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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 30, 1999
[ ] 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 68847
(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 $184,739,602.50 on March 31, 1999. 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 8,210,649 shares.
The number of shares outstanding of the Registrant's Common Stock, as of March
31, 1999, was 22,048,861.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement dated April 28, 1999 for Registrant's
1999 Annual Meeting of Shareholders to be held June 4, 1999 are incorporated by
reference in Part III.
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THE BUCKLE, INC.
FORM 10-K
JANUARY 30, 1999
TABLE OF CONTENTS
PAGE
----
PART I
Item 1. Business 3
Item 2. Properties 10
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
PART II
Item 5. Market for Registrant's Common Equity and Related 11
Shareholder Matters
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial 11
Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 11
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes In and Disagreements With Accountants on 11
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 12
Management
Item 13. Certain Relationships and Related Transactions 12
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports 12
on Form 8-K
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PART I
ITEM 1 - BUSINESS
The Buckle, Inc. (the "Company") is a retailer of medium to better-priced casual
apparel for fashion conscious young men and women. As of January 30, 1999, the
Company operated 222 retail stores in 29 states throughout the central United
States, as well as in the northwest and southwestern states under the names
"Brass 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 individual 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 56 stores at the start
of 1989 to 222 stores by the close of fiscal 1998. The Company changed its
corporate name to The Buckle, Inc. on April 23, 1991. All references herein to
fiscal 1998 refer to the 52-week period ended January 30, 1999. Fiscal 1997 and
fiscal 1996 refer to the 52-week periods ended January 31, 1998 and February 1,
1997, respectively.
The Company's principal executive offices and distribution center are located at
2407 West 24th Street, Kearney, Nebraska 68847. 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 to offer customers a wide
selection of key brand name merchandise while also providing a broad range of
services designed to create customer loyalty. 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, casual
bottoms, tops, sweaters, sportswear, outerwear, accessories, and footwear. Denim
is a significant contributor to total sales (over 27% of fiscal 1998 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 (34% of fiscal 1998 net sales). The Company strives to
provide a continually changing selection of the latest casual fashions. Over the
past five years, footwear has been a significant growth category for the
Company, growing from 3.0% of net sales for fiscal 1994 to 17.3% of fiscal 1998
net sales.
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
----------------- 1998 1997 1996
------ ------ ------
Denims .............................................. 27.3% 29.3% 31.6%
Slacks/Casual Bottoms ............................... 4.1 4.0 3.4
Tops (including sweaters) ........................... 34.0 35.0 34.6
Sportswear/Fashion Clothes (including dresses) ...... 7.5 8.3 10.6
Outerwear ........................................... 2.3 2.4 2.4
Accessories ......................................... 5.8 4.4 4.7
Footwear ............................................ 17.3 16.6 12.6
Other ............................................... 1.7 .0 .1
----- ----- -----
Total ................. 100.0% 100.0% 100.0%
===== ===== =====
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Brand name merchandise constitutes over 85% of the Company's sales volume. The
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 compared to the merchandise sold in other stores. While the
brands offered by the Company change to meet current customer preferences, the
Company currently offers brands such as Lucky Brand Dungarees, Dr. Martens,
Tommy Jeans, Silver, and Polo Jeans Company. The Company believes brand name
merchandise will continue to constitute the 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 to provide highly motivated
employees who give personal attention to customers. Each salesperson is educated
to help create a complete look for the customer by showing merchandise as
coordinating outfits. The Company also offers specialized services such as free
alterations, free gift wrapping, layaways, a special order system which allows
stores to obtain specifically requested merchandise from other Company stores, a
frequent shopper card, and The Buckle private label credit card. 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 7% of net
sales has 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 so that individual store inventories can 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 which
shifts specific merchandise to locations where it is selling better. 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 that 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.
In 1997, the store decor and fixtures were redesigned to provide an appealing,
up-to-date appearance. The first store with the new design was opened in
February 1997. Since that time, all new and fully remodeled stores have received
this design. The design presents a unique atmosphere in which the store's
architectural elements, including feature display walls, provide a backdrop,
creating a stronger visual presentation for the customer. Special care is taken
to provide a comfortable environment to which customers can relate. The interior
is well lighted to provide true, bright color rendition of the merchandise. The
fixtures that were redesigned help enhance the merchandise presentation within
the stores.
Prior to the 1997 design, all stores opened and fully remodeled since June 1990
through the end of 1996 (180 stores) have the previous more contemporary format
and do business as "The Buckle."
