<PAGE> 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.
<PAGE> 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
<PAGE> 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>
<PAGE> 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.
<PAGE> 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
<PAGE> 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
===
<PAGE> 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.
<PAGE> 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
<PAGE> 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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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
<PAGE> 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>
<PAGE> 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>
<PAGE> 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>
<PAGE> 1
EXHIBIT 10.11
PROGRAMMED LENDING NOTE
$5,000,000.00 MAY 16, 1997
The undersigned jointly and severally promise(s) to pay to the order of
____FIRST NATIONAL BANK AND TRUST CO. OF KEARNEY__________________("Lender")
the sum of __FIVE MILLION AND NO/100________ DOLLARS, or so much thereof as may
be advanced from time to time, with interest at the rate set forth below
(calculated on the basis of actual days elapsed in a 365 day year) on the
unpaid principal balance until this Note is fully paid. Principal and interest
shall be payable at Lender's office, or at such other place as the holder
hereof may designate, in lawful money of the United States. Unless otherwise
provided herein all payments shall be applied first to accrued interest and the
balance to principal.
The interest rate of this Note shall be:
/ / an annual rate of ____%.
/ / an annual rate ____________ Lender's Reference Rate as
established from time to time, each change in the interest rate to
be effective on the day of a change in the Reference Rate. The
initial interest rate shall be ____%.
/ / an annual rate ___________ Lender's Reference Rate, to be
adjusted on the ____day of each _____________ during the term of this
Note. The initial interest rate shall be __%
/X/ an annual rate 0.00% ABOVE NEW YORK PRIME AS PUBLISHED IN THE
WALL STREET JOURNAL AS ESTABLISHED FROM TIME TO TIME . The initial
rate shall be 8.50__ %.
Interest after maturity (whether this Note matures by demand, acceleration or
lapse of time) shall be charged on the outstanding principal of default at / /
____ % above the rate at maturity or /X/ 16.0%__ ("Default Rate"). In no event
shall the interest charged on this Note exceed the maximum rate, if any,
allowed by law.
Principal and interest shall be due in a single payment on ____N/A___ or as
follows:_________ MONTHLY INTEREST PAYMENTS DUE BEGINNING JULY 1, 1997, AND
CONTINUING MONTHLY THEREAFTER;_______________
and, if not sooner paid, all unpaid principal and accrued interest shall be due
and payable on MAY 31, 1998
/X/ (Check if applicable) If any payment of principal or interest
is not paid within 15 days after the due date, a late charge of four percent(4%)
of the amount of the delinquent payment may be assessed by the holder;
provided, however, that nothing in this paragraph shall limit or affect the
holder's right to accelerate the sums owing under this Note as set forth below
or any other rights and remedies of the holder hereunder or under the Loan
Documents (as defined below).
The term "Lender's Reference Rate" shall mean a rate established by the
Lender from time to time for its internal use and guidance in the pricing of
loans. Lender may, at its sole discretion, change its Reference Rate and the
undersigned agree(s) that Lender is not obligated to give notice of changes in
Lender's Reference Rate or other index used for establishing the interest rate
of this Note. No representation is made that Lender's Reference Rate or other
index used for establishing the interest rate of this Note is either the
lowest, the best or a favored rate.
This obligation may be prepaid, in whole or in part, at any time without
penalty. Any partial prepayment shall not postpone the due date or change the
amount of any subsequent installments.
All advances under this Note made after maturity, if any, are subject to
all terms and conditions hereof and are due and payable on demand; provided
that Lender has no obligation to make any advances or readvances after
maturity.
Upon non-payment of any installment of principal or interest when due; or
if holder shall at any time believe that the prospect of timely payment of this
Note is impaired; or upon the death, dissolution, termination of existence,
insolvency, business failure or appointment of a receiver of any part of the
property of, or upon any assignment for the benefit of creditors by, any
maker(s), endorser(s), surety(ies) or guarantor(s) of this Note; or upon the
occurrence of any event of default under any of the Loan Documents; the holder
shall have the right to declare the entire balance due and payable without
notice. If this Note is payable on demand nothing contained herein shall
prevent the holder from demanding payment of this Note at any time and for any
reason without prior notice. The failure of the holder to exercise this option
to accelerate, or to exercise any other right or remedy hereunder or under the
Loan Documents, shall not constitute a waiver of such option, right or remedy,
and the holder may exercise such option, right or remedy during any existing or
subsequent default regardless of any prior forbearance.
The undersigned agree(s) to pay all costs, fees and expenses incurred by
the holder in connection with any action taken to collect any sums due
hereunder or under the Loan Documents, to enforce any provisions hereof or of
the Loan
<PAGE> 2
Documents, or to protect any of the holder's rights hereunder or under the Loan
Documents (collectively, "Costs"). Such Costs shall include, but not be
limited to, costs of title searches, commitments and policies, sums advanced to
discharge liens on or otherwise to protect any collateral for this Note, and
unless prohibited by law reasonable attorney fees. Such Costs shall be added
to the principal sum due hereunder and draw interest at the Default Rate.
Lender shall have at all times a security interest in and right of set-off
against the balances in any deposit account with respect to which the maker(s)
and endorser(s) hereof, or any of them, are parties, and may at any time,
without notice, apply the same against payment of this Note or any other
obligation of the undersigned to Lender, whether due or not, regardless of the
existence or amount of any other security held by Lender.
