1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended AUGUST 3, 1996 Commission File Number: 000-20132 THE BUCKLE, INC. (Exact name of Registrant as specified in its charter) Nebraska 47-0366193 ----------------------------------- ------------------------ (State or other jurisdiction (I.R.S. Employer of 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 31, 1996 was 7,085,006 shares of Common Stock.
2 THE BUCKLE, INC. FORM 10-Q INDEX Pages ----- Part 1. Financial Information (unaudited) Balance Sheets - August 3, 1996 and February 3, 1996 3 Statements of Income - thirteen and twenty-six weeks ended August 3, 1996 and July 29, 1995 4 Statements of Cash Flows - twenty-six weeks ended August 3, 1996 and July 29, 1995 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 2
3 THE BUCKLE, INC. BALANCE SHEETS (columnar amounts in thousands) (Unaudited) <TABLE> <CAPTION> ASSETS August 3, February 3, CURRENT ASSETS: 1996 1996 <S> <C> <C> Cash and cash equivalents $ 20,145 $ 22,499 Short-term Investments 6,925 5,485 Accounts receivable, net of allowance of $219,889 and $240,373 2,124 976 Inventory 32,656 27,057 Prepaid expenses and other assets 1,406 1,329 -------- -------- Total current assets 63,256 57,346 PROPERTY AND EQUIPMENT: 47,377 45,282 Less accumulated depreciation 23,837 21,422 -------- -------- 23,540 23,860 OTHER ASSETS 721 477 -------- -------- $ 87,517 $ 81,683 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Accounts payable $ 13,888 $ 8,662 Accrued employee compensation 3,789 6,682 Accrued store operating expenses 1,647 1,197 Gift certificates redeemable 736 921 Income taxes payable 551 2,090 -------- -------- Total current liabilities 20,611 19,552 DEFERRED INCOME TAXES 502 502 STOCKHOLDERS' EQUITY: Common stock, authorized 20,000,000 shares of $.05 par value; issued 7,077,756 and 6,971,525 shares, respectively 354 348 Additional paid-in capital 25,686 24,241 Retained earnings 41,874 38,550 Treasury stock at cost (126,400 shares) (1,510) (1,510) -------- -------- Total stockholders' equity 66,404 61,629 -------- -------- $ 87,517 $ 81,683 ======== ======== </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 3, July 29, August 3, July 29, 1996 1995 1996 1995 --------- -------- --------- -------- <S> <C> <C> <C> <C> SALES, net of returns and allowances $ 43,330 $ 34,614 $ 83,247 $ 65,465 COST OF SALES (including buying, distribution and occupancy costs) 30,887 25,153 59,514 47,695 -------- -------- -------- -------- Gross profit 12,443 9,461 23,733 17,770 OPERATING EXPENSES: Selling 8,101 6,541 16,175 12,978 General and administrative 1,360 1,209 2,654 2,329 -------- -------- -------- -------- 9,461 7,750 18,829 15,307 -------- -------- -------- -------- Income from operations 2,982 1,711 4,904 2,463 OTHER INCOME 248 207 418 602 -------- -------- -------- -------- Income before income taxes 3,230 1,918 5,322 3,065 Income tax expense 1,208 723 1,998 1,155 -------- -------- -------- -------- NET INCOME $ 2,022 $ 1,195 $ 3,324 $ 1,910 ======== ======== ======== ======== Net income per share $ 0.28 $ 0.17 $ 0.46 $ 0.27 ======== ======== ======== ======== Weighted average number of shares outstanding 7,291 7,018 7,257 7,006 ======== ======== ======== ======= </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 3, 1996 July 29, 1995 -------------- ------------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,324 $ 1,910 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation 2,627 2,599 Loss on disposal of assets 16 42 Changes in assets and liabilities: Accounts receivable (1,148) (1,064) Inventory (5,599) (7,914) Prepaid expenses and other assets (77) (224) Accounts payable 5,226 2,586 Accrued employee compensation (2,893) (2,320) Accrued store operating expenses 450 253 Gift certificates redeemable (185) (177) Income taxes payable (1,539) (626) ========= ======== Net cash provided by operating activities 202 (4,935) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (2,323) (3,579) Increase in other assets (244) (161) ========= ======== Net cash used in investing activities (2,567) (3,740) CASH FLOWS FROM FINANCING ACTIVITIES: Change in short-term investments (1,440) 787 Stock options exercised 1,451 58 --------- -------- Net cash provided by financing activities 11 845 ========= ======== Net decrease in cash and cash equivalents (2,354) (7,830) Cash and cash equivalents, Beginning of period 22,499 19,535 ========= ======== Cash and cash equivalents, End of period $ 20,145 $ 11,705 ========= ======== </TABLE> See notes to financial statements. 5
