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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.
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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
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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
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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
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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
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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.
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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
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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
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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
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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.
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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.
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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
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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
