1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended MAY 5, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from ____________ to ____________ Commission File Number: 000-20132 THE BUCKLE, INC. (Exact name of Registrant as specified in its charter) NEBRASKA 47-0366193 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2407 WEST 24TH STREET, KEARNEY, NEBRASKA 68845-4915 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (308) 236-8491 - ----------------------------------------------------------- (Former name, former address and former fiscal year if changed since last report) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares issued of the Registrant's Common Stock, outstanding as of June 11, 2001 was 20,559,541 shares of Common Stock.
2 THE BUCKLE, INC. FORM 10-Q INDEX <TABLE> <CAPTION> Pages ----- <S> <C> Part I. Financial Information (unaudited) Item 1. Financial Statements 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk 11 Part II. Other Information Item 1. Legal Proceedings 12 Item 2. Changes in Securities and Use of Proceeds 12 Item 3. Defaults Upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12 (a) Exhibit 11, statement regarding computation of earnings per share (b) No reports on Form 8-K were filed by the Company during the Quarter ended May 5, 2001 Signatures 13 </TABLE> 2
3 THE BUCKLE, INC. BALANCE SHEETS (Columnar amounts in thousands) (Unaudited) ASSETS May 5, February 3, CURRENT ASSETS 2001 2001 --------- ---------- Cash and cash equivalents $ 59,540 $ 69,155 Short-term investments: Held-to-maturity 35,499 34,847 Available-for-sale 4,151 4,398 Accounts receivable, net of allowance of $200,000 and $250,000, respectively 1,017 2,068 Inventory 62,893 54,392 Prepaid expenses and other assets 3,711 6,593 --------- --------- Total current assets 166,811 171,453 PROPERTY AND EQUIPMENT 105,644 103,686 Less accumulated depreciation 50,087 47,605 --------- --------- 55,557 56,081 OTHER ASSETS 3,171 2,999 --------- --------- $ 225,539 $ 230,533 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 13,126 $ 13,703 Accrued employee compensation 4,375 11,753 Accrued store operating expenses 3,309 4,072 Gift certificates redeemable 1,738 2,199 Income taxes payable 2,151 3,890 --------- --------- Total current liabilities 24,699 35,617 DEFERRED COMPENSATION 981 850 --------- --------- Total liabilities 25,680 36,467 STOCKHOLDERS' EQUITY Common stock, authorized 100,000,000 shares of $.01 par value; issued 20,558,722 and 20,378,657 shares, respectively 206 204 Additional paid-in capital 14,273 13,006 Retained earnings 185,686 181,447 Unearned compensation - restricted stock (311) (620) Accumulated other comprehensive income (loss) 5 29 --------- --------- Total stockholders' equity 199,859 194,066 --------- --------- $ 225,539 $ 230,533 ========= ========= See notes to financial statements. 3
4 THE BUCKLE, INC. STATEMENTS OF INCOME (Amounts in thousands, except per share data) (Unaudited) Thirteen Weeks Ended -------------------- May 5, April 29, 2001 2000 -------- --------- SALES, net of returns and allowances $ 76,439 $ 78,501 COST OF SALES (including buying, distribution and occupancy costs) 53,586 54,570 -------- -------- Gross profit 22,853 23,931 OPERATING EXPENSES Selling 14,690 14,466 General and administrative 2,557 2,406 -------- -------- 17,247 16,872 -------- -------- Income from operations 5,606 7,059 OTHER INCOME 1,135 752 -------- -------- Income before income taxes 6,741 7,811 Income tax expense 2,502 2,945 -------- -------- Income before cumulative effect of change in accounting 4,239 4,866 Cumulative effect of change in accounting, net of taxes of $0 and $162, respectively -- 270 -------- -------- NET INCOME $ 4,239 $ 4,596 ======== ======== Per share amounts: Basic income per share: Income before cumulative effect of a change in accounting $ 0.21 $ 0.24 Cumulative effect of change in accounting, net of taxes -- (.02) -------- -------- Net income $ 0.21 $ 0.22 ======== ======== Diluted income per share: Income before cumulative effect of change in accounting $ 0.20 $ 0.23 Cumulative effect of change in accounting, net of taxes -- (.02) -------- -------- Net income $ 0.20 $ 0.21 ======== ======== See notes to financial statements. 4
5 THE BUCKLE, INC. STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited) <TABLE> <CAPTION> Thirteen Weeks Ended ---------------------------------- May 5, 2001 April 29, 2000 ----------- -------------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 4,239 $ 4,596 Adjustments to reconcile net income to net cash flows from operating activities Depreciation 2,764 2,611 Loss on disposal of assets 39 92 Amortization of unearned compensation-restricted stock 31 66 Reverse compensation expense on forfeited stock (186) -- Cumulative effect of change in accounting method -- 270 Changes in operating assets and liabilities Accounts receivable 1,051 170 Inventory (8,501) (10,025) Prepaid expenses and other assets 2,882 (335) Accounts payable (577) 1,775 Accrued employee compensation (7,378) (6,371) Accrued store operating expenses (763) (567) Gift certificates redeemable (461) (398) Income taxes payable (1,739) 2,408 Deferred compensation 131 359 -------- -------- Net cash flows from operating activities (8,468) (5,349) CASH FLOWS FROM INVESTING ACTIVITIES Change in short-term investments (429) 4,412 Purchase of property and equipment (2,279) (4,848) Change in other assets (172) (182) -------- -------- Net cash flows from investing activities (2,880) (618) CASH FLOWS FROM FINANCING ACTIVITIES Purchases of common stock -- (1,588) Proceeds from the exercise of stock options 1,733 48 -------- -------- Net cash flows from financing activities 1,733 (1,540) -------- -------- Net decrease in cash and cash equivalents (9,615) (7,507) Cash and cash equivalents, Beginning of period 69,155 37,205 -------- -------- Cash and cash equivalents, End of period $ 59,540 $ 29,698 ======== ======== </TABLE> See notes to financial statements. 5