ADVERTISING AND PROMOTION
In fiscal 1998, the Company spent $3.6 million (net co-op reimbursements) or
1.1% of net sales on advertising and in-store point of sale materials. In-store
seasonal sign kits, promotional signage and the Company's own LOOK Magazine are
used to enhance merchandising presentations, the stores' image and special
events at point of sale.
Magazine inserts in leading teen publications are used during key seasons to
introduce new merchandise, build awareness and brand the Buckle's image.
On-screen theatre advertising is utilized in select larger markets as an image
builder for the Company. Radio advertising will continue to be a media source
used to support special events in approximately 80% of the Company's markets.
The Company also publishes a corporate web site at www.buckle.com. The Internet
is a great source for providing image and information to investors, customers
and employees.
The Company has developed programs to help strengthen relationships with loyal
guests. Seasonal postcards and birthday cards are direct mailed to loyal
Shoppers. In addition, the Company will continue offering the frequent shopper
program (the Buckle Primo Card), a program designed to build customer loyalty.
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STORE OPERATIONS
The Company has two Vice Presidents of Sales, two regional managers, eight
district managers, and 42 area managers. All district and 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. The Company
recruits interns and management trainees on college campuses and focuses on
building its management organization from within. Store managers perform sales
training of new employees at the store level. Salespeople displaying particular
talent generally are assigned to stores operated by district managers for
training as a store manager. A majority of the Company's store managers and most
of its middle and upper level management are former salespeople, including the
President of the Company, Dennis Nelson, and its Chairman, Dan Hirschfeld.
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.
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 95% of the Company's stores as well as surveillance camera systems in
approximately 40% of the stores. As a result, the Company achieved a merchandise
shrinkage rate of 0.5% of net sales for fiscal 1998 and 0.4% for fiscal years
1997 and 1996.
The average store is approximately 4,700 square feet (of which the Company
estimates an average of approximately 85% is selling space), and stores range in
size from 2,450 square feet to 7,300 square feet.
PURCHASING AND DISTRIBUTION
The Company has a very experienced buying team. The buying team, which includes
the President, Vice President of Men's Merchandising, in addition to the men's
and women's merchandisers, has 5 members who have between 14 and 28 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 this date. Management believes that as the
Company has grown it has been able to obtain better purchasing terms.
In fiscal 1998, Tommy Jeans (including purchases from 6 different Tommy
divisions), Lucky Brand Dungarees and Dr. Martens made up 17%, 16%, and 16%,
respectively, of the Company's net sales. No other vendor accounted for more
than 10% of the Company's sales. Current significant vendors include Lucky Brand
Dungarees, Dr. Martens, Tommy Jeans, Silver, and Polo Jeans Company. 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, NE. Merchandise is received daily in Kearney, sorted, tagged with
bar-coded tickets, (unless the vendor UPC code can be used), 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 business day of receipt. This system allows stores to receive new
merchandise almost every day, providing customers with a good reason to shop
often and helping create excitement within each store. During fiscal 1998, the
Company began using "pre-packs" to expedite the movement of merchandise through
the distribution center.
The Company is currently in the process of remodeling its corporate headquarters
and has finished the expansion of its distribution center and new office space.
The building space and newly designed distribution system will allow for
handling
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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 to provide 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 a crowded, cluttered look in the stores at
the beginning of a season.
STORE LOCATIONS AND EXPANSION STRATEGIES
As of April 8, 1999, the Company operated 231 stores in 31 states, including 9
stores opened in 1999. The existing stores are in 5 downtown locations, 9 strip
centers, 2 lifestyle centers and 215 shopping malls. The Company anticipates
opening approximately 17 additional new stores in fiscal 1999 and adding 4
additional new states. All new stores for 1999 will be located in higher traffic
shopping malls. The following table lists the location of existing stores as of
April 8, 1999.
Location of Stores
------------------
Number of Number of
State Stores State Stores
----- ------ ----- ---------
C>
Arizona 3 Nebraska 15
Arkansas 5 New Mexico 4
Colorado 10 North Carolina 2
Florida 2 North Dakota 3
Idaho 5 Ohio 8
Illinois 16 Oklahoma 14
Indiana 11 Oregon 1
Iowa 21 South Dakota 3
Kansas 15 Tennessee 5
Kentucky 4 Texas 22
Louisiana 6 Utah 2
Michigan 13 Washington 2
Minnesota 7 West Virginia 1
Mississippi 2 Wisconsin 12
Missouri 11 Wyoming 1
Montana 5
---
Total 231
===
The Buckle has grown significantly over the past ten years, with the number of
stores increasing from 56 at the beginning of 1989 to 222 at the end of fiscal
1998. 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.
