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 AUGUST 2, 1997 [ ] 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 ___________________________________________________________ (Former name, former address and former fiscal year if changed since last report) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares issued of the Registrant's Common Stock, outstanding as of August 29, 1997 was 14,056,086 shares of Common Stock.
2 THE BUCKLE, INC. FORM 10-Q INDEX <TABLE> <CAPTION> Pages ----- <S> <C> Part 1. Financial Information (unaudited) Balance Sheets - August 2, 1997 and February 1, 1997 3 Statements of Income - thirteen and twenty-six weeks ended August 2, 1997 and August 3, 1996 4 Statements of Cash Flows - twenty-six weeks ended August 2, 1997 and August 3, 1996 5 Notes to financial statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part 2. Other Information 11 Signatures 13 </TABLE> 2
3 THE BUCKLE, INC. BALANCE SHEETS (columnar amounts in thousands) (Unaudited) <TABLE> <CAPTION> ASSETS August 2, February 1, - ------ 1997 1997 CURRENT ASSETS: --------- --------- <S> <C> <C> Cash and cash equivalents $ 29,377 $ 35,486 Short-term investments 10,739 8,455 Accounts receivable, net of allowance of $310,295 and $311,795 3,808 1,387 Inventory 43,002 31,106 Prepaid expenses and other assets 2,202 1,965 --------- --------- Total current assets 89,128 78,399 PROPERTY AND EQUIPMENT: 51,995 49,248 Less accumulated depreciation 28,695 26,290 --------- --------- 23,300 22,958 OTHER ASSETS 668 660 --------- --------- $ 113,096 $ 102,017 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Accounts payable $ 17,073 $ 9,407 Accrued employee compensation 6,996 9,565 Accrued store operating expenses 2,162 1,677 Gift certificates redeemable 852 1,106 Income taxes payable 1,078 1,740 --------- --------- Total current liabilities 28,161 23,495 DEFERRED INCOME TAXES 479 479 STOCKHOLDERS' EQUITY: Common stock, authorized 20,000,000 shares of $.05 par value; issued 14,041,486 and 13,963,812 shares, respectively 702 698 Additional paid-in capital 25,844 25,171 Retained earnings 57,910 52,174 --------- --------- Total stockholders' equity 84,456 78,043 --------- --------- $ 113,096 $ 102,017 ========= ========= </TABLE> See notes to financial statements. 3
4 THE BUCKLE, INC. STATEMENTS OF INCOME (amounts in thousands, except per share data) (Unaudited) <TABLE> <CAPTION> Thirteen Weeks Ended Twenty-six Weeks Ended August 2, August 3, August 2, August 3, 1997 1996 1997 1996 --------- --------- --------- --------- <S> <C> <C> <C> <C> SALES, net of returns and allowances $ 55,220 $ 43,330 $ 103,545 $ 83,247 COST OF SALES (including buying, distribution and occupancy costs) 37,779 30,887 71,339 59,514 --------- --------- --------- --------- Gross profit 17,441 12,443 32,206 23,733 OPERATING EXPENSES: Selling 10,321 8,101 20,106 16,175 General and administrative 1,934 1,360 3,532 2,654 --------- --------- --------- --------- 12,255 9,461 23,638 18,829 --------- --------- --------- --------- Income from operations 5,186 2,982 8,568 4,904 OTHER INCOME 401 248 660 418 --------- --------- --------- --------- Income before income taxes 5,587 3,230 9,228 5,322 Income tax expense 2,108 1,208 3,492 1,998 --------- --------- --------- --------- NET INCOME $ 3,479 $ 2,022 $ 5,736 $ 3,324 ========= ========= ========= ========= Net income per share $ 0.23 $ 0.14 $ 0.38 $ 0.23 ========= ========= ========= ========= Weighted average number of shares outstanding 15,111 14,582 14,903 14,514 ========= ========= ========= ========= </TABLE> See notes to financial statements. 4
5 THE BUCKLE, INC. STATEMENTS OF CASH FLOWS (amounts in thousands) (Unaudited) <TABLE> <CAPTION> Twenty-six Weeks Ended August 2, 1997 August 3, 1996 -------------- -------------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 5,736 $ 3,324 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation 2,570 2,627 Loss on disposal of assets 23 16 Changes in assets and liabilities: Accounts receivable (2,421) (1,148) Inventory (11,896) (5,599) Prepaid expenses and other assets (237) (77) Accounts payable 7,666 5,226 Accrued employee compensation (2,569) (2,893) Accrued store operating expenses 485 450 Gift certificates redeemable (254) (185) Income taxes payable (662) (1,539) -------------- -------------- Net cash flows from operating activities (1,559) 202 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (2,935) (2,323) Increase in other assets (8) (244) -------------- -------------- Net cash flows from investing activities (2,943) (2,567) CASH FLOWS FROM FINANCING ACTIVITIES: Change in short-term investments (2,284) (1,440) Stock options exercised 677 1,451 -------------- -------------- Net cash flows from financing activities (1,607) 11 -------------- -------------- Net decrease in cash and cash equivalents (6,109) (2,354) Cash and cash equivalents, Beginning of period 35,486 22,499 -------------- -------------- Cash and cash equivalents, End of period $ 29,377 $ 20,145 ============== ============== </TABLE> See notes to financial statements. 5