6 THE BUCKLE, INC. NOTES TO FINANCIAL STATEMENTS THIRTEEN WEEKS ENDED MAY 5, 2001 AND APRIL 29, 2000 (Unaudited) 1. Management Representation - The accompanying unaudited financial statements have been prepared in accordance with auditing standards generally accepted in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments necessary for a fair presentation of the results of operations for the interim periods have been included. All such adjustments are of a normal recurring nature. Because of the seasonal nature of the business, results for interim periods are not necessarily indicative of a full year's operations. The accounting policies followed by the Company and additional footnotes are reflected in the financial statements for the fiscal year ended February 3, 2001, included in The Buckle, Inc.'s 2000 Annual Report. 2. Description of the Business - The Company is a retailer of medium to better priced casual apparel and footwear for fashion conscious young men and women. The Company operates their business as one reportable industry segment. The Company had 279 stores located in 36 states throughout the central, northwestern and southern areas of the United States as of May 5, 2001, and 261 stores in 35 states as of April 29, 2000. During the first quarter of fiscal 2001, the Company opened five new stores and substantially renovated two stores. During the first quarter of fiscal 2000, the Company opened thirteen new stores and substantially renovated three stores. The following is information regarding the Company's major product lines, stated as a percentage of the Company's net sales: Percentage of Net Sales Thirteen Weeks Ended ------------------------------ Merchandise Group May 5, 2001 April 29, 2000 ----------- -------------- Denims 26.2% 24.9% Slacks/Casual Bottoms 5.6% 4.2% Tops (including sweaters) 31.2% 31.8% Sportswear/Fashion clothes 12.2% 12.3% Outerwear 0.7% 1.1% Accessories 10.1% 6.6% Shoes 12.7% 16.5% Little Guys/Gals 1.2% 2.3% Other 0.1% 0.3% ----- ----- 100.0% 100.0% ===== ===== 3. Net Income Per Share - Basic earnings per share data are based on the weighted average outstanding common shares during the period. Diluted earnings per share data are based on the weighted average outstanding common shares and the effect of all dilutive potential common shares, including stock options and warrants. 6
7 THE BUCKLE, INC. NOTES TO FINANCIAL STATEMENTS THIRTEEN WEEKS ENDED MAY 5, 2001 AND APRIL 29, 2000 (Unaudited) 4. Accounting Pronouncements - SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", is effective for all fiscal years beginning after June 15, 2000. SFAS No. 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Under SFAS 133, certain contracts that were not formerly considered derivatives may now meet the definition of a derivative. The Company adopted this statement effective February 4, 2001. The adoption of SFAS 133 did not have a significant impact on the financial position, results of operations, or cash flows of the Company. 5. Change in Accounting - On January 30, 2000, the Company changed its revenue recognition policy related to layaway sales in accordance with the guidance and interpretations provided by the SEC's Staff Accounting Bulletin (SAB) No. 101 - Revenue Recognition. This SAB affected the Company's recognition of layaway sales, which requires recognition of revenue from sales made under its layaway program upon delivery of the merchandise to the customer. The Company recorded a cumulative effect adjustment for the change in this accounting principle in accordance with APB Opinion No. 20, Accounting Changes. 6. Comprehensive Income - Unrealized gains and losses on the Company's available-for-sale securities are included in other comprehensive income, net of related taxes. <TABLE> <CAPTION> Thirteen Weeks Ended May 5, 2001 April 29, 2000 ----------- -------------- <S> <C> <C> Net Income 4,239 4,596 Unrealized gain on available for sale securities net of taxes of $14,000 and $16,000, respectively (24) 27 --------- --------- Total Comprehensive Income $ 4,215 $ 4,623 ========= ========= </TABLE> 7
