<PAGE> 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 NOVEMBER 2, 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
November 30, 1996 was 6,981,206 shares of Common Stock.
<PAGE> 2
THE BUCKLE, INC.
FORM 10-Q
INDEX
Pages
-----
Part 1. Financial Information (unaudited)
Item 1. Financial Statements
Balance Sheets - November 2, 1996 and
February 3, 1996 3
Statements of Income - thirteen and thirty-
nine weeks ended November 2, 1996
and October 28, 1995 4
Statements of Cash Flows - thirty-nine weeks
ended November 2, 1996 and October 28,
1995 5
Notes to financial statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
Part 2. Other Information 11
Signatures 13
2
<PAGE> 3
ITEM 1 - FINANCIAL STATEMENTS
THE BUCKLE, INC.
BALANCE SHEETS
(columnar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
November 2, February 3,
ASSETS 1996 1996
- ------ ------------ -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $31,051 $22,499
Short-term investments 5,930 5,485
Accounts receivable, net of
allowance of $274,457 and
$240,373 1,971 976
Inventory 31,898 27,057
Preparid expenses and other assets 1,334 1,329
------- -------
Total current assets 72,184 57,346
PROPERTY AND EQUIPMENT: 48,667 45,282
Less accumulated depreciation 25,144 21,422
------- -------
23,523 23,860
OTHER ASSETS 721 477
------- -------
$96,428 $81,683
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $11,722 $ 8,662
Accrued employee compensation 7,758 6,682
Accrued store operating expenses 1,814 1,197
Gift certificates redeemable 741 921
Income taxes payable 2,111 2,090
------- -------
Total current liabilities 24,146 19,552
DEFERRED INCOME TAXES 502 502
STOCKHOLDERS' EQUITY
Common stock, authorized 20,000,000
shares of $.05 par value; issued
6,980,056 and 6,845,125 shares,
respectively 349 342
Additional paid-in capital 24,750 22,737
Retained earnings 46,681 38,550
------- -------
Total stockholders' equity 71,780 61,629
------- -------
$96,428 $81,683
======= =======
</TABLE>
See notes to financial statements.
3
<PAGE> 4
THE BUCKLE, INC.
STATEMENTS OF INCOME
(amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
--------------------------- ----------------------------
November 2, October 28, November 2, October 28,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SALES, net of returns and allowances $61,073 $50,298 $144,321 $115,763
COST OF SALES (including buying,
distribution and occupancy costs) 40,206 33,945 99,712 81,641
------- ------- -------- --------
Gross profit 20,867 16,353 44,609 34,122
OPERATING EXPENSES:
Selling 11,503 9,401 27,687 22,379
General and administrative 1,832 1,380 4,486 3,709
------- ------- -------- --------
13,335 10,781 32,173 26,088
------- ------- -------- --------
Income from operations 7,532 5,572 12,436 8,034
OTHER INCOME 261 126 678 729
------- ------- -------- --------
Income before income taxes 7,793 5,698 13,114 8,763
Income tax expense 2,986 2,145 4,983 3,309
------- ------- -------- --------
NET INCOME $ 4,807 $ 3,544 $ 8,131 $ 5,454
======= ======= ======== ========
Net income per share $ 0.65 $ 0.50 $ 1.12 $ 0.78
======= ======= ======== ========
Weighted average number
of shares outstanding 7,357 7,030 7,291 7,014
======= ======= ======== ========
</TABLE>
See notes to financial statements.
4
<PAGE> 5
THE BUCKLE, INC.
STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Thirty-nine Weeks Ended
-----------------------
November 2, 1996 October 28, 1995
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,131 $ 5,454
Adjustments to reconcile net income
to net cash flows from operating
activities:
Depreciation 3,948 3,967
Loss on disposal of assets 18 44
Changes in assets and liabilities:
Accounts receivable (995) (1,258)
Inventory (4,841) (10,931)
Prepaid expenses and other assets (5) (200)
Accounts payable 3,060 5,584
Accrued employee compensation 1,076 (1,052)
Accrued store operating expenses 617 464
Gift certificates redeemable (180) (188)
Income taxes payable 21 487
--------- ---------
Net cash provided by operating activities 10,850 2,371
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (3,629) (4,527)
Purchase of treasury stock --- (101)
Increase in other assets (244) (175)
--------- ---------
Net cash used in investing activities (3,873) (4,803)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term investments (445) 545
Stock options exercised 2,020 78
--------- ---------
Net cash provided by financing activities 1,575 623
--------- ---------
Net increase (decrease) in cash and cash
equivalents 8,552 (1,809)
Cash and cash equivalents, Beginning of
period 22,499 19,535
--------- ---------
Cash and cash equivalents,End of period $ 31,051 $ 17,726
========= =========
</TABLE>
See notes to financial statements.
5
<PAGE> 6
THE BUCKLE, INC.
NOTES TO FINANCIAL STATEMENTS
THIRTEEN AND THIRTY-NINE WEEKS ENDED
NOVEMBER 2, 1996 AND OCTOBER 28, 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 178 stores located in 22 states throughout the
central United States as of November 2, 1996, and 162 stores in 21 states
as of October 28, 1995.
During the third quarter of fiscal 1996, the Company opened four new
stores. During the third quarter of fiscal 1995, the Company opened
four new stores and substantially renovated one store.
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
<PAGE> 7
THE BUCKLE, INC.
ITEM 2 - 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 thirty-nine week periods ended November 2, 1996,
and October 28, 1995.
THE BUCKLE, INC.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Percentage of Net Sales Percentage of Net Sales
----------------------- -----------------------
Thirteen weeks ended Percentage Thirty-nine weeks ended Percentage
November 2, October 28, increase November 2, October 28, increase
1996 1995 (decrease) 1996 1995 (decrease)
-------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 21.4% 100.0% 100.0% 24.7%
Cost of sales (including
buying, distribution, and
occupancy costs) 65.8% 67.5% 18.4% 69.1% 70.5% 22.1%
-------------------------------------------- --------------------------------------------
Gross profit 34.2% 32.5% 27.6% 30.9% 29.5% 30.7%
Selling expenses 18.8% 18.7% 22.4% 19.2% 19.3% 23.7%
General and
administrative expenses 3.0% 2.7% 32.7% 3.1% 3.2% 20.9%
-------------------------------------------- --------------------------------------------
Income from operations 12.4% 11.1% 35.2% 8.6% 7.0% 54.8%
Other income (expense) .4% .2% 106.2% .5% .6% (6.9%)
-------------------------------------------- --------------------------------------------
Income before provision
for income taxes 12.8% 11.3% 36.8% 9.1% 7.6% 49.7%
Provision for income taxes 4.9% 4.3% 38.6% 3.5% 2.9% 50.6%
-------------------------------------------- --------------------------------------------
Net income 7.9% 7.0% 35.6% 5.6% 4.7% 49.1%
============================================ ============================================
</TABLE>
Net sales increased from $50.3 million in the third quarter of fiscal
1995 to $61.1 million in the third quarter of fiscal 1996, a 21.4%
increase. Comparable store sales for the same period of time increased
$7.0 million or 14.4%. The comparable store sales increase resulted
partially from an increase in the average price per piece of
merchandise sold compared with the fiscal 1995 third quarter.
7
<PAGE> 8
THE BUCKLE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net sales increased from $115.8 million in the first nine months of fiscal
1995 to $144.3 million for the first nine months of fiscal 1996, a 24.7%
increase. Comparable store sales for the thirty-nine weeks ended November 2,
1996 compared to the thirty-nine weeks ended October 28, 1995 increased $15.2
million or 13.7%. Sales growth of 11.0% for this thirty-nine week period was
attributable to the inclusion of a full nine months of operating results for
the 17 stores opened in 1995 and the opening of 14 new stores in the first
thirty-nine weeks of fiscal 1996. The comparable store sales increase also
resulted partially from an increase in the average price per piece of
merchandise sold in fiscal 1996 compared with fiscal 1995. Average sales per
square foot increased 11.5% from $160 to $179.
