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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 JANUARY 31, 2004
[ ] 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 $212,248,685.40 on March 26, 2004. 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 7,553,334 shares.
The number of shares outstanding of the Registrant's Common Stock, as of March
26, 2004, was 21,550,980.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement dated April 15, 2004 for Registrant's
2004 Annual Meeting of Shareholders to be held May 28, 2004 are incorporated by
reference in Part III.
THE BUCKLE, INC.
FORM 10-K
JANUARY 31, 2004
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business 3
Item 2. Properties 12
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters 13
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 14
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure 14
Item 9A. Controls and Procedures 14
PART III
Item 10. Directors and Executive Officers of the Registrant 14
Item 11. Executive Compensation 14
Item 12. Security Ownership of Certain Beneficial Owners and Management 15
Item 13. Certain Relationships and Related Transactions 15
Item 14. Accounting Fees 15
PART IV
Item 15. Exhibits, Financial Statements, Schedules and Reports
on Form 8-K 15
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 January 31, 2004, the Company operated 316 retail stores in 38 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, The Buckle
private label credit card 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 131 stores at the start
of 1994 to 316 stores by the close of fiscal 2003. The Company changed its
corporate name to The Buckle, Inc. on April 23, 1991. All references herein to
fiscal 2003 refer to the 52-week period ended January 31, 2004. Fiscal 2002
refers to the 52-week period ended February 1, 2003 and fiscal 2001 refers to
the 52-week period ended February 2, 2002.
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, sportswear, outerwear, accessories and footwear. Denim is a
significant contributor to total sales (36.2% of fiscal 2003 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 (32.1% of fiscal 2003 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
Fiscal Fiscal Fiscal
Merchandise Group 2003 2002 2001
- ----------------- ---- ---- ----
Denims 36.2% 32.8% 28.8%
Casual Bottoms 3.8 3.7 5.0
Tops (including sweaters) 32.1 32.0 33.5
Sportswear/Fashion Clothes 4.5 4.8 5.7
Outerwear 2.9 3.7 2.9
Accessories 11.4 11.3 11.0
Footwear 8.9 11.4 11.8
Other 0.2 0.3 1.3
----- ----- -----
Total 100.0% 100.0% 100.0%
===== ===== =====
Brand name merchandise accounted for more than 80% of the Company's sales volume
during fiscal 2003. 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/Roxy and Hurley. The Company believes brand name merchandise will
continue to constitute the 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 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 2003, a total of 47 stores had
the new look - 24 new stores and 23 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 2003, the Company spent $4.3 million or 1.0% 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.
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 2003, the Buckle continued its 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,
18 district managers and 56 area managers. Eleven 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
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 74% of the stores. As a result, the Company achieved a
merchandise shrinkage rate of 0.6% of net sales for fiscal 2003, 0.6% of net
sales for fiscal 2002 and 0.7% for fiscal year 2001.
The average store is approximately 4,900 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.
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, two men's merchandisers and six buyers. The top four members of
this buying team combined, have over 100 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 2003, Lucky Brand Dungarees made up 24.3% of the Company's net sales.
No other vendor accounted for more than 10% of the Company's sales. Other
current significant vendors include Silver, Fossil, Ecko, Mavi, Billabong,
Quiksilver/Roxy and Hurley. 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 is currently looking into a building expansion that would allow
further growth in office space as well as additional space for our supplies
department and the online store. Our distribution center should 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 more timely restocking of
in-season merchandise, the Company warehouses a portion of initial shipments for
later distribution. 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.
STORE LOCATIONS AND EXPANSION STRATEGIES
As of April 1, 2004, the Company operated 318 stores in 38 states, including 2
stores opened in fiscal 2004. The existing stores are in 4 downtown locations,
11 strip centers, 7 lifestyle centers and 296 shopping malls. The Company
anticipates opening approximately 10 additional new stores in fiscal 2004. All
new stores for fiscal 2004 are expected to be located in higher traffic shopping
malls except for two which are expected to be located in a lifestyle centers.