8 THE BUCKLE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors which have affected the Company's financial condition and results of operations during the periods included in the accompanying financial statements. RESULTS OF OPERATIONS The table below sets forth the percentage relationships of sales and various expense categories in the Statements of Income for the thirteen-week periods ended May 5, 2001, and April 29, 2000: THE BUCKLE, INC. RESULTS OF OPERATIONS <TABLE> <CAPTION> Percentage of Net Sales -------------------------- Thirteen weeks ended Percentage May 5, April 29, Increase 2001 2000 (decrease) -------------------------------------------- <S> <C> <C> <C> Net Sales 100.0% 100.0% (2.6)% Cost of sales (including buying, distribution and occupancy costs) 70.1% 69.5% (1.8)% -------------------------------------- Gross profit 29.9% 30.5% (4.5)% Selling expenses 19.2% 18.4% 1.5% General and administrative expenses 3.4% 3.1% 6.2% -------------------------------------- Income from operations 7.3% 9.0% (20.6)% Other income 1.5% .9% 50.9% -------------------------------------- Income before provision for income taxes 8.8% 9.9% (13.7)% Provision for income taxes 3.3% 3.7% (15.0)% -------------------------------------- Income before cumulative effect of change in accounting 5.5% 6.2% (12.9)% ====================================== </TABLE> Net sales decreased from $78.5 million in the first quarter of fiscal 2000 to $76.4 million in the first quarter of fiscal 2001, a 2.6% decrease. Comparable store sales decreased from the first quarter of fiscal 2000 to the first quarter of fiscal 2001 by $6.5 million or 8.5%. The comparable store sales decrease resulted partially from a 6.7% decrease in the average price per piece of merchandise sold compared with the fiscal 2000 first quarter. Sales growth of 5.8% for this thirteen week period was attributable to the inclusion of a full three months of operating results for the thirteen stores opened in 2000 and the opening of five new stores in the first thirteen weeks of fiscal 2001. Average sales per square foot decreased 10.4% from $63.58 to $56.95. 8
9 THE BUCKLE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Gross profit after buying, occupancy, and distribution expenses decreased $1.1 million in the first quarter of fiscal 2001 to $22.9 million, a 4.5% decrease. As a percentage of net sales, gross profit decreased from 30.5% in the first quarter of fiscal 2000 to 29.9% in the first quarter of fiscal 2001. This decrease was attributable primarily to higher occupancy costs partially offset by an improvement in the actual merchandise margins. Selling expenses increased from $14.5 million for the first quarter of fiscal 2000 to $14.7 million for the first quarter of fiscal 2001, a 1.5% increase. Selling expenses as a percentage of net sales for the first quarter of fiscal 2001 increased to 19.2% compared to 18.4% for the first quarter of fiscal 2000. The increase was primarily attributable to higher sales salaries and higher travel expenses as a percentage of net sales due to a decline in leverage provided by comparable store sales. General and administrative expenses increased from $2.4 million in the first quarter of fiscal 2000 to $2.6 million in the first quarter of fiscal 2001, a 6.2% increase. As a percentage of net sales, general and administrative expenses for the first quarter of fiscal 2001 increased from 3.1% in fiscal 2000 to 3.4% in fiscal 2001. The increase in general and administrative expense, as a percentage of net sales, resulted primarily from higher payroll and travel expenses due to a decline in leverage provided by comparable store sales. As a result of the above changes, the Company's income from operations decreased $1.5 million to $5.6 million for the first quarter of fiscal 2001 compared to $7.1 million for the first quarter of fiscal 2000, a 20.6% decrease. Income from operations was 7.3% of net sales in the first quarter of fiscal 2001 compared to 9.0% in the first quarter of fiscal 2000. For the quarter ended May 5, 2001, other income increased 50.9% from the first quarter of fiscal 2000. Other income increased in the first quarter of fiscal 2001 due to additional interest income as well as income received from state tax incentive programs. Income tax expense as a percentage of pre-tax income was 37.1% in the first quarter of fiscal 2001 compared to 37.7% in the first quarter of fiscal 2000. Effective for the first quarter of fiscal 2000, the Company changed its revenue recognition policy related to layaway sales in accordance with the guidance and interpretations provided by the SEC's Staff Accounting Bulletin (SAB) No. 101-Revenue Recognition. This change resulted in a cumulative effect of $270,000, net of related taxes, which was reported on the income statement for the quarter ended April 29, 2000. LIQUIDITY AND CAPITAL RESOURCES The Company's primary ongoing cash requirements are for inventory, payroll, new store expansion, and remodeling. Historically, the Company's primary source of working capital has been cash flow from operations. However, the first quarter of each fiscal year is typically a period of decreasing cash flows created by various operating, investing, and financing activities. During the first quarter of fiscal 2001 and 2000, the Company's cash flow used by operating activities was $8.5 and $5.3 million, respectively. 9
