Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended FEBRUARY 1, 2003
|_| 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
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, $.01 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K |_|.
The aggregate market value (based on the closing price of the New York Stock
Exchange) of the Common Stock of the Registrant held by non-affiliates of the
Registrant was $134,291,916.00 on March 24, 2003. For purposes of this response,
executive officers and directors are deemed to be the affiliates of the
Registrant and the holdings by non-affiliates was computed as 7,460,662 shares.
The number of shares outstanding of the Registrant's Common Stock, as of March
24, 2003, was 21,057,734.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement dated April 26, 2003 for Registrant's
2003 Annual Meeting of Shareholders to be held May 29, 2003 are incorporated by
reference in Part III.
THE BUCKLE, INC.
FORM 10-K
FEBRUARY 1, 2003
TABLE OF CONTENTS
PAGE
----
PART I
Item 1. Business 3
Item 2. Properties 11
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
Item 5. Market for Registrant's Common Equity and Related 11
Shareholder Matters
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of Financial 12
Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 12
Item 8. Financial Statements and Supplementary Data 12
Item 9. Changes In and Disagreements With Accountants on 12
Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant 12
Item 11. Executive Compensation 12
Item 12. Security Ownership of Certain Beneficial Owners and
Management 13
Item 13. Certain Relationships and Related Transactions 13
Item 14. Controls and Procedures 13
PART IV
Item 15. Exhibits, Financial Statements, Schedules and Reports 13
on Form 8-K
2
PART I
ITEM 1 - BUSINESS
The Buckle, Inc. (the "Company") is a retailer of medium to better-priced casual
apparel, footwear and accessories for fashion conscious young men and women. As
of February 1, 2003, the Company operated 304 retail stores in 37 states
throughout the central United States, as well as in the northwest, southeast and
southwestern states under the names "Buckle" and "The Buckle." The Company
markets a wide selection of mostly brand name casual apparel including denims,
other casual bottoms, tops, sportswear, outerwear, accessories and footwear. The
Company emphasizes personalized attention to its customers and provides customer
services such as free alterations, free gift-wrapping, easy layaways and a
frequent shopper program. Most stores are located in regional, high-traffic
shopping malls, and this is the Company's strategy for future expansion. All of
the Company's central office functions, including purchasing, pricing,
advertising and distribution, are controlled from its headquarters and
distribution center in Kearney, Nebraska.
Incorporated in Nebraska in 1948, the Company commenced business under the name
Mills Clothing, Inc., a conventional men's clothing store with only one
location. In 1967, a second store, under the trade name Brass Buckle, was
purchased. In the early 1970s, the store image changed to that of a jeans store
with a wide selection of denims and shirts. The first branch store was opened in
Columbus, Nebraska, in 1976. In 1977, the Company began selling young women's
apparel as well, and opened its first mall store. The Company has experienced
significant growth over the past ten years, growing from 104 stores at the start
of 1993 to 304 stores by the close of fiscal 2002. The Company changed its
corporate name to The Buckle, Inc. on April 23, 1991. All references herein to
fiscal 2002 refer to the 52-week period ended February 1, 2003. Fiscal 2001
refers to the 52-week period ended February 2, 2002 and fiscal 2000 refers to
the 53-week period ended February 3, 2001.
The Company's principal executive offices and distribution center are located at
2407 West 24th Street, Kearney, Nebraska 68845. The Company's telephone number
is (308) 236-8491. The Company publishes its corporate web site at
www.buckle.com.
MARKETING AND MERCHANDISING
The Company's marketing and merchandising strategy is designed to create
customer loyalty by offering a wide selection of key brand name merchandise and
providing a broad range of value-added services. The Company provides a unique
specialty apparel store with merchandise designed to appeal to the fashion
conscious 12-to 24-year old. The merchandise mix includes denims, slacks/casual
bottoms, tops, sweaters, sportswear, outerwear, accessories and footwear. Denim
is a significant contributor to total sales (32.8% of fiscal 2002 net sales) and
is a key to the Company's merchandising concept. The Company believes it
attracts customers with a selection of key brands and a wide variety of fits,
finishes and styles in denim. Shirts and tops are also significant contributors
to the total sales (32.0% of fiscal 2002 net sales). The Company strives to
provide a continually changing selection of the latest casual fashions.
The percentage of net sales over the past three fiscal years of the Company's
major product lines are set forth in the following table.
Percentage of Net Sales
-----------------------
Merchandise Group Fiscal Fiscal Fiscal
----------------- 2002 2001 2000
---- ---- ----
Denims 32.8% 28.8% 26.6%
Slacks/Casual Bottoms 3.7 5.0 5.4
Tops (including sweaters) 32.0 33.5 32.2
Sportswear/Fashion Clothes 4.8 5.7 6.5
Outerwear 3.7 2.9 3.3
Accessories 11.3 11.0 9.1
Footwear 11.4 11.8 14.4
Little Guys/Gals 0.1 1.0 2.2
Other 0.2 0.3 0.3
----- ----- -----
Total 100.0% 100.0% 100.0%
====== ====== ======
3
Brand name merchandise constitutes nearly 90% of the Company's sales volume. The
remaining balance is comprised of private label merchandise that is manufactured
to the Company's specifications. The Company's merchandisers continually work
with manufacturers and vendors to produce brand name merchandise that is unique
in color and style. While the brands offered by the Company change to meet
current customer preferences, the Company currently offers brands such as Lucky
Brand Dungarees, Silver, Fossil, Billabong, Ecko, Quiksilver and Roxy. The
Company believes brand name merchandise will continue to constitute a
substantial majority of sales.