The holder hereof may without notice to or consent of, and without
releasing or diminishing the liability of, any maker or endorser of this Note:
(i) agree with any maker hereof to modify the rate or any terms of payment of
this Note, or any terms of the Loan Documents without limitation; (ii) sell,
exchange, cancel, release, surrender, realize upon or otherwise deal with in
any manner and in any order all or any part of any collateral securing this
Note; or (iii) release any party to this Note. Each maker and endorser waives
presentment, demand, notice of dishonor and
protest, and consents to any number of extensions and renewals for any periods
without notice. The undersigned agree(s) that each provision whose box is
checked is part of this Note. This Note shall be the joint and several
obligation of all makers, sureties, guarantors and endorsers and shall be
binding upon each of them, their successors and assigns. This Note shall be
governed by the laws of the State of Nebraska.
This Note is governed by, and Lender is entitled to the benefits of, any
and all loan agreement(s), security agreement(s), mortgage(s), deed(s) of
trust, and other security documents executed by the undersigned, or any of
them, in favor of Lender, including without limitation _____LOAN AGREEMENT DATED
5-16-97_____________ (collectively, "Loan Documents").
These funds are advanced for the purpose of WORKING CAPITAL
------------------------------
- --------------------------------- -----------------------------------------
THE BUCKLE, INC.
BY DENNIS H, NELSON
- --------------------------------- -------------------------------
Note No. LINE 229351 Address PO BOX 1480 KEARNEY NE 68848
-----------------------------------------
<PAGE> 1
EXHIBIT 10.12
LOAN AGREEMENT
This LOAN AGREEMENT ("Agreement") is made as of the 16th day of MAY, 1997,
between FIRST NATIONAL BANK AND TRUST CO. OF KEARNEY ("Lender") and THE BUCKLE,
INC. ("Borrower," whether one or more; unless expressly indicated otherwise, all
references to Borrower shall be both individually and collectively if Borrower
is more than one person and/or entity).
I. THE LOAN
1.1 LOAN. Lender shall lend Borrower the sum of $5,000,000.00 (the
"Loan"), as evidenced by the following note(s) PROGRAMMED LENDING NOTE
OF EVEN DATE IN THE AMOUNT OF $5,000,000.00 (the "Note," whether one or
more), and pursuant to the terms of a loan commitment letter dated __, 199__
("Commitment Letter"). The Loan shall be governed by the terms of this
Agreement, the Commitment Letter, the Note and the other "Loan Documents" (as
defined in the Note), all of which are incorporated herein by reference. The
terms and conditions of this Agreement, the Commitment Letter, the Note and the
other Loan Documents shall be considered cumulative and not exclusive or
alternative.
1.2 PROGRAMMED LENDING. With respect to that portion of the Loan, if
any, that is represented by one or more programmed lending notes, Lender at
Borrower's request will advance funds under and in accordance with the terms of
each such note from time to time as long as the outstanding principal balance
does not exceed the maximum principal amount of the note. The actual principal
balance outstanding at any one time may be increased or decreased from time to
time as a result of advances by Lender and payments by Borrower, and a payment
by the Borrower during the term of a programmed lending note of the entire
principal balance of such note shall not operate as a discharge of Borrower
under the note.
1.3 ADVANCES. All Loan advances may be made to Borrower's regular
checking account number 326-406. A check or other charge presented against
this account in excess of the account balance may be treated by Lender as a
request for a Loan advance, and payment by Lender of any such check may at its
option constitute a Loan advance under this Agreement. Advances, if made
pursuant to the payment of a check or other charge, shall be debited to the
Loan balance and credited to the checking account balance, and unless otherwise
agreed by Lender shall be in multiples of $1,000 or an amount equal to the
unused portion of the maximum credit available if less than $1,000.
II. CONDITIONS OF LENDING/ADVANCES
The obligation of Lender to make the Loan and any advances under the
Note(or any of them if more than one) is subject to the following conditions
precedent: (a) Borrower is not in default under any provisions of this
Agreement, the Commitment Letter, any Note or any other Loan Documents; (b) all
warranties and representations of Borrower under this Agreement, the Commitment
Letter, the Note and the other Loan Documents are true as of the date of the
requested advance; (c) no litigation or other legal proceeding is pending or
threatened against Borrower that has not been disclosed to Lender in writing
before the date of the Loan or advance; (d) there is no material adverse change
in the financial condition or earning power of Borrower or any guarantor of the
Loan, or material decrease in the value of any security for the Loan; and (e)
there is no change in any law or regulation that makes it unlawful for Lender
to make the Loan or advances under the Note (or any of them if more than one)
or to give effect to Lender's obligations as contemplated hereby. Further,
Lender may require appropriate documentation as to the reason for a requested
advance before making an advance.
III. SECURITY
3.1 LOAN DOCUMENTS. All advances and readvances made pursuant to the Note
(or any of them if more than one) and this Agreement shall be secured by all
security agreements, mortgages, deed(s) of trust and other security documents
set forth in the Note and included within the term "Loan Documents" therein.
Such security shall secure all existing and future indebtedness owed by
Borrower to Lender.
3.2 FURTHER ASSURANCES. Borrower agrees to execute and deliver such
security agreements, financing statements, and other such documents as Lender
will require for perfection of security interests, liens, and other security
described above, as Lender may reasonably request at any time from time to time
in form satisfactory to Lender.
<PAGE> 2
IV. COVENANTS
Until payment of all sums owing under this Agreement, the Commitment
Letter, the Note and the other Loan Documents Borrower shall:
4.1 FINANCIAL INFORMATION. Furnish to Lender with reasonable promptness
the following financial information:______________________________________
__________________________________________________________________________
4.2 LEGAL PROCEEDINGS. Notify Lender in writing of any material
legal action or proceeding commenced against Borrower.
