1 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 31, 1998 [ ] 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, $.05 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. [X] 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 $268,659,750.00 on April 13, 1998. 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 5,373,195 shares. The number of shares outstanding of the Registrant's Common Stock, as of April 13, 1998, was 14,592,221. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive Proxy Statement dated April 28, 1998 for Registrant's 1998 Annual Meeting of Shareholders to be held May 28, 1998 are incorporated by reference in Part III.
2 THE BUCKLE, INC. FORM 10-K JANUARY 31, 1998 TABLE OF CONTENTS Page PART I Item 1. Business 3 Item 2. Properties 10 Item 3. Legal Proceedings 11 Item 4. Submission of Matters to a Vote of Security Holders 11 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 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
3 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 31, 1998, the Company operated 199 retail stores in 26 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 shoes. 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 45 stores at the start of 1988 to 199 stores by the close of fiscal 1997. The Company changed its corporate name to The Buckle, Inc. on April 23, 1991. All references herein to fiscal 1997 refer to the 52-week period ended January 31, 1998. Fiscal 1996 and fiscal 1995 refer to the 52 and 53-week periods ended February 1, 1997 and February 3, 1996, 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. 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, dresses, outerwear, accessories, and shoes. Denim is a significant contributor to total sales (over 29% of fiscal 1997 net sales) and is a key to the Company's merchandising concept. The Company believes it attracts customers with a selection of brands and a wide variety of fits, finishes and styles in denim. Shirts and tops are also a significant contributor to the total sales (35% of fiscal 1997 net sales). The Company strives to provide a continually changing selection of the latest casual fashions. 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. <TABLE> <CAPTION> Percentage of Net Sales ----------------------- Merchandise Fiscal Fiscal Fiscal Group 1997 1996 1995 ----------- ------ ------ ------- <S> <C> <C> <C> Denims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.3% 31.6% 32.6% Slacks/Casual Bottoms. . . . . . . . . . . . . . . . . . . . . . . 4.0 3.4 1.7 Tops (including sweaters) . . . . . . . . . . . . . . . . . . . . 35.0 34.6 37.3 Sportswear/Fashion Clothes (including dresses) . . . . . . . . . . 8.3 10.6 14.8 Outerwear . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 2.4 2.1 Accessories . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4 4.7 4.9 Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.6 12.6 6.0 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0 .1 .6 ------ ------ ------ Total. . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% ====== ====== ====== </TABLE>
4 Brand name merchandise constitutes over 80% 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 JNCO. 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 February 26, 1997 in The Wolfchase Galleria in Memphis, TN. 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 1997, The Company spent $3.2 million (net co-op reimbursements) or 1.2% of net sales on advertising and in-store point of sale materials. In the past, radio and direct mail have been the primary sources of advertising for The Company. Beginning in 1996, there has been less emphasis on direct mail coupons and more focus on in-store visual enhancements, special events and image advertising. On-screen theatre advertising is being added to the media mix in select 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 publishes a corporate web site at www.buckle.com. The Internet provides an information source for investors, customers and employees. The Company will continue offering the frequent shopper program (The Buckle Primo Card), a program designed to build customer loyalty. In-store seasonal sign kits and promotional signage is used to enhance merchandising presentations, the stores' image and special events at point of sale.