Management believes the Company provides a unique store setting by maintaining a
high level of customer service and by offering a wide selection of fashionable,
quality merchandise at good values. The Company believes that it is essential to
create an enjoyable shopping atmosphere and, in order to fulfill this mission,
we must provide highly motivated employees who give personal attention to
customers. Each salesperson is educated to help create a complete look for the
customer by helping them find the best fits and showing merchandise as
coordinating outfits. The Company also incorporates specialized services such as
free alterations, free gift wrapping, layaways, a frequent shopper card, the
Buckle private label credit card and a special order system which allows stores
to obtain specifically requested merchandise from other Company stores.
Customers are encouraged to use the Company's layaway plan, which allows
customers to make a partial payment on merchandise that is then held by the
store until the balance is paid. For the past three fiscal years, an average of
approximately five to six percent of net sales have been made on a layaway
basis.
Merchandising and pricing decisions are made centrally; however, the Company's
distribution system allows for variation in the mix of merchandise distributed
to each store. This allows individual store inventories to be tailored to
reflect differences in customer buying patterns at various locations. In
addition, to assure a continually fresh, new look in its stores, the Company
ships new merchandise daily to most stores, including varying styles and colors
that differ from prior merchandise. The Company also has a transfer program that
shifts specific merchandise to locations where it is selling best. This
distribution and transfer system helps to maintain customer satisfaction by
providing in-stock popular items and reducing the need to mark down slow-moving
merchandise at a particular location. The Company believes the reduced markdowns
justify the incremental costs of distribution associated with the transfer
system. The Company does not hold storewide off-price sales at anytime.
During fiscal 2002, the Company unveiled a totally new store design and
corporate logo. The company worked with a national design firm to review
architectural elements, including all wall systems, lighting, finishes and
fixtures. The new design has been very positively received by guests, landlords
and management. The last prior update to the store look was in fiscal 1997. New
materials include: wood flooring, enhanced graphic elements, corrugated metals
and Icon brand elements. Accessory and shoe fixtures were developed and rolled
out to all stores in fiscal 2002. The Company opened the first new prototype
stores in the summer of 2002 with all subsequent remodels and new stores
featuring the new design. At the end of fiscal 2002, a total of 15 stores had
the new look - eight new stores and seven remodeled locations.
The basic overall store architectural design presents a unique atmosphere in
which the store's architectural elements, including feature display walls,
provide a backdrop and create a strong visual presentation for the customer.
Special care is taken to provide a comfortable environment to which customers
can relate.
MARKETING AND ADVERTISING
In fiscal 2002, the Company spent $4.4 million (net co-op reimbursements) or
1.1% of net sales on advertising, promotions and in-store point of sale
materials. In-store seasonal sign kits, promotional signage, image brochures and
catalogs are used to enhance merchandising presentations and the stores' image.
Promotions such as sweepstakes, gift with purchase offers and special events are
designed to create a unique shopping experience for Buckle guests. Magazine
advertising in leading teen publications is used during key seasons to introduce
new merchandise, build awareness and brand the Buckle's image. The Buckle
partners with key vendors on magazine opportunities and special promotions to
extend its marketing reach. Radio advertising continues as a media source used
to support special events and promotions such as sweepstakes, grand openings and
end-of-season sales in approximately 75% of the Company's markets.
In 2002, along with the new store concept, the Company rolled out a new logo to
create a stronger brand identity for the Buckle. The new logo includes a B-Icon
element and signature red color. All marketing materials and supplies were
redesigned to translate the new brand identity throughout the Company including
the retail stores, online and corporate communication.
4
The Company offers programs to strengthen relationships with loyal guests. The
Company continues to support a frequent shopper program (the Buckle Primo Card),
a rewards program designed to build customer loyalty. Private label credit card
marketing is another avenue for marketing to loyal guests. The Company extends
exclusive benefits to active Buckle Cardholders such as coupons and other
special targeted mailings. In 2002, the Buckle introduced B-Rewards, an
exclusive rewards program for Buckle Cardholders. Qualifying Cardholders are
mailed B-Rewards merchandise certificates at the end of each Rewards program
inviting them back into the store at the start of the next season. The Buckle
Card marketing program is partially funded by WFNNB, a third-party bank that
owns the Buckle Card accounts.
The Company publishes a corporate web site at www.buckle.com. The Company's web
site serves as a second retail touch-point for cross-channel marketing, reaching
a growing online audience. Buckle.com is an eCommerce enabled channel with an
interactive, entertaining, informative and brand building environment where
visitors can get the latest Buckle fashion information with special features
including an online denim guide, "look" suggestions and style boutiques. The
Company has an opt-in online database and sends periodic and targeted e-mail
campaigns to notify members of the latest store promotions and product
offerings. Online guests can shop, enter sweepstakes, fill out a wish list, find
out about career opportunities, and read the latest Buckle financial news. The
Buckle Online Store was launched April 26, 1999 as a marketing tool, to extend
the Company's brand beyond the physical locations. Offering a growing selection
of the merchandise inventory online, the Company presents the online store as a
"taste test" in new markets as well as a cross-channel tool in existing markets.