4.3 ENVIRONMENTAL LAWS. Keep its property and operations in compliance
with all applicable laws, ordinances and regulations relating to industrial
hygiene or environmental protection (collectively, "Environmental Laws"); allow
Lender to enter Borrower's property to conduct any and all inspections and
testing that Lender reasonably deems necessary or desirable to determine
whether Borrower is in compliance with Environmental Laws; notify Lender of any
spill, release or discovery of any substance deemed to be hazardous or toxic
under any Environmental Laws (collectively, "Hazardous Materials") on, onto or
from any of Borrower's properties; notify Lender of any order, request, notice
or other form of written or oral communication from any governmental agency
relating to any violation or potential violation of any Environmental Laws in
connection with any of Borrower's properties; and indemnify and hold harmless
Lender, its directors, employees and agents, and any successors to Lender's
interest, from and against any and all claims, damages, losses and liabilities
arising in connection with the presence, use, disposal or transport of any
Hazardous Materials on, under, from or about Borrower's property.
NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE CONTRARY, THE
PROVISIONS OF THIS PARAGRAPH 4.3, INCLUDING WITHOUT LIMITATION BORROWER'S
OBLIGATION PURSUANCT TO THE FOREGOING INDEMNITY, SHALL SURVIVE PAYMENT OF THE
LOAN.
4.4 MAINTAIN ENTITY. If Borrower is or includes a corporation or
partnership, maintain its existence as a duly organized corporation and/or
partnership and promptly notify Lender of any change in its articles of
incorporation and/or partnership agreement.
V. WARRANTIES AND REPRESENTATIONS
Borrower warrants and represents to Lender as follows:
5.1 FINANCIAL STATEMENTS. All financial statements relating to Borrower
provided to Lender fairly reflect the financial condition of Borrower as of the
dates of such statements, and there has been no material adverse change in the
financial condition of Borrower since the dates thereof.
5.2 PROCEEDINGS. No proceedings exist or are threatened against Borrower
that will substantially and adversely affect Borrower's condition, financial or
otherwise.
VI. OTHER COVENANTS, WARRENTIES AND REPRESENTATIONS
In addition to the above covenants, warranties and representations, Borrower
covenants, warrants and represents to Lender as follows:
________________________________________________________________________________
________________________________________________________________________________
VII. EVENTS OF DEFAULT
In addition to anything contained in the Commitment Letter, the Note and
the other Loan Documents, the occurrence of any of the following shall
constitute an Event of Default by Borrower:
7.1 FAILURE OF PAYMENT. Failure to pay in full all principal and interest
under the Note (or any of them if more than one) when due.
7.2 FALSE WARRANTIES OR REPRESENTATIONS. Any of the warranties or
representations in sections V and VI hereof being or becoming materially false,
or any information contained in any schedule, statement, report, notice or
other writing furnished by or on behalf of Borrower to Lender pursuant to this
Agreement, or otherwise in connection with the Loan, being materially false.
7.3 BREACH OF COVENANT. A breach or failure in performance of any
covenant set forth in sections IV and VI hereof.
7.4 OTHER BREACH. A breach or failure in the performance of any other
provision of the Agreement, not specified above, which shall have continued for
a period of thirty (30) days after Lender has given notice of such breach or
failure; or a breach or failure in the performance of any term,
<PAGE> 3
covenant, warranty, representation or other agreement contained in the
Commitment Letter, any Note or any other Loan Documents, after giving effect to
any express notice requirement and/or curative period set forth therein.
7.5 OTHER INDEBTEDNESS. Any default in the payment or performance of any
indebtedness, liability or obligation of Borrower (or any one or more of them
if more than one) to Lender, not specified above, whether now existing or
hereafter arising.
VIII. REMEDIES
The occurrence of any Event of Default shall constitute a default under
the Note and the other Loan Documents, and Lender shall have all rights and
remedies available under this Agreement, the Commitment Letter, the Note, the
other Loan Documents and applicable law, including without limitation the right
to declare the entire balance of the Note immediately due and payable, and all
such rights and remedies shall be cumulative. No delay or omission of Lender
in exercising any of its rights or remedies shall operate as a waiver of such
right or remedy or any other right or remedy of Lender, and a waiver on any
occasion shall not constitute a waiver of such right or remedy on any future
occasion.
IX. MISCELLANEOUS
9.1 GOVERNING LAW. This Agreement and the Loan shall be governed
by the laws of the State of Nebraska.
9.2 SURVIVAL OF REPRESENTATIONS. All covenants, warranties and
representations made in writing by Borrower in connection herewith
shall survive the execution and delivery of this Agreement, the
Commitment Letter, the Note and the other Loan Documents.
9.3 BINDING EFFECT. All agreements, covenants, warranties and
representations in this Agreement shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto.
9.4 ASSIGNMENT. Borrower may not assign this Agreement, the
Commitment Letter, the Note (or any of them if more than one) or any
other Loan Documents without the express written consent of Lender,
which shall be exercised at Lender's sole discretion.
9.5 RENEWALS; EXTENSIONS. The provisions of this Agreement shall
apply to any renewal or extension of the Loan, except as modified or
amended in writing by the parties hereto at the time of such renewal
or extension.
9.6 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than
one person and/or entity, the obligations, liabilities, covenants,
agreements, warranties and representations contained in or arising
from this Agreement are joint and several as to each such person
and/or entity.
9.7 LIMITATION OF LIABILITY. LENDER SHALL NOT BE LIABLE FOR ANY
CLAIMS, DEMANDS, LOSSES OR DAMAGES MADE, CLAIMED OR SUFFERED BY ANY
PARTY TO THIS AGREEMENT.
9.8 ENTIRE AGREEMENT. This Agreement, the Note and the other Loan
Documents contain the entire agreement of the parties, and cannot be
modified or altered unless reduced to writing and consented to by all
the undersigned parties.
