Cabela's 2012 Annual Report Download - page 106

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CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Amounts)
15. IMPAIRMENT AND RESTRUCTURING CHARGES
Impairment and restructuring charges consisted of the following for the years ended:
2012 2011 2010
Impairment losses relating to:
Land held for sale $ 17,694 $ 4,617 $ 1,834
Property, equipment, and other assets 1,321 154 3,792
Accumulated amortization of deferred grant income 1,309 6,538 -
20,324 11,309 5,626
Restructuring charges for severance and related benefits - 935 -
Total $ 20,324 $ 12,244 $ 5,626
Long-lived assets of the Company are evaluated for possible impairment (i) whenever changes in
circumstances may indicate that the carrying value of an asset may not be recoverable and (ii) at least annually
for recurring fair value measurements and for those assets not subject to amortization. In 2012, 2011, and 2010,
the Company evaluated the recoverability of land held for sale, economic development bonds, property (including
existing store locations and future retail store sites), equipment, goodwill, and other intangible assets.
Land Held for Sale:
In December 2012, the Company received an appraisal report that updated the value from a previous
appraisal on one property held for sale. Results from the 2012 appraisal report concluded that the carrying value
was higher than the estimated fair value, resulting in an impairment loss. This 2012 appraisal was based on the
sales comparison approach to estimate the “as-is” fee simple market value of the subject property. This approach
involved a process in which a market value estimate was derived from analyzing the market for similar properties
that have sold or that are available for sale (Level 2 inputs). In the fourth quarter of 2012, the Company also
impaired a second property held for sale based on an arms-length sales contract of adjoining land anticipated
to close in mid-2013 (Level 2 inputs). In 2011, the Company wrote down the carrying value of certain land
held for sale properties based on signed agreements for their sale. The Company recognized impairment losses
totaling $17,694, $4,617, and $1,834 in 2012, 2011, and 2010, respectively. Local economic trends, government
regulations, and other restrictions where we own properties may impact management projections that could change
undiscounted cash flows in future periods which could trigger possible future write downs.
Economic Development Bonds:
In the fourth quarter of 2012, the Company received information on one project that the development will
be delayed thus reducing the amount expected to be received and delaying the timing of projected cash flows.
Therefore, the fair value of this economic development bond was determined to be below carrying value, with
the decline in fair value deemed to be other than temporary. In the fourth quarter of 2011, the Company received
information on three projects that development was either delayed or that actual tax revenues were lower than
estimated, thus reducing the amount expected to be received and delaying the timing of projected cash flows.
Therefore, the discounted cash flows indicated that the fair values of these three economic development bonds
were below carrying value, with the decline in fair value deemed to be other than temporary. These fair value
adjustments totaling $5,030 and $24,314 in 2012 and 2011, respectively, reduced the carrying value of the economic
development bond portfolio at the end of 2012 and 2011 and resulted in corresponding reductions in deferred
grant income. These reductions in deferred grant income resulted in increases in depreciation expense of $1,309
and $6,538 in 2012 and 2011, respectively, which have been included in impairment and restructuring charges in
the consolidated statements of income. The discounted cash flow models for the Company’s other bonds did not