Cabela's 2009 Annual Report Download - page 28

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Our failure to obtain or negotiate economic development packages with local and state governments
could cause us to significantly alter our retail store strategy or format and/or delay the construction of one or
more of our retail stores and could adversely affect our revenue, cash flows, and profitability.
We have received economic development packages from many of the local and state governments where our
retail stores are located. In some locations, we have experienced an increased amount of government and citizen
resistance and critical review of economic development packages. This resistance and critical review may cause
local and state government officials in future locations to deny or limit economic development packages that might
otherwise be available to us. The failure to obtain similar economic development packages in the future for any of
these reasons could cause us to significantly alter our retail store strategy or format. As a result, we could be forced to
invest less capital in our stores which could have an adverse effect on our ability to construct the stores as attractive
tourist and entertainment shopping destinations, possibly leading to a decrease in revenue or revenue growth. In
addition, the failure to obtain similar economic development packages for stores built in the future would have an
adverse impact on our cash flows and on the return on investment in these stores.
The failure of properties to generate sufficient taxes to amortize economic development bonds owned
by us that relate to the development of such properties would have an adverse impact on our cash flows and
profitability.
We often purchase economic development bonds issued by state or local governmental entities in connection
with the development of our retail stores. The proceeds of these bonds are then used to fund the construction and
equipping of new retail stores and related infrastructure development. The repayments of principal and interest on
these bonds are typically tied to sales, property, or lodging taxes generated from the related retail store and, in some
cases, from other businesses in the surrounding area, over periods which range between 20 and 30 years. 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. At the time we purchase
these bonds, we make estimates of the discounted future cash flow streams they are expected to generate in the form
of interest and principal payments. Because these cash flows are based primarily on future property or sales tax
collections at our retail stores and other facilities (which in many cases may not be operating at the time we make our
estimates), these estimates are inherently subjective and the probability of ultimate realization is highly uncertain. If
sufficient tax revenue is not generated by the subject properties, we will not receive the full amount of the expected
payments due under the bonds, which would have an adverse impact on our cash flows and profitability.
Our failure to comply with the terms of current economic development agreements could result in our
repayment of grant money or other adverse consequences that would affect our cash flows and profitability.
The economic development packages which we have received in connection with the construction of our current
stores have, in some instances, contained forfeiture provisions and other remedies in the event we do not fully comply
with the terms of the economic development agreements. Among the terms which could trigger these remedies are
the failure to maintain certain employment and wage levels, failure to timely open and operate a retail store, and
failure to develop property adjacent to a retail store. At January 2, 2010, the total amount of grant funding subject to
repayment pursuant to a specific contractual remedy was approximately $10 million. Other remedies that have been
included in some economic development agreements are loss of priority to tax payments supporting the repayment
of bonds held by us. Where specific remedies are not set forth, the local governments would be entitled to pursue
general contract remedies. A default by us under these economic development agreements could have an adverse
effect on our cash flows and profitability.
We may incur costs from litigation or increased regulation relating to products that we sell, particularly
tree stands and firearms, which could adversely affect our revenue and profitability.
We may incur damages due to lawsuits relating to products we sell. We are currently a defendant in certain
product liability lawsuits, including lawsuits relating to tree stands. We may incur losses due to lawsuits, including
potential class actions, relating to our performance of background checks on firearms purchases and compliance
with other sales laws as mandated by state and federal law. We may also incur losses from lawsuits relating to the