FIRST NATIONAL BANK AND TRUST CO. OF KEARNEY
--------------------------------------------
Name and Lender
Date: 5-16-97 BY: LARRY L. JEPSON
------------------- -----------------------------
Title: CHAIRMAN AND CEO
----------------------------
Date: 5-16-97 THE BUCKLE, INC
------------------- ----------------------------------
Borrower
Date: 5-16-97 BY; DENNIS H. NELSON, PRESIDENT
------------------- -------------------------------
Borrower
Date:
------------------- -------------------------------
Borrower
STATE OF )
) ss.
COUNTY OF )
<PAGE> 4
The foregoing Agreement was acknowledged before me this_________day of,
________. by________________________________________________________________
__________________________
Notary Public
<PAGE> 1
EXHIBIT 10.13
May 15, 1997
Dennis H. Nelson, President & CEO
The Buckle, Inc.
2407 West 24th Street
P.O. Box 1480
Kearney, NE 68848-1480
Dear Dennis:
Our bank is pleased to issue a renewal loan commitment to your Company for
another year. The purpose of this loan commitment is to provide your Company
with the funds for your financing needs required for this operating year,
subject to the following terms and conditions:
1) An unsecured operating line of credit in the amount of $5,000,000.00
available for your use until the loan expiration date of May 31, 1998,
at which time it will be subject to annual renewal, as has been the
case in previous years.
2) The interest rate charged on the unsecured operating line of credit
will be the National Prime Rate as published in the "Wall Street
Journal" date of change. Interest will be billed and payable monthly
on the unsecured line of credit.
3) A $5,000,000.00 irrevocable commercial letter of credit line.
4) The Company agrees to provide the bank with quarterly financial
statements consisting of a balance sheet and income statement, and to
provide the bank with an annual fiscal year-end audited financial
statement.
We appreciate this opportunity to be able to assist your fine Company with this
financing package in support of your growth objectives. If the terms and
conditions of this loan commitment are satisfactory to you, please acknowledge
your acceptance by signing the following Acknowledgment and returning it to my
attention in the postage-paid return envelope I have provided for your
convenience.
Thank you very much.
Sincerely yours,
LARRY JEPSON
Larry L. Jepson
Chairman & CEO
ACKNOWLEDGMENT
The Undersigned acknowledges and accepts this loan commitment with attendant
terms and conditions as stated, this 16th day of May, 1997.
THE BUCKLE, INC.
BY: DENNIS NELSON, PRESIDENT & CEO May 16, 1997
------------------------------------ ------------
Dennis Nelson, President & CEO Date
<PAGE> 1
EXHIBIT 11
THE BUCKLE, INC.
COMPUTATIONS OF EARNINGS PER SHARE
(dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended
January 31, 1998 February 1, 1997
-------------------------------- --------------------------------
Income Shares Per Share Income Shares Per Share
Amount Amount
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net Income $ 23,331 14,141 $ 1.65 $ 13,624 13,905 $ 0.98
Effect of Dilutive Securities
Stock Options 738 469
-------------------------------- --------------------------------
Diluted EPS $ 23,331 14,879 $ 1.57 $ 13,624 14,374 $ 0.95
================================ ================================
</TABLE>
<PAGE> 1
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JAN. 31, 1998 Feb. 1, 1997 Feb. 3, 1996
(dollar amounts in thousands, except per share and sales per sq. ft.)
<S> <C> <C> <C>
INCOME STATEMENT DATA
Net Sales $ 267,921 $206,393 $172,291
Net Income before income taxes 37,417 21,667 15,920
Provisions for income taxes 14,086 8,043 6,073
Net Income $ 23,331 $ 13,624 $ 9,847
Diluted Income per share $ 1.57 $ .95 $ .71
Net Income as a percentage of
net sales 8.7% 6.6% 5.7%
SELECTED FINANCIAL DATA
Working Capital $ 77,885 $ 54,904 $ 37,794
Total Assets $ 144,837 $102,017 $ 81,683
Long Term Debt 0 0 0
Stockholders' Equity $ 107,882 $ 78,043 $ 61,629
Number of stores open at year end 199 181 164
Average sales per square foot
(in real $, not thousands) $ 300 $ 255 $ 238
Average sales per store $ 1,400 $ 1,183 $ 1,094
Comparable store sales change 18.6% 11.1% 7.5%
</TABLE>
<PAGE> 2
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Years Ended
-----------------------------------------------------------------------------------
JANUARY 31, February 1, February 3, January 28, January 29,
1998 1997 1996 1995 1994
-----------------------------------------------------------------------------------
(dollar amounts in thousands, except per share and selected operating data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net Sales $267,921 $206,393 $ 172,291 $145,038 $129,631
Cost of sales (including
buying, distribution and
occupancy costs) 174,379 140,359 118,262 100,578 89,094
-----------------------------------------------------------------------------------
Gross profit 93,542 66,034 54,029 44,460 40,537
Selling expenses 49,040 38,361 33,166 27,840 24,792
General and
administrative expenses 8,772 7,157 6,101 4,848 4,644
-----------------------------------------------------------------------------------
Income from operations 35,730 20,516 14,762 11,772 11,101
Other income 1,687 1,151 1,158 510 476
-----------------------------------------------------------------------------------
Income before provision
for income taxes 37,417 21,667 15,920 12,282 11,577
Income taxes 14,086 8,043 6,073 4,586 4,376
-----------------------------------------------------------------------------------
Net income $ 23,331 $ 13,624 $ 9,847 $ 7,696 $ 7,201
===================================================================================
Basic Income Per Share $ 1.65 $ 0.98 $ 0.72 $ 0.55 $ 0.52
Diluted Income Per Share $ 1.57 $ 0.95 $ 0.71 $ 0.55 $ 0.51
SELECTED OPERATING DATA
Stores open at end of period 199 181 164 147 131
Average sales per square foot $ 300 $ 255 $ 238 $ 225 $ 238
Average sales per store (000's) $ 1,400 $ 1,183 $ 1,094 $ 1,029 $ 1,103
Comparable store sales change 18.6% 11.1% 7.5% -1.8% -3.7%
BALANCE SHEET DATA
Working capital $ 77,885 $ 54,904 $ 37,794 $ 28,704 $ 23,498
Total assets $144,837 $102,017 $ 81,683 $ 65,051 $ 54,408
Long term debt - - - - -
Stockholders' equity $107,881 $ 78,043 $ 61,629 $ 51,782 $ 44,555
</TABLE>
11
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
The Buckle, Inc.
