 we announced a reduction in workforce of approximately 10% at our company headquarters. Severance
and related benefits under this workforce reduction totaled $1,670, which was recorded in selling, distribution, and
administrative expenses.
During the fourth quarter of 2008, we evaluated the recoverability of our available for sale economic
development bonds being actively marketed and recorded an other-than-temporary impairment. We also evaluated
the recoverability of our property and equipment. The impairment charges associated with these assets totaled
$2,269 and were recorded in selling, distribution, and administrative expenses in the fourth quarter of 2008. We also
incurred prepayment penalties totaling $775 in the fourth quarter of 2008. In addition, included in restructuring and
impairment charges was the impairment of goodwill and other intangibles described earlier totaling $1,070, for total
restructuring and impairment charges of $5,784.
Land Held for Sale or Development – Proceeds from the sale of land from development activities are recognized
in other revenue and the corresponding costs of land sold are recognized in other costs of revenue.
Government Economic Assistance – When we construct a new retail store or retail development, we may receive
economic assistance from local governments to fund a portion or all of our associated capital costs. This assistance
typically comes in the form of cash and/or land grants and has been typically funded by the local government through
proceeds from the sale of economic development bonds. We have historically purchased the majority of the bonds
associated with our developments. Cash grants are made available to fund land, retail store construction, and/or
development infrastructure costs. Economic development bonds are typically repaid through sales and/or property
taxes generated by the retail store and/or within a designated development area. Cash and land grants are recognized
as deferred grant income as a reduction to the costs, or recognized fair value in the case of land grants, of the
associated property and equipment. Deferred grant income is amortized to earnings, as a reduction of depreciation
expense, over the average estimated useful life of the associated assets.
Deferred grant income estimates, and their associated present value, are updated quarterly. These estimates
are determined when estimation of the fair value of associated economic development bonds are performed if there
are related bond investments. When it is determined that recorded amounts will not be recovered through projected
discounted cash flows, an adjustment is made to reduce deferred grant income, and accumulated amortization
on the deferred grant at that point in time is reversed as an increase to depreciation expense. We may agree to
guarantee deficiencies in tax collections which fund the repayment of economic development bonds. We guaranteed
an economic development bond totaling $3,695 at the end of 2007 and did not guarantee any economic development
bonds at the end of 2008.