5 STORE OPERATIONS The Company has two Vice Presidents of Sales, two regional managers, seven district managers, and 48 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, as well as the installation of electronic article surveillance systems in more than 85% of the Company's stores. As a result, the Company achieved a shrinkage rate of 0.7% of net sales for fiscal 1997and fiscal 1996 and 0.6% for fiscal 1995. The average store is approximately 4,650 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 13 and 27 years 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 an exclusive agreement with an agent in Hong Kong for the manufacture of The Buckle, Inc.'s private label merchandise. This agreement was entered into as of 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 1997, Lucky Brand Dungarees and Dr. Martens each made up 14.7% 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 JNCO. 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, tagged with bar coded tickets, sorted, and packaged for distribution to individual stores 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
6 and helping create excitement within each store. During fiscal 1995, the Company began to direct-ship to its Buckle stores merchandise from Levi Strauss and Company. The Company is currently in the process of expanding its corporate headquarters and distribution center, with building space and a newly designed distribution system that would allow for handling 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 1, 1998, the Company operated 203 stores in 27 states, including 4 stores opened in 1998. The existing stores are in 6 downtown locations, 9 strip centers and 188 shopping malls. The Company anticipates opening approximately 16 additional new stores in fiscal 1998. All new stores for 1998 will be located in higher traffic shopping malls. The following table lists the location of existing stores as of April 1, 1998. Location of Stores State Number of Stores ------ ---------------- Arizona 1 Arkansas 5 Colorado 9 Florida 1 Idaho 3 Illinois 13 Indiana 11 Iowa 20 Kansas 15 Kentucky 4 Louisiana 4 Michigan 13 Minnesota 7 Mississippi 2 Missouri 11 Montana 4 Nebraska 15 New Mexico 4 North Dakota 3 Ohio 8 Oklahoma 13 South Dakota 3 Texas 19 Tennessee 2 Washington 1 Wyoming 1 Wisconsin 11 --- Total 203 ===
7 The Buckle has grown significantly over the past ten years, with the number of stores increasing from 45 at the beginning of 1988 to 199 at the end of fiscal 1997. 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. The following table sets forth information regarding store openings and closing since the beginning of fiscal 1988 to the end of fiscal 1997: Total Number of Stores Per Year <TABLE> <CAPTION> Fiscal Open at start Opened in Current Year of year Year Total -------------------- -------------------- -------------------- -------------------- <S> <C> <C> <C> 1988 45 11 56 1989 56 10 66 1990 66 6 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 19 199 </TABLE> 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 and 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 $485,000, including construction costs of approximately $365,000 (which is prior to any construction allowance received) and inventory costs of approximately $120,000. The Company anticipates opening approximately 20 new stores during fiscal 1998 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 1998, it is estimated that each will receive full remodeling. The Company has budgeted a total of $13.0 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 1998. The Company plans to expand in 1998 by opening stores in two 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.
8 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 and the ability to find suitable malls with acceptable sites on satisfactory terms and the availability of internal or external financing sources. 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. 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 Fujitsu Atrium 9000 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 cash registers 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. EMPLOYEES As of January 31, 1998, the Company had approximately 4000 employees - approximately 700 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 200 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 1, 1998, 553 employees participated in the medical plan, 558 in the dental plan, 571 in the life insurance plan, 533 in the
9 long-term disability plan and 254 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. In the men's merchandise areas, the Company competes with specialty retailers such as Gap, Gadzooks, Pacific Sunwear, and Abercrombie & Fitch. The men's market also competes with certain department stores, such as Dillards, Proffitt's, 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, Gadzooks, Express, Gap, and Vanity. The women's sales also compete with department stores, such as Dillards, Proffitt's, May Company stores, and certain local and 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 56. 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 48. 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 39. 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.
10 SCOTT PORTER, AGE 36. Mr. Porter is the Vice President-Men's Merchandising. 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 42. 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 advertising, store design and site selection. GARY LALONE, AGE 48. 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. S. WAYNE DAUGHERTY, AGE 54. Mr. Daugherty is Vice President - Operations and Secretary. He joined the Company in June 1978 and began working in various areas of the Company's business, including advertising, store systems development, general facilities operations, site selection and leasing. From 1988 to the present, Mr. Daugherty's primary activities have been real estate and construction, and operational purchasing. BRETT P. MILKIE, AGE 38. 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 -------------------------- --------------------- 1998 10 1999 9 2000 12 2001 16 2002 30 2003 34 2004 28 2005 and later 67 --- Total 206 === 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 55,000 square feet of space with over 50% of the area being allocated for the distribution and returns-to-vendor departments. The expanded facility will provide an additional 123,000 square feet of space, with approximately 7,000 square feet allocated as additional office space. The expansion/ remodel will continue through the end of fiscal 1998.