Kearney, Nebraska
We have audited the accompanying balance sheets of The Buckle, Inc. as of
January 31, 1998 and February 1, 1997, and the related statements of income,
stockholders' equity and cash flows for each of the three fiscal years in the
period ended January 31, 1998. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of The Buckle, Inc. as of January 31, 1998 and
February 1, 1997 and the results of its operations and its cash flows for each
of the three fiscal years in the period ended January 31, 1998 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 27, 1998
12
<PAGE> 4
BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 31, February 1,
ASSETS 1998 1997
(dollar amounts are in thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 53,593 $ 35,486
Short-term investments 14,013 8,455
Accounts receivable, net of allowance of $491 and
$312, respectively 2,149 1,387
Inventory 42,339 31,106
Prepaid expenses and other assets (Note D) 2,370 1,965
--------------------------------------
Total current assets 114,464 78,399
PROPERTY AND EQUIPMENT (Note B): 59,100 49,248
Less accumulated depreciation (29,688) (26,290)
--------------------------------------
29,412 22,958
OTHER ASSETS (Note E) 961 660
--------------------------------------
$ 144,837 $ 102,017
======================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 17,248 $ 9,407
Accrued employee compensation 14,519 9,565
Accrued store operating expenses 2,407 1,677
Gift certificates redeemable 1,357 1,106
Income taxes payable 1,048 1,740
--------------------------------------
Total current liabilities 36,579 23,495
DEFERRED INCOME TAXES (Note D) 377 479
COMMITMENTS (Notes C and F)
STOCKHOLDERS' EQUITY (Note H):
Common stock, authorized 20,000,000 shares of $.05 par value; issued and
outstanding; 14,439,736 and 13,963,812 shares, respectively 722 349
Additional paid-in capital 33,204 25,520
Retained earnings 75,505 52,174
Unearned compensation - restricted stock (1,550) -
--------------------------------------
Total stockholders' equity 107,881 78,043
--------------------------------------
$ 144,837 $ 102,017
======================================
</TABLE>
See notes to financial statements.
13
<PAGE> 5
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended
--------------------------------------------------------
JANUARY 31, February 1, February 3,
1998 1997 1996
(dollar amounts are in thousands except per share data)
<S> <C> <C> <C>
SALES, Net of returns and allowances of
$18,424, $13,650 and $11,057
respectively $ 267,921 $ 206,393 $ 172,291
COST OF SALES (Including buying, distribution
and occupancy costs) 174,379 140,359 118,262
--------------------------------------------------------
Gross profit 93,542 66,034 54,029
OPERATING EXPENSES:
Selling 49,040 38,361 33,166
General and administrative 8,772 7,157 6,101
--------------------------------------------------------
57,812 45,518 39,267
--------------------------------------------------------
INCOME FROM OPERATIONS 35,730 20,516 14,762
OTHER INCOME, Net 1,687 1,151 1,158
--------------------------------------------------------
INCOME BEFORE INCOME TAXES 37,417 21,667 15,920
PROVISION FOR INCOME TAXES (Note D) 14,086 8,043 6,073
--------------------------------------------------------
NET INCOME $ 23,331 $ 13,624 $ 9,847
========================================================
BASIC INCOME PER SHARE $ 1.65 $ 0.98 $ 0.72
========================================================
DILUTED INCOME PER SHARE $ 1.57 $ 0.95 $ 0.71
========================================================
</TABLE>
See notes to financial statements.
14
<PAGE> 6
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Unearned
Stock Capital Earnings Compensation Total
(dollar amounts are in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE, January 28, 1995 $ 342 $ 22,737 $ 28,703 $ - $ 51,782
Common stock (11,250 shares) issued
on exercise of stock options 1 101 - - 102
Repurchase of common stock
(5,900 shares) (1) (101) - - (102)
Net income - - 9,847 - 9,847
--------------------------------------------------------------------------
BALANCE, February 3, 1996 342 22,737 38,550 - 61,629
Common stock (136,781 shares)
issued on exercise of stock options 7 2,041 - - 2,048
Tax benefit related to exercise of
employee stock options - 742 - - 742
Net income - - 13,624 - 13,624
--------------------------------------------------------------------------
BALANCE, February 1, 1997 349 25,520 52,174 - 78,043
2-for-1 stock split 349 (349) - - -
Common stock (425,924 shares)
issued on exercise of stock options 21 3,369 - - 3,390
Tax benefit related to exercise of
employee stock options - 3,117 - - 3,117
Restricted stock issuance
(50,000 shares) 3 1,547 - (1,550) -
Net income - - 23,331 - 23,331
--------------------------------------------------------------------------
BALANCE, January 31, 1998 $ 722 $ 33,204 $ 75,505 $ (1,550) $ 107,881
==========================================================================
</TABLE>
See notes to financial statements.