10 THE BUCKLE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The uses of cash for both thirteen-week periods include payment of annual bonuses accrued at fiscal year end, changes in inventory and accounts payable for build up of inventory levels, and construction costs for opening new stores. The Company has available an unsecured operating line of credit of $7.5 million and a $10.0 million unsecured line of credit for foreign and domestic letters of credit, with Wells Fargo Bank Nebraska, N.A. Borrowings under the lending arrangements provide for interest to be paid at a rate equal to the prime rate published in the Wall Street Journal on the date of the borrowings. As of May 5, 2001, the Company had working capital of $142.1 million, including $59.5 million of cash and cash equivalents and short-term investments of $39.7 million. The Company has, from time to time, borrowed against these lines during periods of peak inventory build-up. There were no bank borrowings during the first quarter of fiscal 2001 and 2000. During the first quarter of fiscal 2001 and 2000 the Company invested $2.2 million and $4.6 million, respectively, in new store construction, store renovation and upgrading store technology, net of any construction allowances received from landlords. The Company also spent approximately $0.1 million and $0.2 million in the first quarter of fiscal 2001 and 2000, respectively, in capital expenditures for the corporate headquarters. During the remainder of fiscal 2001, the Company anticipates completing approximately 23 additional store construction projects, including approximately 18 new stores and approximately five stores to be remodeled and/or relocated. As of May 5, 2001, seven additional lease contracts have been signed, and additional leases are in various stages of negotiation. Management now estimates that total capital expenditures during fiscal 2001 will be approximately $18.0 million before any landlord allowances estimated to be $3.0 million. The Company believes that existing cash and cash flow from operations will be sufficient to fund current and long-term anticipated capital expenditures and working capital requirements for the next several years. SEASONALITY AND INFLATION The Company's business is seasonal, with the Christmas season (from approximately November 15 to December 30) and the back-to-school season (from approximately July 15 to September 1) historically contributing the greatest volume of net sales. For fiscal years 1998, 1999, and 2000, the Christmas and back-to-school seasons accounted for an average of approximately 40% of the Company's fiscal year net sales. Although the operations of the Company are influenced by general economic conditions, the Company does not believe that inflation has had a material effect on the results of operations during the thirteen-week periods ended May 5, 2001, and April 29, 2000. 10
11 FORWARD LOOKING STATEMENTS Information in this report, other than historical information, may be considered to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "1995 Act"). Such statements are made in good faith by the Company pursuant to the safe-harbor provisions of the 1995 Act. In connection with these safe-harbor provisions, this management's discussion and analysis contains certain forward-looking statements, which reflect management's current views and estimates of future economic conditions, company performance and financial results. The statements are based on many assumptions and factors that could cause future results to differ materially. Such factors include, but are not limited to, changes in product mix, changes in fashion trends, competitive factors and general economic conditions, economic conditions in the retail apparel industry, as well as other risks and uncertainties inherent in the Company's business and the retail industry in general. Any changes in these factors could result in significantly different results for the Company. The Company further cautions that the forward-looking information contained herein is not exhaustive or exclusive. The Company does not undertake to update any forward-looking statements, which may be made from time to time by or on behalf of the Company. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has evaluated the disclosure requirements of Item 305 of S-K "Quantitative and Qualitative Disclosures about Market Risk," and has concluded that the Company has no market risk sensitive instruments for which these additional disclosures are required. 11
12 THE BUCKLE, INC. PART II -- OTHER INFORMATION Item 1. Legal Proceedings: None Item 2. Changes in Securities: None Item 3. Defaults Upon Senior Securities: None Item 4. Submission of Matters to a Vote of Security Holders: None (a) None (b) None (c) None (d) None Item 5. Other Information: None Item 6. Exhibits and Reports on Form 8-K: (a) See Exhibit 11, statement regarding computation of earnings per share. (b) No reports on Form 8-K were filed by the Company during the quarter ended May 5, 2001. 12
13 THE BUCKLE, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE BUCKLE, INC. Dated: June 15, 2001 /s/ DENNIS H. NELSON ------------------------------ DENNIS H. NELSON, President and CEO Dated: June 15, 2001 /s/ KAREN B. RHOADS ------------------------------ KAREN B. RHOADS, Vice President of Finance and CFO 13