STORE OPERATIONS
The Company has an Executive Vice President of Sales, a Vice President of Sales,
15 district managers and 61 area managers. Ten of the district managers and all
of the area managers also serve as manager of their home base store. Each store
has one manager, one or two assistant managers, one to three additional
full-time salespeople and up to 20 part-time salespeople. Most stores have peak
levels of staff during the back-to-school and Christmas seasons. Almost every
location also employs a seamstress.
The Company places great importance on educating quality personnel. Along with
sharing career opportunities with Buckle employees, the Company recruits interns
and management trainees from college campuses. A majority of the Company's store
managers, all of its Area and District managers and most of its upper level
management are former salespeople, including the President and CEO, Dennis H.
Nelson and Chairman, Daniel J. Hirschfeld. Recognizing talent and promoting
managers from within allows the Company to build a strong foundation for
management.
Store managers receive compensation in the form of a base salary and incentive
bonuses. District and area managers also receive added incentives based upon the
sales performance of stores in their district/area. Store managers perform sales
training of new employees at the store level. Salespeople displaying particular
talent are generally assigned to stores operated by district managers for
training as a store manager.
The Company has established a comprehensive program stressing the prevention and
control of shrinkage losses. Steps taken to reduce shrinkage include monitoring
cash refunds, voids, inappropriate discounts, employee sales and
returns-to-vendor. The Company also has electronic article surveillance systems
in approximately 99% of the Company's stores as well as surveillance camera
systems in approximately 71% of the stores. As a result, the Company achieved a
merchandise shrinkage rate of 0.6% of net sales for fiscal 2002, 0.7% of net
sales for fiscal 2001 and 0.6% for fiscal year 2000.
The average store is approximately 4,800 square feet (of which the Company
estimates an average of approximately 80% is selling space), and stores range in
size from 2,600 square feet to 8,475 square feet.
5
PURCHASING AND DISTRIBUTION
The Company has a very experienced buying team. The buying team includes the
President, the Vice President of Women's Merchandising, one women's
merchandiser, seven women's buyers, and three men's merchandisers and two men's
buyers. The top five members of this buying team combined, have 110 years of
experience with the Company. The experience and leadership within the buying
team contributes significantly to the company's success by enabling the buying
team to react quickly to changes in fashion and by providing extensive knowledge
of sources for branded and private label goods.
The Company purchases products from manufacturers within the United States and
from some foreign manufacturers. The Company's merchandising team monitors U.S.
fashion centers (in New York and on the West Coast) and shops high fashion
stores to adapt new ideas to The Buckle. The Company continually monitors fabric
selection, quality and delivery schedules. The Company has not experienced any
material difficulties with merchandise manufactured in foreign countries. The
Company does not have long-term or exclusive contracts with any brand name
manufacturer or supplier. The Company does have a long term relationship with an
agent in Hong Kong for the manufacture of The Buckle, Inc.'s private label
merchandise. An agreement with this company was entered into on November 28,
1994, for orders placed subsequent to that date.
In fiscal 2002, Lucky Brand Dungarees made up 25.0% of the Company's net sales.
No other vendor accounted for more than 10% of the Company's sales. Other
current significant vendors include Fossil, Silver, Billabong, Ecko, Quiksilver
and Roxy. The Company continually strives to offer brands that are currently
popular with its customers and, therefore, the Company's suppliers and purchases
from specific vendors may vary significantly from year to year.
The Buckle stores generally carry the same merchandise, with quantity and
seasonal variations based upon historical sales data, climate and perceived
local customer interest. The Company uses a centralized receiving and
distribution center located within the corporate headquarters building in
Kearney, Nebraska. Merchandise is received daily in Kearney where it is sorted,
tagged with bar-coded tickets (unless the vendor UPC code can be used or the
merchandise is pre-ticketed), and packaged for distribution to individual stores
primarily via United Parcel Service. The Company's goal is to ship the majority
of its merchandise out to the stores within one to two business days of receipt.
This system allows stores to receive new merchandise almost every day, creating
excitement within each store and providing customers with a good reason to shop
often. When available, the Company uses merchandise "pre-packs" to expedite the
movement of product through the distribution center.
The Company's current building space and distribution system will allow for
handling of up to 450 stores. The Company has developed an effective
computerized system for tracking merchandise from the time it is checked in at
the Company's distribution center until it arrives at the stores and is sold to
a customer. The system's function is to insure that store shipments are
delivered accurately and promptly, to account for inventory and to assist in
allocating merchandise among stores. Management can track, on a daily basis,
which merchandise is selling at specific locations and directs transfers of
merchandise from one store to another as necessary. This allows stores to carry
a reduced inventory while at the same time satisfying customer demands.
To reduce inter-store shipping costs and provide a more timely restocking of
in-season merchandise, the Company has increased its focus on warehousing a
portion of initial shipments. Sales reports are then used to replenish, on a
basis of one to three times each week, those stores that are experiencing the
greatest success selling specific styles, colors and sizes of merchandise. This
system is also designed to prevent an over-crowded look in the stores at the
beginning of a season.
