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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended AUGUST 3, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ____________ to ____________
Commission File Number: 000-20132
THE BUCKLE, INC.
(Exact name of Registrant as specified in its charter)
NEBRASKA 47-0366193
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2407 WEST 24TH STREET, KEARNEY, NEBRASKA 68845-4915
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (308) 236-8491
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares issued of the Registrant's Common Stock, outstanding as of
August 23, 2002 was 21,159,328 shares of Common Stock.
THE BUCKLE, INC.
FORM 10-Q
INDEX
Pages
-----
Part I. Financial Information (unaudited)
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
Part II. Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
2
THE BUCKLE, INC.
BALANCE SHEETS
(Columnar amounts in thousands)
(Unaudited)
ASSETS August 3, February 2,
CURRENT ASSETS 2002 2002
--------- -----------
Cash and cash equivalents $ 79,804 $ 101,915
Investments:
Held-to-maturity 55,255 40,368
Available-for-sale 625 951
Accounts receivable, net of
allowance of $175,000 and $250,000, respectively 1,531 2,021
Inventory 83,106 54,297
Prepaid expenses and other assets 8,316 7,357
--------- ---------
Total current assets 228,637 206,909
PROPERTY AND EQUIPMENT 114,318 111,443
Less accumulated depreciation and amortization 61,382 57,151
--------- ---------
52,936 54,292
OTHER ASSETS 3,503 3,456
--------- ---------
$ 285,076 264,657
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 28,888 $ 11,133
Accrued employee compensation 5,651 10,755
Accrued store operating expenses 4,722 4,231
Gift certificates redeemable 1,747 2,482
Income taxes payable 471 1,397
--------- ---------
Total current liabilities 41,479 29,998
DEFERRED COMPENSATION 951 957
--------- ---------
Total liabilities 42,430 30,955
STOCKHOLDERS' EQUITY
Common stock, authorized 100,000,000 shares
of $.01 par value; issued 21,157,571 and
21,115,538 shares, respectively 212 211
Additional paid-in capital 19,821 19,320
Retained earnings 222,676 214,309
Unearned compensation - restricted stock (63) (126)
Accumulated other comprehensive loss -- (12)
--------- ---------
Total stockholders' equity 242,646 233,702
--------- ---------
$ 285,076 $ 264,657
========= =========
See notes to financial statements.
3
THE BUCKLE, INC.
STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
(Unaudited)
Thirteen Weeks Ended Twenty-six Weeks Ended
-------------------- ----------------------
August 3, August 4, August 3, August 4,
2002 2001 2002 2001
-------- -------- -------- --------
SALES, net of returns and allowances $ 83,516 $ 78,596 $163,371 $155,035
COST OF SALES (including buying,
distribution and occupancy costs) 59,706 56,411 116,445 109,997
-------- -------- -------- --------
Gross profit 23,810 22,185 46,926 45,038
-------- -------- -------- --------
OPERATING EXPENSES:
Selling 15,912 14,732 30,948 29,422
General and administrative 2,527 2,458 5,072 5,015
-------- -------- -------- --------
18,439 17,190 36,020 34,437
-------- -------- -------- --------
Income from operations 5,371 4,995 10,906 10,601
OTHER INCOME 1,108 1,342 2,417 2,477
-------- -------- -------- --------
Income before income taxes 6,479 6,337 13,323 13,078
Income tax expense 2,410 2,428 4,956 4,930
-------- -------- -------- --------
NET INCOME $ 4,069 $ 3,909 $ 8,367 $ 8,148
======== ======== ======== ========
Per share amounts:
Basic income per share $ 0.19 $ 0.19 $ 0.40 $ 0.40
======== ======== ======== ========
Diluted income per share $ 0.19 $ 0.18 $ 0.38 $ 0.38
======== ======== ======== ========
Basic weighted average shares 21,158 20,595 21,152 20,577
Diluted weighted average shares 21,938 21,509 21,943 21,512
See notes to financial statements.
4
THE BUCKLE, INC.
STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Twenty-six Weeks Ended
-------------------------------------
August 3, 2002 August 4, 2001
-------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,367 $ 8,148
Adjustments to reconcile net income to net cash
flows from operating activities
Depreciation 5,674 5,636
Loss on disposal of assets 145 244
Amortization of unearned compensation-restricted stock 63 62
Forfeiture of restricted stock -- (483)
Changes in operating assets and liabilities
Accounts receivable 490 (485)
Inventory (28,809) (26,753)
Prepaid expenses and other assets (959) 2,544
Accounts payable 17,755 14,036
Accrued employee compensation (5,104) (5,952)
Accrued store operating expenses 491 94
Gift certificates redeemable (735) (587)
Income taxes payable (926) (3,705)
Deferred compensation (6) 120
--------- ---------
Net cash flows from operating activities (3,554) (7,081)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments (18,420) (10,229)
Proceeds from maturities of investments 3,859 9,751
Purchase of property and equipment (4,463) (6,545)
Change in other assets (35) (58)
--------- ---------
Net cash flows from investing activities (19,059) (7,081)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the exercise of stock options 502 2,024
--------- ---------
Net cash flows from financing activities 502 2,204
--------- ---------
Net decrease in cash and cash equivalents (22,111) (12,138)
Cash and cash equivalents, Beginning of period 101,915 69,155
--------- ---------
Cash and cash equivalents, End of period $ 79,804 $ 57,017
========= =========
See notes to financial statements.
5
THE BUCKLE, INC.
NOTES TO FINANCIAL STATEMENTS
THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 3, 2002 AND AUGUST 4, 2001
(Unaudited)
1. Management Representation - The accompanying unaudited financial statements
have been prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial information.
Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States
of America for complete financial statements. In the opinion of management,
all adjustments necessary for a fair presentation of the results of
operations for the interim periods have been included. All such adjustments
are of a normal recurring nature. Because of the seasonal nature of the
business, results for interim periods are not necessarily indicative of a
full year's operations. The accounting policies followed by the Company and
additional footnotes are reflected in the financial statements for the
fiscal year ended February 2, 2002, included in The Buckle, Inc.'s 2001
Annual Report.
2. Description of the Business - The Company is a retailer of medium to better
priced casual apparel and footwear for fashion conscious young men and
women. The Company operates their business as one reportable industry
segment. The Company had 300 stores located in 37 states throughout the
central, northwestern and southern areas of the United States as of August
3, 2002, and 288 stores in 37 states as of August 4, 2001. During the
second quarter of fiscal 2002, the Company opened two new stores and
substantially renovated four stores. During the second quarter of fiscal
2001, the Company opened nine new stores and substantially renovated four
stores.
The following is information regarding the Company's major product lines,
stated as a percentage of the Company's net sales:
Percentage of Net Sales Percentage of Net Sales
Thirteen Weeks Ended Twenty-six Weeks Ended
Merchandise Group Aug. 3, 2002 Aug. 4, 2001 Aug. 3, 2002 Aug. 4, 2001
------------ ------------ ------------ ------------
Denims 29.7% 25.5% 30.0% 25.8%
Slacks/Casual bottoms 2.6% 4.8% 3.1% 5.2%
Tops (incl. sweaters) 32.4% 34.5% 31.8% 32.9%
Sportswear/Fashions 10.5% 11.2% 10.5% 11.7%
Outerwear 1.3% 0.5% 0.9% 0.6%
Accessories 11.4% 11.0% 10.7% 10.6%
Footwear 11.9% 11.3% 12.6% 12.0%
Little Guys/Gals 0.2% 1.2% 0.3% 1.1%
Other -- -- .1% .1%
----- ----- ----- -----
100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
3. Net Income Per Share - Basic earnings per share data are based on the
weighted average outstanding common shares during the period. Diluted
earnings per share data are based on the weighted average outstanding
common shares and the effect of all dilutive potential common shares,
including stock options.
6
THE BUCKLE, INC.