The following table lists the location of existing stores as of April 1, 2004.
Location of Stores
Number of Number of
State Stores State Stores
Alabama 5 Nebraska 16
Arizona 6 Nevada 1
Arkansas 5 New Mexico 4
California 10 North Carolina 7
Colorado 12 North Dakota 3
Florida 3 Ohio 12
Georgia 3 Oklahoma 13
Idaho 5 Oregon 2
Illinois 16 Pennsylvania 4
Indiana 12 South Carolina 1
Iowa 19 South Dakota 3
Kansas 16 Tennessee 8
Kentucky 6 Texas 33
Louisiana 7 Utah 9
Michigan 18 Virginia 2
Minnesota 11 Washington 7
Mississippi 5 West Virginia 2
Missouri 13 Wisconsin 13
Montana 5 Wyoming 1
---
Total 318
===
The Buckle has grown significantly over the past ten years, with the number of
stores increasing from 131 at the beginning of 1994 to 316 at the end of fiscal
2003. 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 1994 to the end of fiscal 2003:
Total Number of Stores Per Year
Fiscal Open at start Opened in Closed in
Year of year Current Year Current Year Total
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
2003 304 16 4 316
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 $560,000 (prior to any
construction allowance received) and inventory costs of approximately $150,000,
net of accounts payable.
The Company anticipates opening approximately 12 new stores during fiscal 2004
and completing the remodeling of approximately 8 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 2004, it is estimated that each will receive full remodeling. The Company
has budgeted a total of $22.0 million (before estimated construction allowances
from landlords of $3.1 million) for new store construction, remodeling,
technology upgrades and improvements at the corporate headquarters during fiscal
2004.
The Company plans to expand in 2004 by opening stores in existing markets. 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.
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 January 31, 2004, the Company had approximately 5,800 employees -
approximately 1,046 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 January 31, 2004, 867 employees participated in the medical
plan, 877 in the dental plan, 848 in the life insurance plan, 822 in the
long-term disability plan and 332 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, Hollister, Hot Topic,
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, Aeropostale,
Hollister, 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.
TRADEMARKS
"BUCKLE", "BKLE", "RECLAIM", "BKE", "THE BUCKLE" and "GIMMICK" 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 62. 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 54. 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 45. 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 48. Mr. Shada is Executive Vice President - Sales and a
Director of the Company. He was elected Executive Vice President on May 31, 2001
and served as Vice President of Sales from April 19, 1991 until such date. Mr.
Shada was elected 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 site selection and development
and education of personnel as store managers and as area and district managers.
BRETT P. MILKIE, AGE 44. 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 40. 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 47. 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.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS
Information in this report, other than historical information, may be considered
to be forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Exchange Act. Such statements are
made in good faith by the Company and the Company intends that such
forward-looking statements be subject to the safe harbors created thereby. In
connection with these safe-harbor provisions, the Company is providing
cautionary statements identifying important factors that could cause actual
results to differ materially from those projected in any 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 estimates, assumptions and uncertainties that could cause
future results to differ materially from those projected in any such
forward-looking statements. All forward-looking statements included in this
report (including Exhibit 13, Annual Report to Shareholders), are based upon
information available to the Company as of the date of this report. The Company
further cautions that the risk factors contained herein are not exhaustive or
exclusive. The Company does not assume any obligation to update or revise any
forward-looking statements to reflect events or circumstances that occur after
such statements are made. Some of the uncertainties include the following:
MERCHANDISING/FASHION SENSITIVITY. The Company's success is largely dependent
upon its ability to gauge the fashion tastes of its customers and to provide
merchandise that satisfies customer demand in a timely manner. The Company's
failure to anticipate, identify or react appropriately and timely to the changes
in fashion trends could have a material adverse effect on the Company's
business, financial condition and results of operations. Misjudgments or
unanticipated fashion changes could also have a material adverse effect on the
Company's image with its customers.