15
<PAGE> 7
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended
--------------------------------------------------------
JANUARY 31, February 1, February 3,
1998 1997 1996
(dollar amounts are in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 23,331 $ 13,624 $ 9,847
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation 5,309 5,346 5,430
Deferred taxes (225) 167 (423)
Loss on disposal of assets 191 - 65
Changes in operating assets and liabilities:
Accounts receivable (763) (411) 28
Inventory (11,233) (4,049) (10,068)
Prepaid expenses and other assets 2,836 (84) 27
Accounts payable 7,841 745 2,697
Accrued employee compensation 4,954 2,882 2,253
Accrued store operating expenses 729 481 336
Gift certificates redeemable 251 185 142
Income taxes payable (691) (351) 1,254
-----------------------------------------------------
Net cash flows from operating activities 32,530 18,535 11,588
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (12,087) (4,489) (6,223)
Proceeds from sale of property and equipment 133 45 4
Increase in other assets (301) (182) (137)
Purchase of short-term investments (11,428) (6,786) (5,097)
Proceeds from maturities of short-term investments 5,870 3,816 2,829
-----------------------------------------------------
Net cash flows from investing activities (17,813) (7,596) (8,624)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock
and exercise of stock options 3,390 2,048 102
Purchases of common stock - - (102)
-----------------------------------------------------
Net cash flows from financing activities 3,390 2,048 -
-----------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 18,107 12,987 2,964
CASH AND CASH EQUIVALENTS, Beginning of year 35,486 22,499 19,535
-----------------------------------------------------
CASH AND CASH EQUIVALENTS, End of year $ 53,593 $ 35,486 $ 22,499
=====================================================
</TABLE>
See notes to financial statements.
16
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1998, FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
(dollar amounts are in thousands)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR - The Buckle, Inc. (the Company) has its fiscal year end on
the Saturday nearest January 31. All references in these financial
statements to fiscal years are to the calendar year in which the fiscal
year begins. Fiscal 1997 represents the 52-week period ended January 31,
1998. Fiscal year 1996 represents the 52-week period ended February 1,
1997 and fiscal year 1995 represents the 53-week period ended February 3,
1996.
NATURE OF OPERATIONS - The Company is a retailer of medium to better
priced casual apparel for fashion conscious young men and women operating
in 199 stores located in 26 states throughout the central United States,
as of January 31, 1998.
During fiscal 1997, the Company opened nineteen new stores, substantially
renovated two stores and closed one store. During fiscal 1996, the
Company opened seventeen new stores and substantially renovated four
stores. During fiscal 1995, the Company opened seventeen new stores and
substantially renovated eight stores.
REVENUE RECOGNITION - The Company operates on a cash and carry basis, so
revenue is recognized at the time of sale. Returns are recorded at the
time merchandise is returned.
INVENTORIES - Inventories are stated at the lower of cost or market. Cost
is determined by the first-in, first-out method.
DEPRECIATION AND AMORTIZATION - Property and equipment are stated on the
basis of historical cost. Depreciation is provided using a combination of
accelerated and straight-line methods based upon the estimated useful
lives of the assets. The majority of the property and equipment have
useful lives of five to ten years with the exception of a building, which
has an estimated useful life of 31.5 years.
CASH EQUIVALENTS - For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments with a maturity of
three months or less when purchased to be cash equivalents.
SHORT-TERM INVESTMENTS - Short-term investments are carried at amortized
cost. All of the Company's short-term investments have been classified as
held-to-maturity securities. The investments are all municipal bonds,
U.S. Treasury securities or repurchase agreements. The carrying amount of
the investments approximates fair value at January 31, 1998.
PRE-OPENING EXPENSES - Costs related to opening new stores are expensed
as incurred.
ADVERTISING COSTS - Advertising costs are expensed as incurred and
amounted to $3,218, $2,757 and $2,474 for fiscal years 1997, 1996 and
1995, respectively.
STOCK-BASED COMPENSATION - The Company accounts for its stock-based
compensation under provisions of Accounting Principles Opinion 25,
Accounting for Stock Issued to Employees (APB 25).
FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATIONS - Financial
instruments, which potentially subject the Company to concentrations of
credit risk, are primarily cash and short-term investments and accounts
receivable. The Company places its investments primarily in tax-free
municipal bonds or U.S. Treasury securities with short-term maturities,
and limits the amount of credit exposure to any one entity.
Concentrations of credit risk with respect to accounts receivable are
limited due to the nature of the Company's receivables; mainly layaways,
for which the Company retains possession of the merchandise until the
customer's account is paid in full and employee receivables, which can be
offset against future compensation. Because of their maturities, the
Company's financial instruments have a fair value approximating their
carrying value.
17
<PAGE> 9
EARNINGS PER SHARE - The Financial Accounting Standards Board (FASB)
issued Statement No. 128, "Earnings Per Share", which is effective for
1997 financial statements. FASB No. 128 requires dual presentation of
Basic and Diluted earnings per share for all periods for which an income
statement is presented. Basic earnings per share data are based on the
weighted average outstanding common shares during the period. Diluted
earnings per share data are based on the weighted average outstanding
common shares and the effect of all dilutive potential common shares,
including stock options and warrants. All prior periods earnings per
share data have been restated in accordance with FASB No. 128.
The earnings per share and the average weighted shares outstanding for
the prior periods presented have also been restated to reflect the impact
of the Company's 2-for-1 stock split made in the form of a 100 percent
stock dividend issued on April 24, 1997.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
these estimates.
ACCOUNTING PRONOUNCEMENTS - In June 1997, the FASB issued Statement
No. 130, Reporting Comprehensive Income. This statement establishes
standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. This
statement is effective for 1998 financial statements.