NOTES TO FINANCIAL STATEMENTS
THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 3, 2002 AND AUGUST 4, 2001
(Unaudited)
Thirteen Weeks Ended Thirteen Weeks Ended
August 3, 2002 August 4, 2001
Per Share Per Share
Income Shares Amount Income Shares Amount
------- ------ --------- -------- -------- ---------
Basic EPS
Net Income $ 4,069 21,158 $ 0.19 $ 3,909 20,595 $ 0.19
Effect of Dilutive Securities
Stock Options -- 780 -- -- 914 (0.01)
------------------------------ -----------------------------
Diluted EPS $ 4,069 21,938 $ 0.19 $ 3,909 21,509 $ 0.18
============================= ============================
Twenty-six Weeks Ended Twenty-six Weeks Ended
August 3, 2002 August 4, 2001
Per Share Per Share
Income Shares Amount Income Shares Amount
------- ------ --------- ------ ------ ---------
Basic EPS
Net Income $ 8,367 21,152 $ 0.40 8,148 20,577 $0.40
Effect of Dilutive Securities
Stock Options -- 791 (0.02) -- 935 (0.02)
------------------------------ -----------------------------
Diluted EPS $ 8,367 21,943 $ 0.38 $ 8,148 21,512 $0.38
============================= ============================
4. Accounting Pronouncements - In June 2001, the FASB approved the issuance of
SFAS No. 143, Accounting for Asset Retirement Obligations. This Statement
addresses financial accounting and reporting obligations associated with
the retirement of tangible long-lived assets and the associated asset
retirement costs. SFAS No. 143 is effective for the Company beginning
February 2, 2003. The Company does not believe the adoption of SFAS No. 143
will have a significant impact on the financial position, results of
operations, or cash flows of the Company.
Effective at the beginning of fiscal 2002, the Company adopted SFAS No.
144, Accounting for the Impairment and Disposal of Long-Lived Assets. This
Statement replaces SFAS No. 121, Accounting for Impairment or Disposal of
Long-Lived Assets, and replaces the provisions of APB Opinion No. 30,
Reporting the Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business for the disposal of segments of a business.
7
BUCKLE, INC.
NOTES TO FINANCIAL STATEMENTS
THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 3, 2002 AND AUGUST 4, 2001
(Unaudited)
The Statement develops one accounting model for long-lived assets to be
disposed of by sale and broadens the reporting of discontinued operations.
The adoption of SFAS No. 144 did not have a significant impact on the
financial position, results of operations, or cash flows of the Company.
In April 2002, the FASB approved the issuance of SFAS No. 145, Rescission
of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13,
and Technical Corrections which will be effective for the Company February
2, 2003. This Statement rescinds SFAS No. 4, Reporting Gains and Losses
from Extinguishment of Debt, and an amendment of that Statement, SFAS No.
64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This
Statement also rescinds SFAS No. 44, Accounting for Intangible Assets of
Motor Carriers. This Statement amends SFAS No. 13, Accounting for Leases,
to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions. This Statement also amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. Management
anticipates that the adoption of SFAS No. 145 will not have a significant
effect on the Company's results of operations or its financial position.
In June 2002, the FASB approved the issuance of SFAS No. 146, Accounting
for Costs Associated with Exit or Disposal Activities. This Statement
addresses financial accounting and reporting for costs associated with exit
or disposal activities and nullifies Emerging Issues Task Force (EITF)
Issue No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs
Incurred in a Restructuring)." The provisions of this Statement are
effective for exit or disposal activities that are initiated after December
31, 2002. Management does not believe the adoption of SFAS No. 146 will
have a significant effect on the Company's results of operations or its
financial position.
5. Comprehensive Income - Unrealized gains and losses on the Company's
available-for-sale securities are included in other comprehensive income,
net of related taxes.
Thirteen Weeks Ended Twenty-six Weeks Ended
---------------------- ---------------------------
August 3, August 4, August 3, August 4,
2002 2001 2002 2001
--------- --------- --------- ---------
Net Income $ 4,069 $ 3,909 $ 8,367 $ 8,148
Unrealized gain (loss) on available
for sale securities, net of taxes
-- -- 12 (24)
-------- -------- ------- --------
Total Comprehensive Income $ 4,069 $ 3,909 $ 8,379 $ 8,124
======== ======== ======= ========
8
THE BUCKLE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial condition and results of
operations during the periods included in the accompanying financial statements.