6
STORE LOCATIONS AND EXPANSION STRATEGIES
As of April 1, 2003, the Company operated 307 stores in 37 states, including 3
stores opened in fiscal 2003. The existing stores are in 4 downtown locations,
11 strip centers, 5 lifestyle centers and 287 shopping malls. The Company
anticipates opening approximately 12 additional new stores in fiscal 2003. All
new stores for fiscal 2003 are expected to be located in higher traffic shopping
malls except for one which is expected to be located in a lifestyle center. The
following table lists the location of existing stores as of April 1, 2003.
Location of Stores
------------------
State Number of Stores State Number of Stores
----- ---------------- ----- ----------------
Alabama 4 Montana 5
Arizona 6 Nebraska 15
Arkansas 5 New Mexico 4
California 9 North Carolina 7
Colorado 10 North Dakota 3
Florida 3 Ohio 13
Georgia 3 Oklahoma 14
Idaho 5 Oregon 2
Illinois 16 Pennsylvania 4
Indiana 12 South Carolina 1
Iowa 20 South Dakota 3
Kansas 16 Tennessee 7
Kentucky 5 Texas 32
Louisiana 7 Utah 8
Michigan 18 Virginia 1
Minnesota 10 Washington 5
Mississippi 5 West Virginia 2
Missouri 12 Wisconsin 14
Wyoming 1
---
Total 307
===
The Buckle has grown significantly over the past ten years, with the number of
stores increasing from 104 at the beginning of 1993 to 304 at the end of fiscal
2002. The Company's plan is to continue expansion by developing the geographic
region it currently serves and by expanding into contiguous markets. The Company
intends to open new stores only when management believes there is a reasonable
expectation of satisfactory results.
The following table sets forth information regarding store openings and closings
since the beginning of fiscal 1993 to the end of fiscal 2002:
Total Number of Stores Per Year
Fiscal Open at start Opened in Closed in
Year of year Current Year Current Year Total
--------------------------------------------------------------------------------------------
1993 104 27 - 131
1994 131 16 - 147
1995 147 17 - 164
1996 164 17 - 181
1997 181 19 1 199
1998 199 24 1 222
1999 222 27 1 248
2000 248 28 2 274
2001 274 24 3 295
2002 295 11 2 304
7
The Company's criteria used when considering a particular location for
expansion include:
1. Market area, including proximity to existing markets to capitalize
on name recognition;
2. Trade area population (number, average age, and college population);
3. Economic vitality of market area;
4. Mall location, anchor tenants, tenant mix, average sales per square
foot;
5. Available location within a mall, square footage, storefront width,
and facility of using the current store design;
6. Availability of suitable management personnel for the market;
7. Cost of rent, including minimum rent, common area and extra charges;
8. Estimated construction costs, including landlord charge backs and
tenant allowances.
The Company generally seeks sites of 4,000 to 5,000 square feet for its stores.
The projected cost of opening a store with the new design is approximately
$710,000, including construction costs of approximately $540,000 (prior to any
construction allowance received) and inventory costs of approximately $170,000,
net of accounts payable.
The Company anticipates opening approximately 15 new stores during fiscal 2003
and completing the remodeling of approximately 15 existing stores. Remodels
range from partial to full, with construction costs for a full remodel being
nearly the same as for a new store. Of the stores scheduled for remodeling
during fiscal 2003, it is estimated that each will receive full remodeling. The
Company has budgeted a total of $19.6 million (before estimated construction
allowances from landlords of $2.8 million) for new store construction,
remodeling, technology upgrades and improvements at the corporate headquarters
during fiscal 2003.
The Company plans to expand in 2003 by opening stores in existing markets and
plans to open a store in one new state. New store openings are generally
scheduled to coincide with the increased customer traffic of the Easter,
back-to-school or Christmas holiday shopping seasons.
The Company believes that, given the time required for training personnel,
staffing a store and developing adequate district and regional managers, its
current management infrastructure is sufficient to support its currently planned
rate of growth.
The Company's ability to expand in the future will depend, in part, on general
business conditions, the ability to find suitable malls with acceptable sites on
satisfactory terms, the availability of financing and the readiness of trained
store managers. There can be no assurance that the Company's expansion plans
will be fulfilled in whole or in part, or that leases under negotiation for
planned new sites will be obtained on terms favorable to the Company.
MANAGEMENT INFORMATION SYSTEMS
The Company's management information systems (MIS) and electronic data
processing systems (EDP) consist of a full range of retail, financial and
merchandising systems, including purchasing, inventory distribution and control,
sales reporting, accounts payable and merchandise management.
The system includes PC based point-of-sale (POS) registers equipped with bar
code readers in each store. These registers are polled nightly by the central
computer (IBM AS/400) using a virtual private network for collection of
comprehensive data, including complete item-level sales information, employee
time clocking, merchandise transfers and receipts, special orders, supply orders
and returns-to-vendor. In conjunction with the nightly polling, the central
computer sends the PC server messages from various departments at the Company
headquarters and price changes for the price lookup (PLU) file maintained within
the POS registers.
Each weekday morning, the Company initiates an electronic "sweep" of the
individual store bank accounts to the Company's primary concentration account.
This allows the Company to meet its obligations with a minimum of borrowing and
to invest excess cash on a timely basis.