6 THE BUCKLE, INC. NOTES TO FINANCIAL STATEMENTS THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 3, 1996 AND JULY 29, 1995 (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 3, 1996, included in The Buckle, Inc.'s 1995 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 174 stores located in 22 states throughout the central United States as of August 3, 1996, and 158 stores in 21 states as of July 29, 1995. During the second quarter of fiscal 1996, the Company opened three new stores and substantially renovated two stores. During the second quarter of fiscal 1995, the Company opened five 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. 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 3, 1996, and July 29, 1995: 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 3, July 29, increase August 3, July 29, increase 1996 1995 (decrease) 1996 1995 (decrease) ----------------------------------- ------------------------------------ <S> <C> <C> <C> <C> <C> <C> Net Sales 100.0% 100.0% 25.2% 100.0% 100.0% 27.2% Cost of sales (including buying, distribution and occupancy costs) 71.3% 72.7% 22.8% 71.5% 72.9% 24.8% ------------------------------ ------------------------------ Gross profit 28.7% 27.3% 31.5% 28.5% 27.1% 33.6% Selling expenses 18.7% 18.9% 23.9% 19.4% 19.8% 24.6% General and administrative expenses 3.1% 3.5% 12.5% 3.2% 3.5% 14.0% ------------------------------ ------------------------------ Income from operations 6.9% 4.9% 74.2% 5.9% 3.8% 99.1% Other income (expense) .6% .6% 19.6% .5% .9% (30.6%) ------------------------------ ------------------------------ Income before provision for income taxes 7.5% 5.5% 68.3% 6.4% 4.7% 73.6% Provision for income taxes 2.8% 2.0% 67.0% 2.4% 1.8% 72.9% ------------------------------ ------------------------------ Net Income 4.7% 3.5% 69.1% 4.0% 2.9% 74.0% ============================== ============================== </TABLE> Net sales increased from $34.6 million in the second quarter of fiscal 1995 to $43.3 million in the second quarter of fiscal 1996, a 25.2% increase. Comparable store sales increased from the second quarter of fiscal 1995 to the second quarter of fiscal 1996 by $3.4 million or 9.4%. The 7
8 comparable store sales increase resulted partially from an increase in the average price per piece of merchandise sold compared with the fiscal 1995 second quarter. THE BUCKLE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net sales increased from $65.5 million in the first six months of fiscal 1995 to $83.2 million for the first six months of fiscal 1996, a 27.2% increase. Comparable store sales for the twenty-six weeks ended August 3, 1996 compared to the twenty-six weeks ended July 29, 1995 increased $8.9 million or 13.6%. Sales growth of 13.6% 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 1995 and the opening of 10 new stores in the first twenty-six weeks of fiscal 1996. Average sales per square foot increased 14.3% from $91.56 to $104.62. Gross profit after buying, occupancy, and distribution expenses increased $3.0 million in the second quarter of fiscal 1996 to $12.4 million, a 31.5% increase. As a percentage of net sales, gross profit increased from 27.3% in the second quarter of fiscal 1995 to 28.7% in the second quarter of fiscal 1996. Gross profit increased $6.0 million for the first twenty-six weeks of fiscal 1996 to $23.7 million, a 33.6% increase. As a percentage of net sales, gross profit in the first six months increased from 27.1% for fiscal 1995, to 28.5% for fiscal 1996. 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. This increase was partially offset by an increase in the percentage of redemptions from PRIMO cards compared to the prior year. The PRIMO card is a frequent shopper incentive program implemented in October, 1994. Selling expenses increased from $6.5 million for the second quarter of fiscal 1995 to $8.1 million for the second quarter of fiscal 1996, a 23.9% increase. Selling expenses as a percentage of net sales decreased to 18.7% for the second quarter of fiscal 1996 compared to 18.9% for the second quarter of fiscal 1995. Year-to-date selling expense rose 24.6% from $13.0 million through the first half of fiscal 1995 to $16.2 million for the first half of fiscal 1996. As a percentage of net sales, selling expense decreased to 19.4% compared to 19.8% for the same period a year ago. This decrease is primarily attributable to improvements in the sales salaries as a percentage of net sales the second quarter of 1996 compared to 1995, partially offset by higher bonus accruals for incentives based upon net profits. General and administrative expenses increased from $1.2 million in the second quarter of fiscal 1995 to $1.4 million in the second quarter of fiscal 1996, a 12.5% increase. As a percentage of net sales, general and administrative expenses decreased to 3.1% for the second quarter of fiscal 1996 compared to 3.5% for the second quarter of fiscal 1995. For the first half of fiscal 1996, general and administrative expense rose 14.0% from $2.3 million for the six months ended July 29, 1995, to $2.7 million for the six months ended August 3, 1996. As a percentage of net sales, general and administrative expense decreased to 3.2% for the first half of fiscal 1996 compared to 3.5% for the first half of fiscal 1995. Decreases in general and administrative expenses, as a percentage of net sales, resulted primarily from leverage of fixed costs based upon the strong comparable store sales during the second quarter of fiscal 1996. 8