RESULTS OF OPERATIONS
The table below sets forth the percentage relationships of sales and various
expense categories in the Statements of Income for each of the thirteen and
twenty-six week periods ended August 3, 2002, and August 4, 2001:
THE BUCKLE, INC.
RESULTS OF OPERATIONS
Percentage of Net Sales Percentage of Net Sales
----------------------- -----------------------
Thirteen weeks ended Percentage Twenty-six weeks ended Percentage
August 3, August 4, increase August 3, August 4, increase
2002 2001 (decrease) 2002 2001 (decrease)
-------------------------------------- -------------------------------------
Net sales 100.0% 100.0% 6.3% 100.0% 100.0% 5.4%
Cost of sales (including
buying, distribution and
occupancy costs) 71.5% 71.8% 5.8% 71.3% 70.9% 5.9%
-------------------------------- --------------------------------
Gross profit 28.5% 28.2% 7.3% 28.7% 29.1% 4.2%
Selling expenses 19.1% 18.7% 8.0% 18.9% 19.0% 5.2%
General and
administrative expenses 3.0% 3.1% 2.8% 3.1% 3.2% 1.1%
-------------------------------- --------------------------------
Income from operations 6.4% 6.4% 7.5% 6.7% 6.9% 2.9%
Other income 1.4% 1.7% (17.4)% 1.5% 1.6% (2.4)%
-------------------------------- --------------------------------
Income before income
taxes 7.8% 8.1% 2.2% 8.2% 8.5% 1.9%
Income tax expense 2.9% 3.1% (0.7)% 3.1% 3.2% 0.5%
-------------------------------- --------------------------------
Net income 4.9% 5.0% 4.1% 5.1% 5.3% 2.7%
================================ ================================
Net sales increased from $78.6 million in the second quarter of fiscal 2001 to
$83.5 million in the second quarter of fiscal 2002, a 6.3% increase. Comparable
store sales increased from the second quarter of fiscal 2001 to the second
quarter of fiscal 2002 by $1.0 million or 1.3%. The comparable store sales
increase resulted partially from a 1.6% increase in the average price per piece
of merchandise sold compared with the fiscal 2001 second quarter.
Net sales increased from $155.0 million in the first six months of fiscal 2001
to $163.4 million for the first six months of fiscal 2002, a 5.4% increase.
Comparable store sales for the twenty-six weeks ended August 3, 2002 compared to
the twenty-six weeks ended August 4, 2001 remained unchanged. Sales growth for
this twenty-six week period was attributable to the inclusion of a full six
months of operating results for the 24 stores opened in 2001 and the opening of
5 new stores in the first twenty-six weeks of fiscal 2002. Average sales per
square foot decreased 0.7% from $114.06 to $113.25 for the six months ended
August 3, 2002.
9
THE BUCKLE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Gross profit after buying, occupancy, and distribution expenses increased $1.6
million in the second quarter of fiscal 2002 to $23.8 million, a 7.3% increase.
As a percentage of net sales, gross profit increased from 28.2% in the second
quarter of fiscal 2001 to 28.5% in the second quarter of fiscal 2002. Gross
profit increased $1.9 million for the first twenty-six weeks of fiscal 2002 to
$46.9 million, a 4.2% increase. As a percentage of net sales, gross profit in
the first six months decreased from 29.1% for fiscal 2001, to 28.7% for fiscal
2002. The primary reason for improvement in gross profit as a percentage of net
sales for the second quarter of fiscal 2002 compared to the second quarter of
fiscal 2001 is improvement in actual merchandise margins partially offset by
higher occupancy costs. The decrease in gross profit as a percentage of net
sales for the six month period of fiscal 2002 compared to the same period of
fiscal 2001 was primarily attributable to higher occupancy costs outweighing
improvement in the actual merchandise margins.
Selling expense increased from $14.7 million in the second quarter of fiscal
2001 to $15.9 million for the second quarter of fiscal 2002, an 8.0% increase.
Selling expenses as a percentage of net sales increased from 18.7% for the
second quarter of fiscal 2001 to 19.1% for the second quarter of fiscal 2002.