Management monitors the performance of each of its stores on a continual basis.
Daily information is used to evaluate inventory, determine markdowns, analyze
profitability and assist management in the scheduling and compensation of
employees. Additionally, reports are generated verifying daily bank deposit
information against recorded sales, identifying transactions rung at prices that
differ from the PLU file, and listing selected "exception" transactions (e.g.
refunds, cash paid-outs, discounts). These reports are used to help assure
consistency among the stores and to help prevent losses due to error or
dishonesty.
8
The PLU system allows management to control merchandise pricing centrally,
permitting faster and more accurate processing of sales at the store and the
monitoring of specific inventory items to confirm that centralized pricing
decisions are carried out in each of the stores. Management is able to direct
all price changes, including promotional, clearance and markdowns on a central
basis and estimate the financial impact of such changes.
The virtual private network for communication with the stores also supports the
Company's intranet site. The intranet allows stores to view various types of
information from the corporate office, including timely information from the
advertising, merchandising and benefits departments. Stores can also perform
product searches with pictures on the intranet and request employee numbers for
new teammates.
The Company is committed to ongoing review of the MIS and EDP systems to provide
productive, timely information and effective controls. This review includes
testing of new products and systems to assure that the Company is aware of
technological developments. Most important, continual feedback is sought from
every level of the Company to assure that information provided is pertinent to
all aspects of the Company's operations.
EMPLOYEES
As of February 1, 2003, the Company had approximately 5,800 employees -
approximately 1,103 of whom were full-time. The Company has an experienced
management team and substantially all of the management team, from store
managers through senior management, commenced work for the Company on the sales
floor. The Company experiences high turnover of store and distribution center
employees, primarily due to having a significant number of part-time employees.
However, the Company has not experienced significant difficulty in hiring
qualified personnel. Of the total employees, approximately 300 are employed at
the corporate headquarters and in the distribution center. None of the Company's
employees are represented by a union. Management believes that employee
relations are good.
The Company provides medical, dental, life insurance and long-term disability
plans, as well as a 401(k) and a section 125 cafeteria plan for eligible
employees. An employee must be at least 20 years of age and work a minimum of
1,000 hours during the plan year to be eligible for the 401(k) plan. To be
eligible for the plans, other than the 401(k) Plan, an employee must have worked
for the Company for 90 days or more, and his or her normal workweek must be 35
hours or more. As of February 1, 2003, 834 employees participated in the medical
plan, 844 in the dental plan, 824 in the life insurance plan, 782 in the
long-term disability plan and 313 in the cafeteria plan. With respect to the
medical, dental and life insurance plans, the Company pays 80% to 100% of the
employee's expected premium cost plus 20% to 100% of the expected cost of
dependent coverage under the health plan. The exact percentage is based upon the
employee's term of employment and job classification within the Company. In
addition, all employees receive discounts on company merchandise.
COMPETITION
The men's and women's apparel industries are highly competitive with fashion,
selection, quality, price, location, store environment and service being the
principal competitive factors. While the Company believes that it is able to
compete favorably with other merchandisers, including department stores and
specialty retailers, with respect to each of these factors, the Company believes
it competes mainly on the basis of customer service and merchandise selection.
In the men's merchandise areas, the Company competes with specialty retailers
such as Abercrombie & Fitch, American Eagle Outfitters, Gadzooks, Gap and
Pacific Sunwear. The men's market also competes with certain department stores,
such as Dillards, Federated stores, May Company stores, Saks and other local or
regional department stores and specialty retailers, as well as with mail order
and internet merchandisers.
In the women's merchandise area, the Company competes with specialty retailers
such as Abercrombie & Fitch, American Eagle Outfitters, Express, Gadzooks, Gap,
Maurices, Pacific Sunwear, Wet Seal and Vanity. The women's sales also compete
with department stores, such as Dillards, Federated stores, May Company stores,
Saks and certain local or regional department stores and specialty retailers, as
well as with mail order and internet merchandisers.
Many of the Company's competitors are considerably larger and have substantially
greater financial, marketing and other resources than the Company, and there is
no assurance that the Company will be able to compete successfully with them in
the future. Furthermore, while the Company believes it competes effectively for
favorable site locations and lease terms, competition for prime locations within
a mall is intense.
9
TRADEMARKS
"BUCKLE", "BKLE", "RECLAIM", "BKE" and "THE BUCKLE" are federally registered
trademarks of the Company. The Company believes the strength of its trademarks
is of considerable value to its business, and its trademarks are important to
its marketing efforts. The Company intends to protect and promote its trademarks
as management deems appropriate.
EXECUTIVE OFFICERS OF THE COMPANY
The Executive Officers of the Company are listed below, together with brief
accounts of their experience and certain other information.
DANIEL J. HIRSCHFELD, AGE 61. Mr. Hirschfeld is Chairman of the Board of the
Company. He has served as Chairman of the Board since April 19, 1991. Prior to
that time, Mr. Hirschfeld served as President and Chief Executive Officer. Mr.
Hirschfeld has been involved in all aspects of the Company's business, including
the development of the Company's management information systems.
