Buckle - 10-Q quarterly report FY

For the Transition Period from ____________ to ____________

Commission File Number: 001-12951

(Exact name of Registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

___________________________________________________________

(Former name, former address and former fiscal year if changed since last report)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. (See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act). Check one.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

The number of shares outstanding of the Registrant's Common Stock, as of May 30, 2008, was 30,629,654.

THE BUCKLE, INC.

FORM 10-Q

INDEX

THE BUCKLE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

THIRTEEN WEEKS ENDED MAY 3, 2008 AND MAY 5, 2007

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

THE BUCKLE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

THIRTEEN WEEKS ENDED MAY 3, 2008 AND MAY 5, 2007

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

THE BUCKLE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

THIRTEEN WEEKS ENDED MAY 3, 2008 AND MAY 5, 2007

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

THE BUCKLE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

THIRTEEN WEEKS ENDED MAY 3, 2008 AND MAY 5, 2007

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

THE BUCKLE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

THIRTEEN WEEKS ENDED MAY 3, 2008 AND MAY 5, 2007

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

THE BUCKLE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

THIRTEEN WEEKS ENDED MAY 3, 2008 AND MAY 5, 2007

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

THE BUCKLE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

THIRTEEN WEEKS ENDED MAY 3, 2008 AND MAY 5, 2007

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

THE BUCKLE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

THIRTEEN WEEKS ENDED MAY 3, 2008 AND MAY 5, 2007

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

THE BUCKLE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

THIRTEEN WEEKS ENDED MAY 3, 2008 AND MAY 5, 2007

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Financial Statements and notes thereto of the Company included in this Form 10-Q. 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.

Company management considers the following items to be key performance indicators in evaluating Company performance.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND 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 3, 2008, and May 5, 2007:

Net sales increased from $121.1 million in the first quarter of fiscal 2007 to $160.3 million in the first quarter of fiscal 2008, a 32.4% increase. Comparable store sales increased by $29.5 million, or 25.6%, for the thirteen week period ended May 3, 2008 compared to the same period in the prior year. The comparable store sales increase was primarily due to an increase in the number of transactions at comparable stores during the period, in addition to a 6.0% increase in the average retail price per piece of merchandise sold during the period, and a 1.0% increase in the average number of units sold per transaction. Sales growth for the thirteen week period was also attributable to the inclusion of a full quarter of operating results for the twenty new stores opened during fiscal 2007, to the opening of seven new stores during the first thirteen weeks of fiscal 2008, and to growth in online sales.

The Company’s average retail price per piece of merchandise sold increased $2.31, or 6.0%, during the first quarter of fiscal 2008 compared to the first quarter of fiscal 2007. This $2.31 increase was primarily attributable to the following changes (with their corresponding effect on the overall average price per piece): a 17.0% increase in average knit shirt price points ($1.69), a 4.8% increase in average denim price points ($0.80), a 9.7% increase in average woven shirt price points ($0.25), and a 4.8% increase in average accessory price points ($0.13). These increases were partially offset by the impact of a shift in the merchandise mix (-$0.44) and by reduced price points in certain other categories (including footwear). These changes are primarily a reflection of merchandise shifts in terms of brands and product styles, fabrics, details, and finishes. Average sales per square foot for the quarter increased 24.3% from $66.55 to $82.73.

Gross profit after buying, distribution, and occupancy expenses increased $20.1 million in the first quarter of fiscal 2008 to $65.6 million, a 44.2% increase. As a percentage of net sales, gross profit increased from 37.6% in the first quarter of fiscal 2007 to 40.9% in the first quarter of fiscal 2008. This increase was attributable to a 0.8% improvement in actual merchandise margins, which was primarily achieved through an increase in regular-price selling during the period that was partially offset by a slight reduction, as a percentage of net sales, in private label merchandise sales. The increase was also attributable to a 2.7% reduction, as a percentage of net sales, related to leveraged buying, distribution, and occupancy costs. These improvements were, however, partially offset by an increase in expense related to the incentive bonus accrual (0.2%, as a percentage of net sales).