Year-to-date selling expense rose 5.2% from $29.4 million through the first half
of fiscal 2001 to $30.9 million for the first half of fiscal 2002. As a
percentage of net sales, selling expense in the first six months decreased from
19.0% for fiscal 2001, to 18.9% for fiscal 2002. For the second quarter of
fiscal 2002 compared to the same period a year ago, selling expense increased as
a percentage of net sales primarily due to higher payroll expenses. The primary
reason for the improvement in year-to-date selling expense as a percentage of
net sales is improvement in various expense categories for the first six months,
plus a slight decrease in payroll expense for the first three months of the
fiscal year, partially offset by higher payroll expense in the second
three-month period of fiscal 2002 compared to the same time period a year ago.
General and administrative expenses remained at $2.5 million in the second
quarter of fiscal 2002 compared to the second quarter of fiscal 2001 due to
rounding, with actual dollars being up 2.8%. As a percentage of net sales,
general and administrative expenses decreased from 3.1% for the second quarter
of fiscal 2001 to 3.0% for the second quarter of fiscal 2002. For the first half
of fiscal 2002, general and administrative expense rose 1.1% from $5.0 million
for the six months ended August 4, 2001, to $5.1 million for the six months
ended August 3, 2002. As a percentage of net sales, general and administrative
expense decreased to 3.1% for the first half of fiscal 2002 compared to 3.2% for
the first half of fiscal 2001. Decreases in general and administrative expenses,
as a percentage of net sales, for both the three and six month periods of fiscal
2002 compared to the same periods of fiscal 2001 resulted primarily from
consistent results in many expense categories with slight improvements in some
expense categories.
As a result of the above changes, the Company's income from operations increased
$0.4 million to $5.4 million for the second quarter of fiscal 2002 compared to
$5.0 million for the second quarter of fiscal 2001, a 7.5% increase. Income from
operations was 6.4% of net sales in both the second quarter of fiscal 2002 and
2001. Income from operations, year-to-date through August 3, 2002, was $10.9
million, a $0.3 million increase from the first half of the prior year. Income
from operations was 6.7% of net sales for the first six months of fiscal 2002
compared to 6.9% for the first six months of fiscal 2001.
10
THE BUCKLE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the quarter ended August 3, 2002, other income decreased $0.2 million. For
the six months ended August 3, 2002, other income decreased $0.1 million. Other
income decreased in the both the three and six-month periods of fiscal 2002
compared to the same periods of fiscal 2001 due to income in the prior year
received from state tax incentive programs.
Income tax expense as a percentage of pre-tax income was 37.2% in both the
second quarter and first half of fiscal 2002 compared to 38.3% and 37.7% in the
second quarter and first half of fiscal 2001.
Liquidity and Capital Resources
The Company's primary ongoing cash requirements are for inventory, payroll, new
store expansion, and remodeling. Historically, the Company's primary source of
working capital has been cash flow from operations. However, the first half of
each fiscal year is typically a period of decreasing cash flows created by
various operating, investing, and financing activities. During the first half of
fiscal 2002 and 2001, the Company's cash flow used by operating activities was
$3.6 and $7.1 million, respectively.
The uses of cash for both twenty-six week periods include payment of annual
bonuses accrued at fiscal year end, changes in inventory and accounts payable
for build up of inventory levels, and construction costs for new and remodeled
stores. The differences in cash flow for the first half of fiscal 2002 compared
to the first half of fiscal 2001 were primarily due to changes in inventory,
prepaid expenses and other assets, accounts payable, investments, property and
equipment, and income taxes payable.
The Company has available an unsecured operating line of credit of $7.5 million
and a $10.0 million unsecured line of credit for foreign and domestic letters of
credit, with Wells Fargo Bank Nebraska, N.A. Borrowings under the lending
arrangements provide for interest to be paid at a rate equal to the prime rate
published in the Wall Street Journal on the date of the borrowings. As of August
3, 2002, the Company had working capital of $187.2 million, including $79.8
million of cash and cash equivalents and investments of $55.9 million. The
Company has, from time to time, borrowed against these lines during periods of
peak inventory build-up. There were no bank borrowings during the first half of
fiscal 2002 or fiscal 2001.