DENNIS H. NELSON, AGE 53. Mr. Nelson is President and Chief Executive Officer
and a Director of the Company. He has held the titles of President and Director
since April 19, 1991. Mr. Nelson was elected Chief Executive Officer on March
17, 1997. Mr. Nelson began his career with the Company in 1970 as a part-time
salesman while he was attending Kearney State College (now the University of
Nebraska - Kearney). While attending college, he became involved in
merchandising and sales supervision for the Company. Upon graduation from
college in 1973, Mr. Nelson became a full-time employee of the Company and he
has worked in all phases of the Company's operations since that date. Prior to
his election as President and Chief Operating Officer on April 19, 1991, Mr.
Nelson performed all of the functions normally associated with those positions.
KAREN B. RHOADS, AGE 44. Ms. Rhoads is the Vice-President - Finance, Treasurer,
Chief Financial Officer and a Director of the Company. Ms. Rhoads was elected a
Director on April 19, 1991. She worked in the corporate offices during college
and later worked part-time on the sales floor. Ms. Rhoads practiced as a CPA for
6 1/2 years, during which time she began working on tax and accounting matters
for the Company as a client. She has been employed with the Company since
November 1987.
JAMES E. SHADA, AGE 47. Mr. Shada is Executive Vice President - Sales and a
Director of the Company. He was elected Executive Vice President on May 31, 2001
and had served as Vice President of Sales from April 19, 1991 until such date.
Mr. Shada was elected a Director of the Company on May 30, 2002. He began
employment with the Company in November of 1978 as a salesperson. Between 1979
and 1985, he managed and opened new stores for the Company, and in 1985 Mr.
Shada became the Company's sales manager. He is also involved in other aspects
of the business including site selection and development and education of
personnel as store managers and as area and district managers.
BRETT P. MILKIE, AGE 43. Mr. Milkie is Vice President-Leasing. He was elected
Vice President-Leasing on May 30, 1996. Mr. Milkie was a leasing agent for a
national retail mall developer for 6 years prior to joining the company in
January 1992 as director of leasing.
KARI SMITH, AGE 39. Ms. Smith is Vice President - Sales. She has held this
position since May 31, 2001. Ms. Smith joined the Company May 16, 1978 as a
part-time salesperson. Later she became store manager in Great Bend, KS and then
began working with other stores as an area manager. Ms. Smith has continued to
develop her involvement with the sales management executive team, helping with
manager meetings and new store manager development, as well as providing support
for store managers, area managers and district managers.
PATRICIA WHISLER, AGE 46. Ms. Whisler is Vice President of Women's
Merchandising. She has held this position since May 31, 2001. Ms. Whisler joined
the Company in February 1976 as a part-time salesperson and later became manager
of a Buckle store before returning to the corporate office in 1983 to work as
part of the growing merchandising team.
10
ITEM 2 - PROPERTIES
All of the store locations operated by the Company are leased facilities. Most
of the Company's stores have lease terms of approximately ten years and
generally do not contain renewal options. In the past, the Company has not
experienced problems renewing its leases, although no assurance can be given
that the Company can renew existing leases on favorable terms. The Company seeks
to negotiate extensions on leases for stores undergoing remodeling to provide
terms of approximately ten years after completion of remodeling. Consent of the
landlord generally is required to remodel or change the name under which the
Company does business. The Company has not experienced problems in obtaining
such consent in the past. Most leases provide for a fixed minimum rental plus an
additional rental cost based upon a set percentage of sales beyond a specified
breakpoint, plus common area and other charges.
The current terms of the Company's leases, including automatic renewal options,
expire as follows:
During Fiscal Number of
Year expiring leases
--------------------------------------------------
2003 51
2004 28
2005 27
2006 19
2007 23
2008 21
2009 49
2010 and later 86
--
Total 304
===
The corporate headquarters and distribution center for the Company operate
within a facility purchased by the Company in 1988, and located in Kearney, NE.
The building provides approximately 179,000 square feet of space with over 70%
of the area being allocated for the distribution and returns-to-vendor
departments. During fiscal 2000, the Company purchased a 40,000 square foot
building with warehouse and office space near the corporate headquarters, which
will give the Company flexibility in its growth. The Company also acquired a
50-year lease, with favorable lease terms, on the land the building is built
upon.
ITEM 3 - LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. As of the date
of this form, the Company was not engaged in any legal proceedings that are
expected, individually or in the aggregate, to have a material adverse effect on
the Company.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth
quarter of fiscal 2002.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's common stock trades on the New York Stock Exchange under the
symbol BKE. Prior to the Company's initial public offering on May 6, 1992, there
was no public market for the Company's common stock. The Company has not paid
any cash dividends in fiscal 2002, 2001 or 2000, and has no current plans for
dividend payment.
The number of record holders of the Company's common stock as of March 24, 2003
was 404. Based upon information from the principal market makers, the Company
believes there are more than 3,000 beneficial owners. The closing price of the
Company's common stock on March 24, 2003 was $18.00.