6 THE BUCKLE, INC. NOTES TO FINANCIAL STATEMENTS THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 2, 1997 AND AUGUST 3, 1996 (Unaudited) 1. Management Representation - The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles 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 1, 1997, included in The Buckle, Inc.'s 1996 Annual Report. 2. Description of the Business - The Company is a retailer of medium to better priced casual apparel for fashion conscious young men and women. The Company operated 192 stores located in 25 states throughout the central, midwest, northwest, and southwest regions of the United States as of August 2, 1997, and 174 stores in 22 states as of August 3, 1996. During the second quarter of fiscal 1997, the Company opened six new stores and substantially renovated one store. During the second quarter of fiscal 1996, the Company opened three new stores and substantially renovated two stores. 3. Net Income Per Share - Net income per share is based on the weighted average number of shares of common stock and common stock equivalents outstanding during the year as calculated under the treasury stock method. The earnings per share and the average weighted shares outstanding for the prior year twenty-six weeks have been restated to reflect the impact of the Company's 2-for-1 stock split made in the form of a 100 percent stock dividend issued on April 24, 1997. 4. Accounting Pronouncement - In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, Earnings Per Share which specifies the computation, presentation and disclosure requirements for earnings per share. The objective of the statement is to simplify the computation of earnings per share. The impact on the Company's earnings per share is not materially different than earnings per share determined in accordance with current guidance. SFAS No. 128 is applicable for fiscal years ending after December 15, 1997. 6
7 THE BUCKLE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors which have affected the Company's financial condition and results of operations during the periods included in the accompanying financial statements. RESULTS OF OPERATIONS The table below sets forth the percentage relationships of sales and various expense categories in the Statements of Income for each of the thirteen and twenty-six week periods ended August 2, 1997, and August 3, 1996: THE BUCKLE, INC. RESULTS OF OPERATIONS <TABLE> <CAPTION> Percentage of Net Sales Percentage of Net Sales ----------------------- ----------------------- Thirteen weeks ended Percentage Twenty-six weeks ended Percentage August 2, August 3, increase August 2, August 3, increase 1997 1996 (decrease) 1997 1996 (decrease) ---------------------------------- ----------------------------------- <S> <C> <C> <C> <C> <C> <C> Net Sales 100.0% 100.0% 27.4% 100.0% 100.0% 24.4% Cost of sales (including buying, distribution and occupancy costs) 68.4% 71.3% 22.3% 68.9% 71.5% 19.9% ---------------------------------- ----------------------------------- Gross profit 31.6% 28.7% 40.2% 31.1% 28.5% 35.7% Selling expenses 18.7% 18.7% 27.4% 19.4% 19.4% 24.3% General and Administrative expenses 3.5% 3.1% 42.2% 3.4% 3.2% 33.1% ---------------------------------- ----------------------------------- Income from operations 9.4% 6.9% 73.9% 8.3% 5.9% 74.7% Other income .7% .6% 61.8% .6% .5% 58.0% ---------------------------------- ----------------------------------- Income before income Taxes 10.1% 7.5% 73.0% 8.9% 6.4% 73.4% Income tax expense 3.8% 2.8% 74.5% 3.4% 2.4% 74.7% ---------------------------------- ----------------------------------- Net Income 6.3% 4.7% 72.0% 5.5% 4.0% 72.6% ================================== =================================== </TABLE> Net sales increased from $43.3 million in the second quarter of fiscal 1996 to $55.2 million in the second quarter of fiscal 1997, a 27.4% increase. Comparable store sales increased from the second quarter of fiscal 1996 to the second quarter of fiscal 1997 by $6.4 million or 15.1%. The comparable store sales increase resulted partially from an increase in the average price per piece of merchandise sold compared with the fiscal 1996 second quarter. 7