Also in June 1997, the FASB issued Statement No. 131, Disclosure About
Segments of an Enterprise and Related Information, which will be
effective in 1998. FASB No. 131 establishes standards for the way public
enterprises report information about operating segments. The Company
currently complies with most provisions of this statement and any
incremental disclosure required by that statement is expected to be
minimal.
B. PROPERTY AND EQUIPMENT
A summary of the cost of property and equipment follows:
(dollar amounts are in thousands)
<TABLE>
<CAPTION>
JANUARY 31, February 1,
1998 1997
------------------------------------------------
<S> <C> <C>
Land $ 634 $ 39
Building and improvements 1,210 1,268
Office equipment 1,869 2,553
Transportation equipment 4,118 1,720
Leasehold improvements 21,366 19,170
Furniture and fixtures 25,890 22,931
Shipping/receiving equipment 1,183 1,179
Screenprinting equipment 102 102
Construction-in-progress 2,728 286
------------------------------------------------
$ 59,100 $ 49,248
================================================
</TABLE>
18
<PAGE> 10
C. FINANCING ARRANGEMENTS
The Company has available an unsecured line of credit of $5 million and a
$5 million letter of credit facility. Borrowings under the line of credit
and letter of credit 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. There were no bank borrowings at January 31, 1998 and
February 1, 1997 or at any time during fiscal 1997, 1996 and 1995. The
Company had outstanding letters of credit totalling $626 and $333 at
January 31, 1998 and February 1, 1997, respectively.
Included in the statements of income, is interest expense of $4, $-0- and
$-0- and interest income of $1,729, $1,023 and $766 for fiscal years
1997, 1996 and 1995, respectively. Cash paid for interest approximates
interest expense for all three years.
D. INCOME TAXES
The provision for income taxes consists of:
(dollar amounts are in thousands)
<TABLE>
<CAPTION>
Fiscal Year
------------------------------------------------------
1997 1996 1995
<S> <C> <C> <C>
Currently payable:
Federal $ 11,763 $ 6,456 $ 5,123
State 2,547 1,420 1,373
Deferred (224) 167 (423)
------------------------------------------------------
Total $ 14,086 $ 8,043 $ 6,073
======================================================
</TABLE>
Total tax expense for the year varies from the amount which would be
provided by applying the statutory income tax rate to earnings before
income taxes. The major reasons for this difference (expressed as a
percent of pre-tax income) are as follows:
<TABLE>
<CAPTION>
Fiscal Year
-----------------------------------------------------
1997 1996 1995
<S> <C> <C> <C>
Statutory rate 35.0 % 35.0 % 35.0 %
Surtax exemption - (0.5) (0.7)
State income tax effect 4.9 5.0 5.5
Tax exempt interest income (2.0) (1.9) (1.8)
Expenses not deductible 0.1 0.1 0.1
Benefits of state tax credits (0.4) (0.6) -
-----------------------------------------------------
37.6 % 37.1 % 38.1 %
=====================================================
</TABLE>
19
<PAGE> 11
Deferred tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
JANUARY 31, February 1,
1998 1997
<S> <C> <C>
Deferred tax assets:
Inventory $ 660 $ 499
Option compensation 579 740
Accrued vacation 232 197
Allowance for doubtful accounts 172 106
Gift certificates 62 47
Other 43 37
-----------------------------------
$ 1,748 $ 1,626
-----------------------------------
Deferred tax liabilities - depreciation $ 377 $ 479
===================================
</TABLE>
The deferred tax assets are classified in prepaid expenses and other
assets.
Cash paid for income taxes was $10,678; $6,433 and $4,407 in fiscal years
1997, 1996 and 1995, respectively.
E. RELATED PARTY TRANSACTIONS
Included in other assets is a $600 note receivable from a life insurance
trust fund controlled by the Company's Chairman.
The note is secured by a life insurance policy on the Chairman.
F. LEASE COMMITMENTS
The Company conducts its operations in leased facilities under numerous
noncancelable operating leases expiring at various dates through January
31, 2009. Most of the Company's stores have lease terms of approximately
ten years and generally do not contain renewal options. Operating lease
base rental expense for fiscal 1997, 1996 and 1995 was $13,108, $11,493
and $9,947, respectively. Most of the rental payments are based on a
minimum annual rental plus a percentage of sales in excess of a specified
amount. Percentage rents for fiscal 1997, 1996 and 1995 were $1,479; $847
and $474, respectively. Total future minimum rental commitments under
these operating leases are as follows:
(dollar amounts are in thousands)
Fiscal Year
1998 $ 14,151
1999 14,371
2000 14,172
2001 13,768
2002 12,505
Thereafter 26,753
----------
Total minimum payments required $ 95,720
==========
20
<PAGE> 12
G. PROFIT SHARING PLAN
The Company has a 401(k) profit sharing plan covering all eligible
employees who desire to participate. Contributions to the plan are based
upon the amount of the employees' deferrals and the employer's matching
formula. The Company's matching contribution relates to the employees'
deferrals up to 6% of the employees' compensation. The Company has
elected to make matching contributions equal to 100% of the employees'
deferrals not exceeding 6%. The total expense under the profit sharing
plan was $792, $638 and $546 for fiscal years 1997, 1996 and 1995,
respectively.
H. STOCK-BASED COMPENSATION
The Company has several stock option plans that provide for granting of
options to purchase common stock to designated employees, officers and
directors. The options may be in the form of incentive stock options or
nonqualified stock options, and are granted at fair market value on the
date of grant. The options generally expire ten years from the date of
grant. At January 31, 1998, 1,193,151 shares of common stock were
available for grant under the various option plans of which 931,000
shares were not available to executive officers of the Company.