Gross profit after buying, occupancy, and distribution expenses increased $4.5
million in the third quarter of fiscal 1996 to $20.9 million, a 27.6%
increase. As a percentage of net sales, gross profit increased from 32.5% in
the third quarter of fiscal 1995 to 34.2% in the third quarter of fiscal 1996.
Gross profit increased $10.5 million for the first thirty-nine weeks of fiscal
1996 to $44.6 million, a 30.7% increase. As a percentage of net sales, gross
profit in the first nine months increased from 29.5% for fiscal 1995, to 30.9%
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, as well as, improvement in the actual merchandise
margin for fiscal 1996 compared to fiscal 1995. These increases were 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 $9.4 million for the third quarter of fiscal
1995 to $11.5 million for the third quarter of fiscal 1996, a 22.4% increase.
Selling expenses as a percentage of net sales increased to 18.8% for the
third quarter of fiscal 1996 compared to 18.7% for the third quarter of
fiscal 1995. Year-to-date selling expense rose 23.7% from $22.4 million
through the first nine months of fiscal 1995 to $27.7 million for the first
nine months of fiscal 1996. As a percentage of net sales, selling expense
decreased to 19.2% compared to 19.3% for the same period a year ago. The
quarterly and year-to-date changes were primarily attributable to
improvements in the sales salaries as a percentage of net sales for both
periods of time during fiscal 1996 compared to fiscal 1995. These
improvements were more than offset in the third quarter and partially offset
for the nine month period due to higher bonus accruals for incentives based
upon net profits and accruals for performance based stock options.
General and administrative expenses increased from $1.4 million in the third
quarter of fiscal 1995 to $1.8 million in the third quarter of fiscal 1996, a
32.7% increase. As a percentage of net sales, general and administrative
expenses increased to 3.0% for the third quarter of fiscal 1996 compared to
2.7% for the third quarter of fiscal 1995. For the first three quarters of
fiscal 1996, general and administrative expense rose 20.9% from $3.7 million
for the three quarters ended October 28, 1995, to $4.5 million for the three
quarters ended November 2, 1996. As a percentage of net sales, general and
administrative expense decreased to 3.1% for the first nine months of fiscal
1996 compared to 3.2% for the first nine months of fiscal 1995. The increase in
general and administrative expenses for the third quarter of fiscal 1996 was
primarily due to higher bonus accruals for incentives based upon net profits
and accruals for performance based stock options. Decreases in general and
administrative
8
<PAGE> 9
THE BUCKLE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
expenses for the nine months ended November 2, 1996, as a percentage of net
sales, resulted primarily from leverage of fixed costs based upon the strong
comparable store sales during the third quarter of fiscal 1996, partially
offset by the accruals as mentioned previously.
As a result of the above changes, the Company's income from operations
increased over $1.9 million to $7.5 million for the third quarter of fiscal
1996 compared to $5.6 million for the third quarter of fiscal 1995, a 35.2%
increase. Income from operations was 12.4% of net sales in the third quarter
of fiscal 1996 compared to 11.1% in the third quarter of fiscal 1995. Income
from operations, year-to-date through November 2, 1996, was $12.4 million, up
$4.4 million from the prior year first nine months. Income from operations was
8.6% of net sales for the first three quarters of fiscal 1996 compared to 7.0%
for the first three quarters of fiscal 1995.
For the quarter ended November 2, 1996, other income increased 106.2%. This
increase is primarily due to additional interest income, as the levels of cash
and short term investments were greater than in the third quarter of 1995. For
the nine months ended November 2, 1996, other income decreased 6.9%. The
decrease was due to the prior year's accrual of state tax incentives
receivable by the company of approximately $240,000 recorded in the first
quarter of fiscal 1995. The decrease was partially offset by an increase in
interest income in the first nine months of fiscal 1996 compared to the first
nine months of fiscal 1995.