9 THE BUCKLE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As a result of the above changes, the Company's income from operations increased $1.3 million to $3.0 million for the second quarter of fiscal 1996 compared to $1.7 million for the second quarter of fiscal 1995, a 74.2% increase. Income from operations was 6.9% of net sales in the second quarter of fiscal 1996 compared to 4.9% in the second quarter of fiscal 1995. Income from operations, year-to-date through August 3, 1996, was $4.9 million, up $2.4 million from the prior year first half. Income from operations was 5.9% of net sales for the first six months of fiscal 1996 compared to 3.8% for the first six months of fiscal 1995. For the quarter ended August 3, 1996, other income increased 19.6%. This increase is primarily due to additional interest income, as the levels of cash and short term investments is greater than in the second quarter of 1995. For the six months ended August 3, 1996, other income decreased 30.6%. The decrease was due to the prior year accrual of state tax incentives receivable by the company of approximately $240,000 recorded in the first quarter of 1995. The decrease was partially offset by an increase in interest income in the first half of fiscal 1996 compared to the first half of fiscal 1995. Income tax expense as a percentage of pre-tax income was 37.5% in the first half of fiscal 1996 compared to 37.7% in the first half of fiscal 1995. 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 1995, the Company's cash flow used by operating activities was $4.9 million. During the first half of fiscal 1996, the company had positive cash flow from operating activities of $202,000. 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 differences creating positive cash flow this year versus net usage of cash last year are increased net income and a greater 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 9
10 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. The Company is subject to several restrictive covenants, including a requirement to maintain $5.0 million in working capital. As of August 3, 1996, the Company had working capital of $42.6 million, including $20.1 million of cash and cash equivalents. THE BUCKLE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 1996 and 1995. During the first half of fiscal 1996 and 1995 the Company invested $2.2 million and $3.1 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 $100,000 and $500,000 in the first half of fiscal 1996 and 1995, 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. During the remainder of fiscal 1996, the Company anticipates completing approximately eight additional store construction projects, including approximately seven new stores and approximately one store to be remodeled and/or relocated. As of August 3, 1996, four additional lease contracts have been signed, and additional leases are in various stages of negotiation. Management now estimates that total capital expenditures during fiscal 1996 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 1993, 1994, and 1995, 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 August 3, 1996, and July 29, 1995. 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: None (a) May 30, 1996, 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 (b) 1. Election of Board of --- ------- -------- Directors: Daniel J. Hirschfeld 6,716,290 0 4,395 Dennis H. Nelson 6,716,291 0 4,395 Karen B. Rhoads 6,716,291 0 4,395 William Fairfield 4,980,000 0 4,395 Robert E. Campbell 6,716,291 0 4,395 William D. Orr 6,714,072 0 4,395 Ralph M. Tysdal 6,715,781 0 4,395 For Against Abstain --- ------- ------- 2. Appoint Deloitte & Touche LLP as independent accountants 6,720,686 0 4,395 *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 3, 1996. 11
12 THE BUCKLE, INC. COMPUTATIONS OF EARNINGS PER SHARE (Unaudited) <TABLE> <CAPTION> Thirteen Weeks Ended Twenty-six Weeks Ended --------------------------- ------------------------- August 3, July 29, August 3, July 29, 1996 1995 1996 1995 ---------- -------- ---------- --------- <S> <C> <C> <C> <C> FINANCIAL STATEMENT COMPUTATIONS: Net Income $ 2,022 $ 1,195 $ 3,324 $ 1,910 ------- ------- ------- ------- NET INCOME PER SHARE: Shares used in this computation: Weighted average shares outstanding 6,951 6,846 6,924 6,844 Dilutive effect of stock options 340 172 333 162 ------- ------- ------- ------- Common and common equivalent shares 7,291 7,018 7,257 7,006 ======= ======= ======= ======= Net income per share $ 0.28 $ 0.17 $ 0.46 $ 0.27 ======= ======= ======= ======= </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: ______________, 1996 ______________________________ DANIEL J. HIRSCHFELD, Chairman and Chief Executive Officer Dated: ______________, 1996 _______________________________ KAREN B. RHOADS, Vice President of Finance and CFO 13