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The following table sets forth information regarding store openings and closings
since the beginning of fiscal 1989 to the end of fiscal 1998:
Total Number of Stores Per Year
Fiscal Open at start Opened in Closed in
Year of year Current Year Current Year Total
- -----------------------------------------------------------------------------------------
1989 56 10 - 66
1990 66 6 1 71
1991 71 15 - 86
1992 86 18 - 104
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
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.
In 1996, The Buckle began development of an updated store design. This design
was used in fiscal 1997 and will continue to be used on new stores, and any
regularly scheduled remodels or relocations. The Company does not plan to
remodel all existing stores with the new design at this time.
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
$550,000, including construction costs of approximately $400,000 (which is prior
to any construction allowance received) and inventory costs of approximately
$150,000.
The Company anticipates opening approximately 26 new stores during fiscal 1999
and completing the remodeling of approximately six 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 six stores scheduled for remodeling
during fiscal 1999, it is estimated that each will receive full remodeling. The
Company has budgeted a total of $22.5 million (before estimated construction
allowances from landlords of $1.5 million) for new store construction,
remodeling, technology upgrades and construction at the corporate headquarters
during fiscal 1999.
The Company plans to expand in 1999 by opening stores in six new states as well
as openings 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.
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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 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. The Company's discussion regarding Year
2000 issues is included in the Company's Annual Report to Shareholders as part
of Management's Discussion and Analysis of Financial Condition and Results of
Operations.
EMPLOYEES
As of January 30, 1999, the Company had approximately 4800 employees -
approximately 800 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 250 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. 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 30, 1999, 635 employees
participated in the medical plan, 639 in the dental plan, 658 in the life
insurance plan, 590 in the long-term disability plan and 310 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 10% 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.
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In the men's merchandise areas, the Company competes with specialty retailers
such as Gap, American Eagle Outfitters, Gadzooks, Pacific Sunwear, and
Abercrombie & Fitch. The men's market also competes with certain department
stores, such as Dillards, Saks, May Company stores, Federated stores, and other
local or regional department stores and specialty retailers, and with mail order
merchandisers.
In the women's merchandise area, the Company competes with specialty retailers
such as Maurices, American Eagle Outfitters, Gadzooks, Pacific Sunwear,
Abercrombie & Fitch, Express, Gap, and Vanity. The women's sales also compete
with department stores, such as Dillards, Saks, May Company stores, Federated
stores, and certain local or regional department stores and specialty retailers,
and with mail order 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 also intense.
TRADEMARKS
"Brass Buckle" 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 57. 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 49. 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 40. Ms. Rhoads is the Vice-President - Finance, Treasurer
and a Director of the Company, and is the Chief Financial Officer. 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.
SCOTT PORTER, AGE 37. Mr. Porter has served as the Vice President - Men's
Merchandising since April 19, 1991 and was elected as corporate Secretary on May
28, 1998. He joined the Company in May of 1978 as a part-time salesman. In 1983,
he commenced full-time employment with the Company as a store manager and began
participating in buying trips. Since 1987, Mr. Porter has devoted most of his
time to men's merchandising, but also is involved in other aspects of the
business, including advertising and store design.
JIM SHADA, AGE 43. Mr. Shada is Vice President - Sales. 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 regional and district managers.
GARY LALONE, AGE 49. Mr. Lalone is Vice President - Sales. Mr. Lalone joined the
Company in March 1982 as the store manager. While managing, he became involved
with the men's merchandising. Mr. Lalone became a regional manager and began
participating in store site selection, advertising, store design and personnel
development. Presently, the majority of Mr. Lalone 's time is spent in sales,
and in helping develop and educate personnel as store managers and as regional
and district managers.
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BRETT P. MILKIE, AGE 39. 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.
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. The Company has not in the past
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 in the past experienced problems in
obtaining such consent. 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 expiring
Year leases
------------------- ------------------
1999 2
2000 19
2001 19
2002 24
2003 39
2004 4
2005 25
2006 and later 99
---
Total 231
===
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.
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 1998.
10
11
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 1998, 1997 or 1996, and has no current plans for
dividend payment. The Company issued a 3-for-2 stock split made in the form of a
stock dividend on June 8, 1998.
The number of record holders of the Company's common stock as of March 31, 1999
was 421. Based upon information from the principal market makers, the Company
believes there are more than 4,200 beneficial owners. The last reported sales
price of the Company's common stock on March 31, 1999 was $22.50.