8 THE BUCKLE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net sales increased from $83.2 million in the first six months of fiscal 1996 to $103.5 million for the first six months of fiscal 1997, a 24.4% increase. Comparable store sales for the twenty-six weeks ended August 2, 1997 compared to the twenty-six weeks ended August 3, 1996 increased $10.4 million or 12.8%. Sales growth of 11.6% for this twenty-six week period was attributable to the inclusion of a full six months of operating results for the 17 stores opened in 1996 and the opening of 11 new stores in the first twenty-six weeks of fiscal 1997. Average sales per square foot increased 12.4% from $104.62 to $117.62. Gross profit after buying, occupancy, and distribution expenses increased $5.0 million in the second quarter of fiscal 1997 to $17.4 million, a 40.2% increase. As a percentage of net sales, gross profit increased from 28.7% in the second quarter of fiscal 1996 to 31.6% in the second quarter of fiscal 1997. Gross profit increased $8.5 million for the first twenty-six weeks of fiscal 1997 to $32.2 million, a 35.7% increase. As a percentage of net sales, gross profit in the first six months increased from 28.5% for fiscal 1996, to 31.1% for fiscal 1997. This increase was attributable to a decrease in occupancy costs as a percentage of net sales due to leverage provided by the increase in comparable store sales. Gross profit also increased due to an improvement in the actual merchandise margins for the first six months of fiscal 1997 compared to the first six months of fiscal 1996. Selling expenses increased from $8.1 million for the second quarter of fiscal 1996 to $10.3 million for the second quarter of fiscal 1997, a 27.4% increase. Selling expenses as a percentage of net sales remained consistant with the prior year's second quarter at 18.7%. Year-to-date selling expense rose 24.3% from $16.2 million through the first half of fiscal 1996 to $20.1 million for the first half of fiscal 1997. As a percentage of net sales, selling expense remained consistant with the same period a year ago at 19.4%. General and administrative expenses increased from $1.4 million in the second quarter of fiscal 1996 to $1.9 million in the second quarter of fiscal 1997, a 42.2% increase. As a percentage of net sales, general and administrative expenses increased to 3.5% for the second quarter of fiscal 1997 compared to 3.1% for the second quarter of fiscal 1996. For the first half of fiscal 1997, general and administrative expense rose 33.1% from $2.7 million for the six months ended August 3, 1996, to $3.5 million for the six months ended August 2, 1997. As a percentage of net sales, general and administrative expense increased to 3.4% for the first half of fiscal 1997 compared to 3.2% for the first half of fiscal 1996. Increases in general and administrative expenses, as a percentage of net sales, resulted primarily from higher bonus accruals for incentives based upon net profits. General and administrative expenses also increased due to the costs associated with filing to trade on the New York Stock Exchange. As a result of the above changes, the Company's income from operations increased $2.2 million to $5.2 million for the second quarter of fiscal 1997 compared to $3.0 million for the second quarter of fiscal 1996, a 73.9% increase. Income from operations was 9.4% of net sales in the second quarter of fiscal 1997 compared to 6.9% in the second quarter of fiscal 1996. Income from operations, year-to-date through August 2, 1997, was $8.6 million, up $3.7 million from the prior year first half. Income from operations was 8.3% of net sales for the first six months of fiscal 1997 compared to 5.9% for the first six months of fiscal 1996. 8
9 THE BUCKLE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For the quarter ended August 2, 1997, other income increased 61.8%. For the six months ended August 2, 1997, other income increased 58.0%. These increases are primarily due to additional interest income, as the levels of cash and short term investments is greater than in the same periods of fiscal 1996. Income tax expense as a percentage of pre-tax income was 37.8% in the first half of fiscal 1997 compared to 37.5% in the first half of fiscal 1996. LIQUIDITY AND CAPITAL RESOURCES The Company's primary ongoing cash requirements are for inventory, payroll, new store expansion, and remodeling. Historically, the Company's primary source of working capital has been cash flow from operations. However, the first half of each fiscal year is typically a period of decreasing cash flows created by various operating, investing, and financing activities. During the first half of fiscal 1996, the company had positive cash flow from operating activities of $202,000. During the first half of fiscal 1997, the Company's cash flow used by operating activities was $1.6 million. The uses of cash for both twenty-six week periods include payment of annual bonuses accrued at fiscal year end, changes in inventory and accounts payable for build up of inventory levels, and construction costs for opening new stores. The primary difference creating net usage of cash this year versus positive cash flow last year is a lesser portion of the build up of inventory being still in accounts payable as of the end of the second quarter compared to the prior year. The Company has available an unsecured line of credit of $5.0 million and a $5.0 million line of credit for foreign and domestic letters of credit, with First National Bank and Trust Company of Kearney, Nebraska. Borrowings under the lending arrangements provide for interest to be paid at a rate equal to the prime rate published in the Wall Street Journal on the date of the borrowings. As of August 2, 1997, the Company had working capital of $61.0 million, including $29.4 million of cash and cash equivalents and short term investments of $10.7 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 half of fiscal 1997 and 1996. During the first half of fiscal 1997 and 1996 the Company invested $2.7 million and $2.2 million, respectively, in new store construction, store renovation and upgrading store technology, net of any construction allowances received from landlords. The Company also spent approximately $200,000 and $100,000 in the first half of fiscal 1997 and 1996, respectively, in capital expenditures for the corporate headquarters. 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. 9
10 THE BUCKLE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS During the remainder of fiscal 1997, the Company anticipates completing approximately ten additional store construction projects, including approximately eight new stores and approximately two stores to be remodeled and/or relocated. As of August 2, 1997, five additional lease contracts have been signed, and additional leases are in various stages of negotiation. Also, in the second half of fiscal 1997, the Company plans to begin construction on an addition to the corporate headquarters and distribution facility. The addition will be approximately 122,000 square feet, added to the current 55,000 square foot building. The majority of the space will be used for the distribution center with only approximately 5,000 square feet for new office space. The Company also plans to upgrade its corporate aircraft, with an expenditure, net of trade-in, of approximately $3 million. Management now estimates that total capital expenditures during fiscal 1997 will be approximately $6.9 million before any landlord allowances, estimated to be $1.3 million. 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 1994, 1995, and 1996, the Christmas and back-to-school seasons accounted for an average of approximately 40% of the Company's fiscal year net sales. Although the operations of the Company are influenced by general economic conditions, the Company does not believe that inflation has had a material effect on the results of operations during the twenty-six week periods ended August 2, 1997, and August 3, 1996. 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. 10
11 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: ---------------------------------------------------- (a) June 2, 1997, Annual Meeting (b) Board of Directors: Daniel J. Hirschfeld Dennis H. Nelson Karen B. Rhoads William Fairfield Robert E. Campbell William D. Orr Ralph M. Tysdal NUMBER OF SHARES* ----------------- For Against Withheld --- ------- -------- (c) 1. Election of Board of Directors: Daniel J. Hirschfeld 6,865,076 0 1,780 Dennis H. Nelson 6,864,026 0 1,780 Karen B. Rhoads 6,863,813 0 1,780 William Fairfield 6,861,425 0 1,780 Robert E. Campbell 6,863,349 0 1,780 William D. Orr 6,863,116 0 1,780 Ralph M. Tysdal 6,863,352 0 1,780 For Against Abstain --- ------- ------- 2. Appoint Deloitte & Touche LLP as independent accountants. 6,862,281 1,480 1,470 3. Approval of the Company's 1997 Management Incentive Plan 6,785,131 38,570 41,530 *includes only shares represented in person or by proxy at the annual meeting (d) None Item 5. Other Information: None ------------------ Item 6. Exhibits and Reports on Form 8-K: --------------------------------- (a) 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 August 2, 1997. 11
12 THE BUCKLE, INC. COMPUTATIONS OF EARNINGS PER SHARE (Unaudited) <TABLE> <CAPTION> Thirteen Weeks Ended Twenty-six Weeks Ended ------------------------- ------------------------- August 2, August 3, August 2, August 3, 1997 1996 1997 1996 --------- --------- --------- --------- FINANCIAL STATEMENT COMPUTATIONS: <S> <C> <C> <C> <C> Net Income $ 3,479 $ 2,022 $ 5,736 $ 3,324 ========= ========= ========= ========= NET INCOME PER SHARE: Shares used in this computation: Weighted average shares outstanding 14,041 13,902 14,005 13,848 Dilutive effect of stock options 1,070 680 898 666 --------- --------- --------- --------- Common and common equivalent shares 15,111 14,582 14,903 14,514 ========= ========= ========= ========= Net income per share $ 0.23 $ 0.14 $ 0.38 $ 0.23 ========= ========= ========= ========= </TABLE> 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: ______________, 1997 ______________________________ DANIEL J. HIRSCHFELD, Chairman Dated: ______________, 1997 _______________________________ KAREN B. RHOADS, Vice President of Finance and CFO 13