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Selling expenses increased from $23.4 million for the first quarter of fiscal 2007 to $31.6 million for the first quarter of fiscal 2008, a 34.7% increase. As a percentage of net sales, selling expenses increased from 19.4% in the first quarter of fiscal 2007 to 19.7% in the first quarter of fiscal 2008. The increase was primarily attributable to an increase in expense related to the incentive bonus accrual (1.0%, as a percentage of net sales), as well as increases in payroll tax expense (0.2%, as a percentage of net sales) and bankcard fees (0.1%, as a percentage of net sales). These increases were, however, partially offset by a 0.5% reduction, as a percentage of net sales, in store payroll expense and a 0.5% reduction related to the leveraging of certain other selling expenses.

General and administrative expenses increased from $5.0 million in the first quarter of fiscal 2007 to $6.7 million in the first quarter of fiscal 2008, a 34.5% increase. As a percentage of net sales, general and administrative expenses increased from 4.1% in the first quarter of fiscal 2007 to 4.2% in the first quarter of fiscal 2008. The increase was primarily driven by an increase in expense related to the incentive bonus accrual (0.3%, as a percentage of net sales), which was partially offset by a 0.2% reduction, as a percentage of net sales, related to the leveraging of certain other general and administrative expenses..

As a result of the above changes, the Company's income from operations increased 60.1% to $27.4 million for the first quarter of fiscal 2008 compared to $17.1 million for the first quarter of fiscal 2007. Income from operations was 17.0% of net sales for the first quarter of fiscal 2008 compared to 14.1% for the first quarter of fiscal 2007.

Other income increased from $2.1 million for the quarter ended May 5, 2007 to $2.3 million for the quarter ended May 3, 2008, an increase of 9.3%. This increase in other income is primarily due to an increase in income earned on the Company’s cash and investments, resulting from higher average balances of cash and investments, which was partially offset by the impact of insurance proceeds received during the first quarter of fiscal 2007 related to Hurricane Katrina and Hurricane Rita insurance claims as further described in Note 7 to the financial statements.

Income tax expense as a percentage of pre-tax income was 37.0% in the first quarter of fiscal 2008 compared to 36.6% in the first quarter of fiscal 2007, bringing net income to $18.7 million in the first quarter of fiscal 2008 compared to $12.2 million in the first quarter of fiscal 2007, an increase of 53.5%.

As of May 3, 2008, the Company had working capital of $214.6 million, including $141.2 million of cash and cash equivalents and short-term investments of $39.0 million. The Company's primary ongoing cash requirements are for inventory, payroll, occupancy costs, dividend payments, new store expansion, and remodeling. Historically, the Company's primary source of working capital has been cash flow from operations. During the first quarters of fiscal 2008 and fiscal 2007, the Company’s cash flow from operating activities was $12.2 million and $11.0 million, respectively.

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, dividend payments, and construction costs for new and remodeled stores. The increase in cash flow for the first quarter of fiscal 2008 compared to the first quarter of fiscal 2007 was primarily due to the liquidation of auction-rate securities and growth in net income, which were partially offset by a larger change in accrued employee compensation.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

During the first quarter of fiscal 2008 and 2007, the Company invested $6.8 million and $5.8 million, respectively, in new store construction, store renovation, and store technology upgrades. The Company also spent $0.8 million and $0.5 million in the first quarter of fiscal 2008 and 2007, respectively, in capital expenditures for the corporate headquarters and distribution facility.

During the remainder of fiscal 2008, the Company anticipates completing approximately 25 additional store construction projects, including approximately 14 new stores and approximately 11 stores to be substantially remodeled and/or relocated. Management estimates that total capital expenditures during fiscal 2008 will be approximately $30 to $32 million. The Company believes that existing cash and cash equivalents, investments, 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. The Company has a consistent record of generating positive cash flow each year and, as of May 3, 2008, had total cash and investments of $259.0 million. The Company does not currently have plans for a merger or acquisition and has fairly consistent plans for new store expansion and remodels. Based upon past results and current plans, management does not anticipate any large swings in the Company’s need for cash in the upcoming years.

Future conditions, however, may reduce the availability of funds based upon factors such as a decrease in demand for the Company’s product, change in product mix, competitive factors, and general economic conditions as well as other risks and uncertainties which would reduce the Company’s sales, net profitability, and cash flows. Also, the Company’s acceleration in store openings and/or remodels or the Company entering into a merger, acquisition, or other financial related transaction could reduce the amount of cash available for further capital expenditures and working capital requirements.