11 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 1997. PART II ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The Company's common stock trades in 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 1997, 1996 or 1995, and has no plans to for the foreseeable future. The Company issued a 2-for-1 stock split made in the form of a 100 percent stock dividend on April 24, 1997. The number of record holders of the Company's common stock as of April 13, 1998 was 342. Based upon information from the principal market makers, the Company believes there are more than 3,000 beneficial owners. The last reported sales price of the Company's common stock on April 13, 1998 was $50.00. The remainder of the information required by this item is incorporated by reference to the information on page 28 of the Company's 1997 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 1997 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 1997 Annual Report to Shareholders which is attached to this Form 10-K. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements together with the report thereon of Deloitte & Touche LLP dated February 27, 1998, appearing on pages 12 through 23 of the Company's 1997 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.
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 1998 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 1998 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 1998 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 1998 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 1997 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 31, 1998, and February 1, 1997 Statements of Income for each of the three years in the period ended January 31, 1998 Statements of Stockholders' Equity for each of the three years in the period ended January 31, 1998 Statements of Cash Flows for each of the three years in the period ended January 31, 1998 Notes to Financial Statements for each of the three years in the period ended January 31, 1998 (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 31, 1998 (C) EXHIBITS See index to exhibits on pages 15 and 16.
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 28, 1998 By: 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 28th day of April, 1998. DANIEL J. HIRSCHFELD ROBERT E. CAMPBELL - ----------------------------------------- ---------------------------- Daniel J. Hirschfeld Robert E. Campbell Chairman of the Board and Director Director DENNIS H. NELSON - ----------------------------------------- ---------------------------- Dennis H. Nelson William D. Orr President and Chief Executive Officer Director and Director KAREN B. RHOADS - ----------------------------------------- ---------------------------- Karen B. Rhoads Bill L. Fairfield Vice President of Finance and Director Chief Financial Officer and Director ---------------------------- Ralph M. Tysdal Director
14 INDEPENDENT AUDITORS' REPORT BOARD OF DIRECTORS THE BUCKLE, INC. We have audited the financial statements of The Buckle, Inc. as of January 31, 1998 and February 1, 1997 and for each of the three years in the period ended January 31, 1998, and have issued our report thereon dated February 27, 1998; such financial statements and report are included in your 1997 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 27, 1998 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES <TABLE> <CAPTION> Allowance for Doubtful Accounts ------------------ <S> <C> Balance, January 28, 1995 $ 212,321 Amounts charged to costs and expenses 456,980 Recoveries of amounts previously written off 7,570 Write-off of uncollectible accounts (436,498) ------------ 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 Write-off of uncollectible accounts (574,987) ------------ Balance, January 31, 1998 $ 490,567 ============ </TABLE>
15 INDEX TO EXHIBITS <TABLE> <CAPTION> EXHIBITS PAGE NUMBER OR INCORPORATION BY REFERENCE TO <S> <C> (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 (3.2) 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 (10.10) Cash or Deferred Profit Sharing Plan Exhibit 10.10 to Form S-1 No. 33-46294 (10.11) Programmed Lending Note dated May 16, 1997 for $5.0 million payable to First National Bank and Trust Co. of Kearney (10.12) Loan Agreement dated May 16, 1997 between The Buckle, Inc. and First National Bank and Trust Co. of Kearney, regarding $5.0 million line of credit. </TABLE>
16 <TABLE> <S> <C> (10.13) Letter dated May 15, 1997 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 (11) Statement regarding Computation of Pro Forma Net Income Per Share (12) Not applicable (13) 1997 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 </TABLE>