The remainder of the information required by this item is incorporated by
reference to the information on page 28 of the Company's 1998 Annual Report to
Shareholders under the caption "Stock Prices by Quarter" which is attached to
this Form 10-K.
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference to the
information on page 11 in the Company's 1998 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 24 through 27 in the Company's 1998 Annual Report
to Shareholders which is attached to this Form 10-K.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has evaluated the disclosure requirements of Item 305 of S-K
"Quantitative and Qualitative Disclosures about Market Risk," and has concluded
that the Company has no market risk sensitive instruments for which these
additional disclosures are required.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements together with the report thereon of Deloitte & Touche
LLP dated February 26, 1999, appearing on pages 12 through 23 of the Company's
1998 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.
11
12
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 9 and 10 of this report, and
"Election of Directors" in the Company's Proxy Statement for its 1999 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
1999 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 1999 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 1999 Annual Shareholders' Meeting and is incorporated by reference.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS
The Company's 1998 Annual Report to Shareholders, a copy of which appears as
Exhibit 13 to this Form 10-K Report, contains the following on pages 12 through
23 and are hereby incorporated by reference to this report:
Independent Auditors' Report
Balance Sheets as of January 30, 1999, and January 31, 1998
Statements of Income for each of the three years in the period
ended January 30, 1999
Statements of Stockholders' Equity for each of the three
years in the period ended January 30, 1999
Statements of Cash Flows for each of the three years in the
period ended January 30, 1999
Notes to Financial Statements for each of the three years in
the period ended January 30, 1999
(a) (2) FINANCIAL STATEMENT SCHEDULE
Independent Auditors' Report
II. Valuation and Qualifying Accounts and Reserves
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 14.
(b) REPORTS ON FORM 8-K
The Company did not file a report on Form 8-K during the quarter ended January
30, 1999.
(c) EXHIBITS
See index to exhibits on pages 15 and 16.
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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 27, 1999 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 27th day of April, 1999.
/s/ DANIEL J. HIRSCHFELD /s/ ROBERT E. CAMPBELL
- ------------------------------------------- -------------------------
Daniel J. Hirschfeld Robert E. Campbell
Chairman of the Board and Director Director
/s/ DENNIS H. NELSON /s/ WILLIAM D. ORR
- ------------------------------------------- -------------------------
Dennis H. Nelson William D. Orr
President and Chief Executive Officer Director
and Director
/s/ KAREN B. RHOADS
- ------------------------------------------- -------------------------
Karen B. Rhoads Bill L. Fairfield
Vice President of Finance and Director
Chief Financial Officer and Director
-------------------------
Ralph M. Tysdal
Director
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14
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS
THE BUCKLE, INC.
We have audited the financial statements of The Buckle, Inc. as of January 30,
1999 and January 31, 1998 and for each of the three years in the period ended
January 30, 1999, and have issued our report thereon dated February 26, 1999;
such financial statements and report are included in your 1998 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 14(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
February 26, 1999
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Allowance for
Doubtful Accounts
-----------------
Balance, February 3, 1996 $ 240,373
Amounts charged to costs and expenses 493,232
Recoveries of amounts previously written off 4,034
Write-off of uncollectible accounts (425,844)
-----------
Balance, February 1, 1997 311,795
Amounts charged to costs and expenses 753,759
Recoveries of amounts previously written off
Write-off of uncollectible accounts (574,987)
-----------
Balance, January 31, 1998 490,567
Amounts charged to costs and expenses 1,132,004
Write-off of uncollectible accounts (1,322,571)
-----------
Balance, January 30, 1999 $ 300,000
===========
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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 14, 1999
(10.5) Acknowledgment for Scott M. Porter
dated April 14, 1999
(10.6) Acknowledgment for James E. Shada
dated April 14, 1999
(10.7) Acknowledgment for Gary L. Lalone
dated April 14, 1999
(10.8) Acknowledgment for Brett P. Milkie
dated April 14, 1999
(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) Programmed Lending Note dated May 11, 1998 for
$5.0 million payable to First National Bank and
Trust Co. of Kearney
15
16
(10.12) Loan Agreement dated May 11, 1998
between The Buckle, Inc. and First
National Bank and Trust Co. of Kearney,
regarding $5.0 million line of credit.
(10.13) Letter dated May 11, 1998 from
First National Bank and Trust Co.
of Kearney, regarding $5.0 million
line of credit and $5.0 million
letter of credit facility.
(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
(12) Not applicable
(13) 1998 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
16