PRIVATE LABEL MERCHANDISE. Sales from private label merchandise accounted for
approximately 18% and 11% of the net sales for fiscal 2003 and fiscal 2002,
respectively. The Company may increase or decrease the percentage of net sales
in private label merchandise in the future. The Company's private label products
generally earn a higher margin than branded product, thus changes in the private
label mix may have a material adverse effect on the Company's sales, merchandise
margin, financial condition and results of operations.
FLUCTUATIONS IN COMPARABLE STORE NET SALES RESULTS. The Company's comparable
store net sales results have fluctuated in the past and are expected to continue
to fluctuate in the future. A variety of factors affect comparable sales
results, including changes in fashion trends, changes in the Company's
merchandise mix, calendar shifts of holiday periods, actions by competitors,
weather conditions and general economic conditions. The Company's comparable
store net sales results for a particular period in the future may decrease. As a
result of these or other factors, the Company's future comparable sales are
likely to have a significant effect on the market price of the Company's common
stock.
EXPANSION AND MANAGEMENT OF GROWTH. The Buckle, Inc.'s continued growth depends
on its ability to open and operate stores on a profitable basis and management's
ability to manage planned expansion. During fiscal 2004, the Company plans to
open 12 new stores. This expansion is dependent upon factors such as the ability
to locate and obtain favorable store sites, negotiate acceptable lease terms,
obtain necessary merchandise and hire and train qualified management and other
employees. There may be factors outside of the Company's control that affect the
ability to expand, including general economic conditions. There is no assurance
that the Company will be able to achieve its planned expansion or that such
expansion will be profitable. Any failure to manage growth could have a material
adverse effect on the Company's business, financial condition and results of
operations.
RELIANCE ON KEY PERSONNEL. The continued success of the Buckle, Inc. is
dependent to a significant degree on the continued service of key personnel,
including senior management. The loss of a member of senior management could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company's success in the future will also be
dependent upon the Company's ability to attract and retain qualified
personnel. The Company's failure to attract and retain qualified personnel could
have a material adverse effect on the Company's business, financial condition
and results of operations.
DEPENDENCE ON A SINGLE DISTRIBUTION FACILITY. The distribution function for all
of the Company's stores is handled from a single facility in Kearney, Nebraska.
Any significant interruption in the operation of the distribution facility due
to natural disasters, system failures or other unforeseen causes would have a
material adverse effect on the Company's business, financial condition and
results of operations. There can be no assurance that the current facilities
will be adequate to support the Company's future growth.
RELIANCE ON FOREIGN SOURCES OF PRODUCTION. The Company purchases a portion of
its private label merchandise directly in foreign markets. In addition, some of
the Company's domestic vendors manufacture goods overseas. The Company does not
have any long-term merchandise supply contracts and its imports are subject to
existing or potential duties, tariffs and quotas. The Company faces a variety of
risks associated with doing business overseas including competition for
facilities and quotas, political instability, possible new legislation relating
to imports that could limit the quantity of merchandise that may be imported,
imposition of duties, taxes and other charges on imports and local business
practice and political issues which may result in adverse publicity. The
Company's inability to rely on foreign sources of production due to these or
other causes could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company cautions that the risk factors described above could cause actual
results to vary materially from those anticipated from any forward-looking
statements made by or on behalf of the Company. Management cannot assess the
impact of each factor on the Company's business or the extent to which any
factor, or combination of factors, may cause actual results to vary from those
contained in forward-looking statements.
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 on or before January 31st of each of the following years:
Number of expiring
Year leases
2005 49
2006 34
2007 27
2008 23
2009 24
2010 44
2011 38
2012 and later 79
--
Total 318
===
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
has given 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 2003.
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. During the third quarter of
fiscal 2003, the Board of Directors authorized the Company's first ever cash
dividend of 10 cent per share to be paid quarterly, with the initial dividend
payment on October 27, 2003 and the second quarterly dividend payment on January
27, 2004.
The number of record holders of the Company's common stock as of March 26, 2004
was 375. 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 26, 2004 was $28.10.