During the first half of fiscal 2002 and 2001 the Company invested $4.1 million
and $6.2 million, respectively, in new store construction, store renovation and
upgrading store technology, net of any construction allowances received from
landlords. The Company also spent approximately $0.4 million and $0.3 million in
the first half of fiscal 2002 and 2001, respectively, in capital expenditures
for the corporate headquarters and distribution center.
During the remainder of fiscal 2002, the Company anticipates completing
approximately nine additional store construction projects, including
approximately six new stores and approximately three stores to be remodeled
and/or relocated. As of August 3, 2002, nine additional lease contracts have
been signed, and additional leases are in various stages of negotiation.
11
THE BUCKLE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management now estimates that total capital expenditures during fiscal 2002 will
be approximately $23.0 million before any landlord allowances, estimated to be
at approximately $2.9 million. Projected capital expenditures include the
Company's plan to replace one of its corporate airplanes during the second half
of fiscal 2002. The Company believes that existing cash and cash flow from
operations will be sufficient to fund current and long-term anticipated capital
expenditures and working capital requirements for the next year.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's Discussion and Analysis of Financial Condition and Results of
Operations are based upon The Buckle, Inc.'s financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
that management make estimates and judgments that affect the reported amounts of
assets and liabilities, and disclosure of contingent assets and liabilities, at
the financial statement date, and the reported amounts of sales and expenses
during the reporting period. The Company regularly evaluates its estimates,
including those related to merchandise returns, inventory, bad debts, health
care costs and income taxes. Management bases its estimates on past experience
and on various other factors that are thought to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The Company's certain critical accounting policies
are listed below.
1. Merchandise Returns. The Company establishes a liability for estimated
merchandise returns at the end of the period. Customer returns could
potentially exceed those reserved for, reducing future net sales results.
2. Inventory. Inventory is valued at the lower of cost or market. Cost is
determined using the average cost method and management makes estimates to
reserve for obsolescence and markdowns that could effect market value,
based on assumptions regarding future demand and market conditions. Such
judgments may have a material impact on current and future operating
results and financial position.
3. Bad Debts. The Company books an allowance for doubtful accounts based upon
historical data and current trends. Management believes the reserve is
adequate; however, customers' ability to pay could deteriorate causing
actual losses to exceed those anticipated in the allowance.
4. Health Care Costs. The Company is self-funded for health and dental claims
up to $60,000 per individual per plan year. This plan covers eligible
employees and management makes estimates at period end to record a reserve
for future claims. The number and amount of claims submitted could vary
from the amounts reserved, effecting current and future net earnings
results.
5. Income Taxes. The Company records a deferred tax asset for future tax
benefits for difference between book and tax revenue and expense
recognition. If the Company is unable to realize all or part of its
deferred tax asset in the future, an adjustment would be charged to income
in the period such determination was made.
12
THE BUCKLE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
As referenced in the tables below, the Company has contractual obligations and
commercial commitments that may affect the financial condition of the Company.
Based on management's review of the terms and conditions of its contractual
obligations and commercial commitments, there is no known trend, demand,
commitment, event or uncertainty that is reasonably likely to occur which would
have a material effect on the Company's financial condition or results of
operations. In addition, the commercial obligations and commitments made by the
Company are customary transactions, which are similar to those of other
comparable retail companies.
The following tables identify the material obligations and commitments as of
August 3, 2002:
- --------------------------------------------------------------------------------------------------
Payments Due by Period
- --------------------------------------------------------------------------------------------------
Contractual obligations Total Less than 1-3 years 4-5 years After 5 years
(dollar amounts in 1 year
thousands)
- --------------------------------------------------------------------------------------------------
Long term debt $ -- $ -- $ -- $ -- $ --
- --------------------------------------------------------------------------------------------------
Operating leases $190,196 $ 27,322 $ 50,964 $ 42,942 $ 68,968
- --------------------------------------------------------------------------------------------------
Total contractual obligations $190,196 $ 27,322 $ 50,964 $ 42,942 $ 68,968
- --------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Amount of Commitment Expiration Per Period
- -----------------------------------------------------------------------------------------------------
Other Commercial Total Amounts Less than 1-3 years 4-5 years After 5 years
Commitments (dollar amounts Committed 1 year
in thousands)
- ----------------------------------------------------------------------------------------------------
Lines of Credit $ 7,500 $ 7,500 $ -- $ -- $ --
Letters of Credit $ 10,000 $ 10,000 $ -- $ -- $ --
Total Commercial Commitments $ 17,500 $ 17,500 $ -- $ -- $ --
- ----------------------------------------------------------------------------------------------------
13
THE BUCKLE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEASONALITY AND INFLATION
The Company's business is seasonal, with the Christmas season (from
approximately November 15 to December 30) and the back-to-school season (from
approximately July 15 to September 1) historically contributing the greatest
volume of net sales. For fiscal years 1999, 2000, and 2001, the Christmas and
back-to-school seasons accounted for an average of approximately 40% of the
Company's fiscal year net sales. Although the operations of the Company are
influenced by general economic conditions, the Company does not believe that
inflation has had a material effect on the results of operations during the
twenty-six week periods ended August 3, 2002, and August 4, 2001.