The Company has available an unsecured line of credit of $17.5 million with Wells Fargo Bank, N.A. for operating needs and letters of credit. The line of credit provides that outstanding letters of credit cannot exceed $10 million. Borrowings under the line of credit provide for interest to be paid at a rate equal to the prime rate established by the Bank. 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 quarters of fiscal 2008 or 2007.

As of May 3, 2008, total cash and investments included $73.3 million of auction-rate securities (“ARS”), which compares to $145.8 million of ARS as of February 2, 2008. ARSs have a long-term stated maturity, but are reset through a “dutch auction” process that occurs every 7 to 49 days, depending on the terms of the individual security. Until February 2008, the ARS market was highly liquid. During February 2008, however, a significant number of auctions related to these securities failed, meaning that there was not enough demand to sell the entire issue at auction. The impact of the failed auctions on holders of ARS is that the holder cannot sell the securities and the issuer’s interest rate is generally reset to a higher “penalty” rate. The failed auctions have limited the current liquidity of certain of the Company’s investments in ARS; however, the Company has no reason to believe that any of the underlying issuers of its ARS are currently at risk or that further auction failures will have a material impact on the Company’s ability to fund its business.

Of the $73.3 million in ARS held as of May 3, 2008, $17.1 million has been included in short-term investments and $56.2 million has been included in long-term investments. Of the $145.8 million in ARS held as of February 2, 2008, $88.9 million has been included in short-term investments and $56.9 million has been included in long-term investments.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon The Buckle, Inc.’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires that management make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the financial statement date, and the reported amounts of sales and expenses during the reporting period. The Company regularly evaluates its estimates, including those related to inventory and income taxes. Management bases its estimates on past experience and on various other factors that are thought to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes that the estimates and judgments used in preparing these financial statements were the most appropriate at that time. Presented below are those critical accounting policies that management believes require subjective and/or complex judgments that could potentially affect reported results of operations.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As referenced in the tables below, the Company has contractual obligations and commercial commitments that may affect the financial condition of the Company. Based on management’s review of the terms and conditions of its contractual obligations and commercial commitments, there is no known trend, demand, commitment, event, or uncertainty that is reasonably likely to occur which would have a material effect on the Company’s financial condition, results of operations, or cash flows. In addition, the commercial obligations and commitments made by the Company are customary transactions which are similar to those of other comparable retail companies.

The following tables identify the material obligations and commitments as of May 3, 2008:

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company has available an unsecured line of credit of $17.5 million, of which $10 million is available for letters of credit, which is excluded from the preceding table. Certain merchandise purchase orders require that the Company open letters of credit. When the Company takes possession of the merchandise, it releases payment on the letters of credit. The amounts of outstanding letters of credit reported reflect the open letters of credit on merchandise ordered, but not yet received or funded. The Company believes it has sufficient credit available to open letters of credit for merchandise purchases. There were no bank borrowings during the first quarter of fiscal 2008 or the first quarter of fiscal 2007. The Company had outstanding letters of credit totaling $.9 million and $0.8 million at May 3, 2008 and February 2, 2008, respectively. The Company has no other off-balance sheet arrangements.

The Company's business is seasonal, with the holiday 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 2007, 2006, and 2005, the holiday and back-to-school seasons accounted for approximately 38%, 36%, and 37%, respectively, 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 3, 2008 and May 5, 2007. Quarterly results may vary significantly depending on a variety of factors including the timing and amount of sales and costs associated with the opening of new stores, the timing and level of markdowns, the timing of store closings, the remodeling of existing stores, competitive factors, and general economic conditions.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.

ITEM 4 - CONTROLS AND PROCEDURES

The Company maintains a system of disclosure controls and procedures that are designed to provide reasonable assurance that material information, which is required to be timely disclosed, is accumulated and communicated to management in a timely manner. An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) was performed as of the end of the period covered by this report. This evaluation was performed under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer.

Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of the end of the period covered by this report were effective to provide reasonable assurance that information required to be disclosed by the Company in the Company’s reports that it files or submits under the Exchange Act is accumulated and communicated to the management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized, and reported within the time periods specified by the SEC’s rules and forms.

There were no changes in the Company's internal control over financial reporting that occurred during the Company's last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

THE BUCKLE, INC.

PART II -- OTHER INFORMATION

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.