Income tax expense as a percentage of pre-tax income was 38.0% in the first
thirty-nine weeks of fiscal 1996 compared to 37.8% in the first thirty-nine
weeks of fiscal 1995. This increase was due primarily to having more dollars
of taxable income at the marginal tax rate of 35% than for the first nine
months 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. During the first
three quarters of fiscal 1996 and 1995, the Company's cash flow provided by
operating activities was $10.9 and $2.4 million, respectively.
The uses of cash for both thirty-nine week periods include payment of annual
bonuses accrued at the prior 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 a greater positive cash
flow this year versus last year are increased net income and a smaller
increase in inventory from the beginning of the fiscal year to the end of the
third quarter during fiscal 1996 compared to fiscal 1995.
The Company has available an unsecured line of credit of $5.0 million and a
$5.0 million line of credit for foreign and domestic letters of credit, with
First National Bank and Trust Company of Kearney, Nebraska. Borrowings under
the lending arrangements provide for interest to be paid at a rate equal to
the prime rate published in the Wall Street Journal on the date of the
borrowings. The Company is subject to several restrictive covenants, including
a requirement to maintain $5.0 million in working
9
<PAGE> 10
THE BUCKLE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
capital. As of November 2, 1996, the Company had working capital of $48.0
million, including $31.1 million of cash and cash equivalents.
The Company has, from time to time, borrowed against these lines during
periods of peak inventory build-up. There were no significant bank borrowings
during the first nine months of fiscal 1996 and 1995.
During the first three quarters of fiscal 1996 and 1995 the Company invested
$3.5 million and $3.8 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 $150,000 and
$700,000 in the first nine months 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.
All fiscal 1996 store construction was complete as of November 15,1996. During
the remainder of fiscal 1996, the Company anticipates beginning construction
on two new stores to be opened early in fiscal 1997. As of November 2, 1996,
two additional lease contracts had been signed, and additional leases were in
various stages of negotiation. Management now estimates that total capital
expenditures during fiscal 1996 will be approximately $6.0 million before any
landlord allowances, estimated to be $1.4 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 and thirty-nine week periods ended November 2, 1996, and October 28,
1995.
10
<PAGE> 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
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 November 2, 1996.
11
<PAGE> 12
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
<PAGE> 1
Exhibit 11
THE BUCKLE, INC.
COMPUTATIONS OF EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
------------------------ -------------------------
November 2, October 28, November 2, October 28,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
FINANCIAL STATEMENT COMPUTATIONS:
Net Income $4,807 $3,544 $8,131 $5,454
------ ------ ------ ------
NET INCOME PER SHARE:
Shares used in this computation:
Weighted average shares outstanding 6,980 6,846 6,943 6,846
Dilutive effect of stock options 377 184 348 168
------ ------ ------ ------
Common and common equivalent shares 7,357 7,030 7,291 7,014
====== ====== ====== ======
Net income per share $ 0.65 $ 0.50 $ 1.12 $ 0.78
====== ====== ====== ======
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000885245
<NAME> THE BUCKLE
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> NOV-02-1996
<CASH> 31,050,784
<SECURITIES> 5,929,914
<RECEIVABLES> 2,245,421
<ALLOWANCES> 274,457
<INVENTORY> 31,898,446
<CURRENT-ASSETS> 72,183,701
<PP&E> 48,666,740
<DEPRECIATION> 25,143,814
<TOTAL-ASSETS> 96,427,889
<CURRENT-LIABILITIES> 24,146,560
<BONDS> 0
0
0
<COMMON> 349,003
<OTHER-SE> 71,430,690
<TOTAL-LIABILITY-AND-EQUITY> 96,427,889
<SALES> 144,320,648
<TOTAL-REVENUES> 144,320,648
<CGS> 99,711,521
<TOTAL-COSTS> 131,885,154
<OTHER-EXPENSES> (678,550)
<LOSS-PROVISION> 34,084
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,114,044
<INCOME-TAX> 4,983,337
<INCOME-CONTINUING> 8,130,707
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,130,707
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.12
</TABLE>