FORWARD LOOKING STATEMENTS
Information in this report, other than historical information, may be considered
to be forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "1995 Act"). Such statements are made in good
faith by the Company pursuant to the safe-harbor provisions of the 1995 Act. In
connection with these safe-harbor provisions, this management's discussion and
analysis contains certain forward-looking statements, which reflect management's
current views and estimates of future economic conditions, company performance
and financial results. The statements are based on many assumptions and factors
that could cause future results to differ materially. Such factors include, but
are not limited to, changes in product mix, changes in fashion trends,
competitive factors and general economic conditions, economic conditions in the
retail apparel industry, as well as other risks and uncertainties inherent in
the Company's business and the retail industry in general. Any changes in these
factors could result in significantly different results for the Company. The
Company further cautions that the forward-looking information contained herein
is not exhaustive or exclusive. The Company does not undertake to update any
forward-looking statements, which may be made from time to time by or on behalf
of the Company.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has evaluated the disclosure requirements of Item 305 of S-K
"Quantitative and Qualitative Disclosures about Market Risk," and has concluded
that the Company has no market risk sensitive instruments for which these
additional disclosures are required.
14
THE BUCKLE, INC.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings: None
Item 2. Changes in Securities and Use of Proceeds: None
Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders:
(a) May 30, 2002, Annual Meeting
(b) Board of Directors:
Daniel J. Hirschfeld Robert E. Campbell
Dennis H. Nelson William D. Orr
Karen B. Rhoads Ralph M. Tysdal
Bill L. Fairfield Bruce L. Hoberman
James E. Shada David A. Roehr
NUMBER OF SHARES*
----------------
For Against Abstain Del N-Vote
--- ------- ------- ----------
(c) 1. Election of Board of Directors:
Daniel J. Hirschfeld 20,507,109 0 32,283
Dennis H. Nelson 20,032,861 0 506,531
Karen B. Rhoads 20,005,651 0 533,741
James E. Shada 20,005,651 0 533,741
Bill L. Fairfield 20,441,949 0 97,443
Robert E. Campbell 20,442,173 0 97,219
William D. Orr 20,438,649 0 100,743
Ralph M. Tysdal 20,442,113 0 97,279
Bruce L. Hoberman 20,504,213 0 35,179
David A. Roehr 20,504,373 0 35,019
2. Appoint Deloitte & Touche LLP
as independent auditors. 20,376,982 162,410 9,100
3. Approve Company's 2002
Management Incentive Program 17,103,621 555,470 709,104 2,171,197
4. Approve Amendment to Company's
1993 Director Stock Option Plan 18,660,803 1,173,212 705,377
*includes only shares represented in person or by proxy at the annual meeting
(d) None
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits 99.1 and 99.2 Certifications Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) No reports on Form 8-K were filed by the Company during the
quarter ended August 3, 2002.
15
THE BUCKLE, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE BUCKLE, INC.
Dated: August 28, 2002 /s/ DENNIS H. NELSON
-------------------- --------------------------------------
DENNIS H. NELSON, President
and CEO
Dated: August 28, 2002 /s/ KAREN B. RHOADS
-------------------- --------------------------------------
KAREN B. RHOADS, Vice President of
Finance and CFO
16