11
Additional information required by this item is incorporated by reference to the
information on page 33 of the Company's 2002 Annual Report to Shareholders under
the caption "Stock Prices by Quarter" which is attached to this Form 10-K. The
remainder of the information required by this item appears under the caption
"Equity Compensation Plan Information" in the Company's Proxy Statement for its
2003 Annual Shareholders' Meeting and is incorporated by reference.
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference to the
information on page 10 in the Company's 2002 Annual Report to Shareholders under
the caption "Selected Financial Data" which is attached to this Form 10-K.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is incorporated by reference to the
information appearing on pages 11 through 15 in the Company's 2002 Annual Report
to Shareholders which is attached to this Form 10-K.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
To the extent that we borrow under our line of credit facility, we would be
exposed to market risk related to changes in interest rates. As of February 1,
2003, no borrowings were outstanding under our line of credit facility. We are
not a party to any derivative financial instruments. Additionally, we are
exposed to market risk related to interest rate risk on the short- and long-term
investments of excess cash in short- and long-term investment grade
interest-bearing securities. If there are changes in interest rates, those
changes would affect the investment income we earn on those investments.
We have certain investments that generate interest income. These investments
have carrying values that are subject to interest rate changes that could impact
our earnings to the extent that we did not hold the investments to maturity.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements together with the independent auditors' report thereon
of Deloitte & Touche LLP, dated March 5, 2003, appearing on pages 16 through 32
of the Company's 2002 Annual Report to Shareholders (which is attached to this
Form 10-K) are incorporated by reference in this Form 10-K.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item appears under the captions "Executive
Officers of the Company" appearing on page 10 of this report, and "Election of
Directors" in the Company's Proxy Statement for its 2003 Annual Shareholders'
Meeting and is incorporated by reference.
ITEM 11- EXECUTIVE COMPENSATION
The information required by this item appears under the caption "Executive
Compensation and Other Information" in the Company's Proxy Statement for its
2003 Annual Shareholders' Meeting and is incorporated by reference.
12
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item appears under the caption "Election of
Directors" in the Company's Proxy Statement for its 2003 Annual Shareholders'
Meeting and is incorporated by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appears under the caption "Compensation
Committee Interlocks and Insider Participation" in the Company's Proxy Statement
for its 2003 Annual Shareholders' Meeting and is incorporated by reference.
ITEM 14 - CONTROLS AND PROCEDURES
Within 90 days prior to the date of this report, the company evaluated, under
the supervision and with the participation of the Company's management,
including the Company's Chief Executive Officer (CEO) and Chief Financial
Officer (CFO), the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon the evaluation, the CEO and CFO concluded that the Company's disclosure
controls and procedures are effective in alerting them, in a timely manner, to
material information relating to the Company required to be included in the
Company's periodic SEC filings.
Additionally, the CEO and CFO determined that there were no significant changes
in the Company's internal controls or in other factors that could significantly
affect the Company's internal controls subsequent to the date of their most
recent evaluation.
PART IV
ITEM 15 - EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(A) (1) FINANCIAL STATEMENTS
The Company's 2002 Annual Report to Shareholders, a copy of which appears as
Exhibit 13 to this Form 10-K Report, contains the following on pages 17 through
32 and are hereby incorporated by reference to this report:
Balance Sheets as of February 1, 2003, and February 2, 2002
Statements of Income for each of the three years in the period
ended February 1, 2003
Statements of Stockholders' Equity for each of the three years
in the period ended February 1, 2003
Statements of Cash Flows for each of the three years in the
period ended February 1, 2003
Notes to Financial Statements for each of the three years in
the period ended February 1, 2003
Independent Auditors' Report
(A) (2) FINANCIAL STATEMENT SCHEDULE
Independent Auditors' Report
Schedule II. Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the required
information is presented in the financial statements or notes thereto. This
schedule is on page 17.
(B) REPORTS ON FORM 8-K
The Company did not file a report on Form 8-K during the quarter ended February
1, 2003.
(C) EXHIBITS
See index to exhibits on pages 18 and 19.
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: April 21, 2003 By: /s/ DENNIS H. NELSON
------------------------------
Dennis H. Nelson,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities indicated on the 21st day of April, 2003.
/s/ DANIEL J. HIRSCHFELD
- ------------------------------------ --------------------------------------------
Daniel J. Hirschfeld Bill L. Fairfield
Chairman of the Board and Director Director
/s/ DENNIS H. NELSON
- -------------------------------------------- --------------------------------------------
Dennis H. Nelson Ralph M. Tysdal
President and Chief Executive Officer Director
and Director
/s/ KAREN B. RHOADS
- -------------------------------------------- --------------------------------------------
Karen B. Rhoads Bruce L. Hoberman
Vice President of Finance and Director
Chief Financial Officer and Director
/s/ JAMES E. SHADA
- -------------------------------------------- --------------------------------------------
James E. Shada David A. Roehr
Executive Vice President of Sales Director
/s/ ROBERT E. CAMPBELL /s/ WILLIAM D. ORR
- ------------------------------------ --------------------------------------------
Robert E. Campbell William D. Orr
Director Director
14
CERTIFICATIONS
I, Dennis H. Nelson, certify that:
1. I have reviewed this annual report of The Buckle, Inc. on Form 10-K for
the fiscal year ended February 1, 2003;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations, and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures for the
registrant and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board or directors:
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize, and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: April 21, 2003 /s/ DENNIS H. NELSON
--------------------------
Dennis H. Nelson
Chief Executive Officer
15
CERTIFICATIONS
I, Karen B. Rhoads, certify that:
1. I have reviewed this annual report of The Buckle, Inc. on Form 10-K for
the fiscal year ended February 1, 2003;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations, and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures for the
registrant and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board or directors:
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize, and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: April 21, 2003 /s/ KAREN B. RHOADS
--------------------------
Karen B. Rhoads
Chief Financial Officer
16
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS
THE BUCKLE, INC.