Additional information required by this item is incorporated by reference to the
information on page 32 of the Company's 2003 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
2004 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 9 in the Company's 2003 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 10 through 15 in the Company's 2003 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 January 31,
2004, 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 4, 2004, appearing on pages 16 through 31
of the Company's 2003 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.
ITEM 9A - 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-15. 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 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 pages 10 and 11 of this report, and
"Election of Directors" in the Company's Proxy Statement for its 2004 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
2004 Annual Shareholders' Meeting and is incorporated by reference.
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 2004 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 2004 Annual Shareholders' Meeting and is incorporated by reference.
ITEM 14 - PRINCIPAL ACCOUNTING FEES
Information regarding the fees billed by our independent auditor and the nature
of services comprising the fees for each of the two most recent fiscal years in
each of the following categories: (1) audit fees, (2) audit-related fees, (3)
tax fees and (4) all other fees, is set forth in the Audit Committee Report
segment of the Proxy Statement and is incorporated herein by reference.
PART IV
ITEM 15 - EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(A) (1) FINANCIAL STATEMENTS
The Company's 2003 Annual Report to Shareholders, a copy of which appears as
Exhibit 13 to this Form 10-K Report, contains the following on pages 16 through
31 and they are hereby incorporated by reference to this report:
Balance Sheets as of January 31, 2004, and February 1, 2003 Statements of
Income for each of the three years in the period ended January 31, 2004
Statements of Stockholders' Equity for each of the three years in the
period ended January 31, 2004 Statements of Cash Flows for each of the
three years in the period ended January 31, 2004 Notes to Financial
Statements for each of the three years in the period ended January 31,
2004 Independent Auditors' Report
(A) (2) FINANCIAL STATEMENT SCHEDULE
Independent Auditors' Report
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
On December 16, 2003, we issued a press release announcing our third quarter
2003 earnings, filed on Form 8-K with the SEC on December 17, 2003.
(C) EXHIBITS
See index to exhibits on pages 18 through 20.
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 13, 2004 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 13th day of April, 2004.
/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 and Director Director
/s/ ROBERT E. CAMPBELL /s/ WILLIAM D. ORR
- ----------------------------------------- --------------------------
Robert E. Campbell William D. Orr
Director Director
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS
THE BUCKLE, INC.
We have audited the financial statements of The Buckle, Inc., ("the Company") as
of January 31, 2004 and February 1, 2003, and for each of the three years in the
period ended January 31, 2004, and have issued our report thereon dated March 4,
2004; such financial statements and report are included in your 2003 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 4, 2004
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Allowance for
Doubtful Accounts
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
Amounts charged to costs and expenses 769,383
Write-off of uncollectible accounts (805,383)
---------
Balance, January 31, 2004 $ 181,000
=========
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 5, 2004
(10.5) Acknowledgment for James E. Shada
dated April 5, 2004
(10.6) Acknowledgment for Brett P. Milkie
dated April 5, 2004
(10.7) Acknowledgment for Patricia K. Whisler
dated April 5, 2004
(10.8) Acknowledgment for Kari G. Smith
dated April 5, 2004
(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) Revolving Line of Credit Note dated August
1, 2003 between The Buckle, Inc. and Wells
Fargo Bank, N.A. for a $17.5 million line of
credit
EXHIBITS PAGE NUMBER OR INCORPORATION
BY REFERENCE TO
(10.12) Credit Agreement dated August 1, 2003 between
The Buckle, Inc. and Wells Fargo Bank, N.A,
regarding $17.5 million line of credit for working
capital and letters of credit.
(10.17) 1993 Director Stock Option Plan Exhibit A to Proxy Statement
for Annual Meeting to be held
May 26, 1993
(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
(10.27) 2003 Management Incentive Plan Exhibit A to Proxy Statement
for Annual Meeting to be held
May 29, 2003
(12) Not applicable
(13) 2003 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
(31a) Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31b) Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(32) Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.