Cabela's 2014 Annual Report Download - page 60

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In 2013 and 2012, we evaluated the recoverability of economic development bonds, property (including
existing store locations and future retail store sites), equipment, goodwill, other property, and other
intangible assets.
On February 4, 2014, a U. S. district court entered a judgment against the Company in the amount of
$14 million. This judgment consists of two issues. The court ordered us to repay a $5 million incentive that we
received in conjunction with a retail store we opened in 2007. In addition, a jury trial determined that we pay
$9 million relating to the real property we received in 2007. Pursuant to this judgment, we recognized a liability
of $14 million at December 28, 2013, including an estimated amount for legal fees and costs, in our consolidated
balance sheet. The recognition of this liability at December 28, 2013, to repay these grants resulted in the Company
recording an increase to the carrying amount of the related retail store property through a reduction in deferred
grant income by the amount repayable, plus legal and other costs. The cumulative additional depreciation that
would have been recognized through December 28, 2013, as an expense in the absence of these grants was
recognized in 2013 as depreciation expense. Therefore, the adjustment that reduced the deferred grant income of
this retail store property at December 28, 2013, resulted in an increase in depreciation expense of $5 million in
2013, which was included in impairment and restructuring charges in the consolidated statements of income. This
impairment loss was recorded to the Retail segment. Refer to Note 14 “Impairment and Restructuring Charges” of
the Notes to Consolidated Financial Statements for additional financial information regarding this matter.
We recognized an impairment loss totaling $1 million in 2013 related to the store closure of our former
Winnipeg, Manitoba, Canada, retail site. The impairment loss of $1 million included leasehold improvement write-
offs as well as lease cancellation and restoration costs. This impairment loss was recorded to the Retail and the
Corporate Overhead and Other segments.
In 2004, the Company acquired property near Denver, Colorado (“the Colorado Property”) with the intent to
build a Cabela’s retail store at that location. The appraised value of the Colorado Property at that time was based
on the projected cash flows from the Company’s prospective retail store development. In the second quarter ended
June 2011, we made a decision not to locate a retail store on the Colorado Property, nor to further develop the
Colorado Property, but to dispose of it, and instead to build two retail stores in different locations in the greater
Denver area. We publicly announced this decision in July 2011. As a result, we classified the Colorado Property
as other property in the Corporate Overhead and Other segment. Shortly after we publicly announced that we
would not develop a retail store on the Colorado Property, we received a letter of intent from a developer offering
to purchase the property. The letter of intent provided evidence of the fair value of the Colorado Property, which,
at the time, resulted in an impairment loss of $3 million that was recognized in the third quarter of 2011. The
developer’s purchase offer expired in 2012, and the Company continued to market the property for sale and sought
an appraisal. In January 2013, we received an appraisal report on the Colorado Property. This appraisal report
concluded that the carrying value of the Colorado Property was higher than the estimated fair value, resulting
in an additional impairment loss of $15 million, which was recognized in the fourth quarter of 2012. After the
impairment loss was recognized, the carrying value of the Colorado Property was $6 million at the end of 2012.
The 2013 appraisal was based on the sales comparison approach to estimate the “as-is” fee simple market value
of the subject property (Level 2 inputs). The appraiser determined that the highest and best use of the Colorado
Property was as raw land, because the demographics, excess retail space, and the economy in the geographic area
would no longer support a value high enough to justify the cost of developing the property.
At December 2013 and 2012, we classified all of our unimproved land not used in our merchandising
business as “other property” and included the carrying value of $15 million and $23 million at the end of 2013
and 2012, respectively, in other assets in the consolidated balance sheets. We intend to sell any of our remaining
other property as soon as any such sale could be economically feasible, and we continue to monitor such property
for impairment.
In the fourth quarter of 2012, we also recognized an impairment loss on a second property based on an arms-
length sales contract of adjoining land anticipated to close in mid-2013 (Level 2 inputs). No adjustments to the
carrying value of other properties were recognized in 2013. We recognized impairment losses on other property of
$18 million in 2012. There were no impairment losses related to other property in 2013.