We have audited the financial statements of The Buckle, Inc., ("the Company") as
of February 1, 2003 and February 2, 2002, and for each of the three years in the
period ended February 1, 2003, and have issued our report thereon dated March 5,
2003; such financial statements and report are included in your 2002 Annual
Report to Stockholders and are incorporated herein by reference. Our audits also
included the financial statement schedule of The Buckle, Inc., listed in Item
15(a)(2). This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
March 5, 2003
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Allowance for
Doubtful Accounts
-----------------
Balance, January 29, 2000 $ 225,000
Amounts charged to costs and expenses 857,968
Write-off of uncollectible accounts (832,968)
-----------
Balance, February 3, 2001 250,000
Amounts charged to costs and expenses 816,276
Write-off of uncollectible accounts (816,276)
-----------
Balance, February 2, 2002 250,000
Amounts charged to costs and expenses 856,309
Write-off of uncollectible accounts (889,309)
-----------
Balance, February 1, 2003 $ 217,000
===========
17
INDEX TO EXHIBITS
EXHIBITS PAGE NUMBER OR INCORPORATION
BY REFERENCE TO
(3) Articles of Incorporation and By-Laws.
(3.1) Articles of Incorporation Exhibit 3.1 to Form S-1
of The Buckle, Inc. as amended No. 33-46294
(3.1.1) Amendment to the Articles of
Incorporation of The Buckle, Inc.
(3.2) By-Laws of The Buckle, Inc. Exhibit 3.2 to Form S-1
No. 33-46294
(4) Instruments defining the rights of security
holders, including indentures
(4.1) See Exhibits 3.1 and 3.2 for provisions
of the Articles of Incorporation and
By-laws of the Registrant defining rights
of holders of Common Stock of the registrant
(4.2) Form of stock certificate for Common Stock Exhibit 4.1 to Form S-1
No. 33-46294
(9) Not applicable
(10) Material Contracts
(10.1) 1991 Stock Incentive Plan Exhibit 10.1 to Form S-1
No. 33-46294
(10.2) 1991 Non-Qualified Stock Option Plan Exhibit 10.2 to Form S-1
No. 33-46294
(10.3) Non-Qualified Stock Option Plan and Exhibit 10.3 to Form S-1
Agreement With Dennis Nelson No. 33-46294
(10.4) Acknowledgment for Dennis H. Nelson
dated April 15, 2003
(10.6) Acknowledgment for James E. Shada
dated April 15, 2003
(10.7) Acknowledgment for Kari G. Smith
dated April 15, 2003
(10.8) Acknowledgment for Brett P. Milkie
dated April 15, 2003
(10.9) Acknowledgment for Patricia K. Whisler
dated April 15, 2003
(10.10) Cash or Deferred Profit Sharing Plan Exhibit 10.10 to Form S-1
No. 33-46294
(10.10.1) Non-Qualified Deferred Compensation Plan
(10.11) Promissory Note dated May 15, 2002
between The Buckle, Inc. and Wells
Fargo Bank Nebraska, N.A. for a
$10.0 million line of credit for issuance
of letters of credit.
(10.12) Promissory note dated May 15, 2002 and
Business Loan agreement dated
May 15, 2002 between The Buckle, Inc.
and Wells Fargo Bank Nebraska, N.A,
regarding $7.5 million operating line of credit.
18
(10.17) 1993 Director Stock Option Plan Exhibit A to Proxy Statement
for Annual Meeting to be held
May 26, 1993
(10.18) 1993 Executive Stock Option Plan Exhibit B to Proxy Statement
for Annual Meeting to be held
May 26, 1993
(10.19) 1995 Management Incentive Plan Exhibit A to Proxy Statement
for Annual Meeting to be held
June 2, 1995
(10.20) 1995 Executive Stock Option Plan Exhibit B to Proxy Statement
for Annual Meeting to be held
June 2, 1995
(10.21) 1997 Management Incentive Plan Exhibit A to Proxy Statement
for Annual Meeting to be held
June 2, 1997
(10.22) 1998 Management Incentive Plan Exhibit A to Proxy Statement
for Annual Meeting to be held
May 28, 1998
(10.23) 1997 Executive Stock Option Plan Exhibit B to Proxy Statement
for Annual Meeting to be held
May 28, 1998
(10.24) 1998 Restricted Stock Plan Exhibit C to Proxy Statement
for Annual Meeting to be held
May 28, 1998
(10.25) 1999 Management Incentive Plan Exhibit A to Proxy Statement
for Annual Meeting to be held
June 4, 1999
(10.26) 2002 Management Incentive Plan Exhibit A to Proxy Statement
for Annual Meeting to be held
May 30, 2002
(10.27) 2003 Management Incentive Plan Exhibit A to Proxy Statement
for Annual Meeting to be held
May 29, 2003
(12) Not applicable
(13) 2002 Annual Report to Stockholders
(18) Not applicable
(19) Not applicable
(22) Not applicable
(23) Consent of Deloitte & Touche LLP
(25) Not applicable
(28) Not applicable
(99.1) Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(99.2) Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
19