The Company granted 50,000 shares of restricted common stock with an
aggregate market value of $1,550 at fiscal 1997 year end. Unearned
compensation equivalent to the market value of the shares at the date of
grant was charged to stockholders' equity. Such unearned compensation
will be amortized into compensation expense over a five year period, at
which time the shares will fully vest.
The Company accounts for its stock-based compensation under the
provisions of Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB Opinion No. 25), (because we are not
showing Comp. expense) which utilizes the intrinsic value method.
Compensation cost related to stock-based compensation was $-0-, $1,400
and $825 for the fiscal years ended 1997, 1996 and 1995, respectively.
If compensation cost for the Company's stock-based compensation plan had
been determined based on the fair value at the grant dates for awards
under the plans consistent with the method of SFAS No. 123, Accounting
for Stock-Based Compensation, the Company's net income and net income per
share would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------
<S> <C> <C> <C>
Net income As reported $ 23,331 $ 13,624 $ 9,847
Pro forma $ 22,482 $ 13,362 $ 9,596
Basic income per share As reported $ 1.65 $ 0.98 $ 0.72
Pro forma $ 1.59 $ 0.96 $ 0.70
Diluted income per share As reported $ 1.57 $ 0.95 $ 0.71
Pro forma $ 1.51 $ 0.93 $ 0.69
</TABLE>
21
<PAGE> 13
The weighted average fair value of options granted during the year was
$9.31, $4.65 and $3.48 per option for 1997, 1996 and 1995, respectively.
The fair value of options granted under the Plans was estimated at the
date of grant using a binomial option pricing model with the following
assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------------------
<S> <C> <C> <C>
Risk-free interest rate 6.00 % 6.00 % 7.00 %
Dividend yield 0.00 % 0.00 % 0.00 %
Expected volatility 40.0 % 40.0 % 40.0 %
Expected life (years) 6.0 years 6.0 years 6.0 years
</TABLE>
A summary of the Company's stock-based compensation activity related to
stock options for the last three fiscal years is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
NUMBER PRICE NUMBER PRICE NUMBER PRICE
<S> <C> <C> <C> <C> <C> <C>
Outstanding - beginning of year 2,071,802 $ 7.97 1,966,540 $ 7.55 1,579,640 $ 7.31
Granted 545,700 13.42 434,800 9.57 419,200 6.91
Expired/terminated (18,875) 10.51 (55,978) 8.63 (10,100) 7.92
Exercised (425,924) 7.98 (273,560) 7.52 (22,200) 4.50
----------------------------------------------------------------------------------
Outstanding - end of year 2,172,703 $ 9.31 2,071,802 $ 7.97 1,966,540 $ 7.55
==================================================================================
</TABLE>
There were 1,603; 979 and 919 options exercisable at January 31, 1998,
February 1, 1997 and February 3, 1996, respectively.
The following table summarizes information about stock options
outstanding as of January 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------------------------------- ------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
<S> <C> <C> <C> <C> <C> <C>
$ 4.500 $ 4.500 586,700 3.88 years $ 4.50 586,700 $ 4.50
$ 6.250 $ 7.125 217,676 6.99 6.89 201,651 6.88
$ 7.438 $ 8.375 203,550 6.01 8.12 203,100 8.12
$ 9.000 $ 10.000 338,502 7.63 9.47 300,652 9.47
$ 12.750 $ 13.938 824,575 7.63 13.58 310,325 13.82
$ 17.250 $ 18.378 1,700 9.45 17.91 750 18.00
-------------------------------------------------------------------------- ------------------------------
2,172,703 6.38 $ 9.31 1,603,178 $ 8.00
========================================================================== ==============================
</TABLE>
22
<PAGE> 14
I. EARNINGS PER SHARE
The following table provides a reconciliation between basic and diluted
earnings per share (amounts in thousands except per share amounts):
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------- --------------------------------- --------------------------------
PER PER PER
SHARE SHARE SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT INCOME SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BASIC EPS
Net income $ 23,331 14,141 $ 1.65 $ 13,624 13,905 $ 0.98 $ 9,847 13,690 $ 0.72
EFFECT OF DILUTIVE
SECURITIES
Stock Options 738 469 221
--------------------------------- --------------------------------- --------------------------------
DILUTED EPS $ 23,331 14,879 $ 1.57 $ 13,624 14,374 $ 0.95 $ 9,847 13,911 $ 0.71
================================= ================================= ================================
</TABLE>
J. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial information for fiscal 1997 and 1996 are
as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
QUARTER
-----------------------------------------------------------------------------------
FISCAL 1997 FIRST SECOND THIRD FOURTH TOTAL
<S> <C> <C> <C> <C> <C>
NET SALES $ 48,325 $ 55,220 $ 79,604 $ 84,772 $ 267,921
GROSS PROFIT $ 14,765 $ 17,441 $ 28,942 $ 32,394 $ 93,542
INCOME FROM OPERATIONS $ 3,382 $ 5,186 $ 12,342 $ 14,820 $ 35,730
NET INCOME $ 2,257 $ 3,479 $ 7,972 $ 9,623 $ 23,331
BASIC INCOME PER SHARE $ 0.16 $ 0.25 $ 0.56 $ 0.68 $ 1.65
DILUTED INCOME PER SHARE $ 0.16 $ 0.24 $ 0.53 $ 0.64 $ 1.57
</TABLE>
<TABLE>
<CAPTION>
QUARTER
-----------------------------------------------------------------------------------
Fiscal 1996 First Second Third Fourth Total
<S> <C> <C> <C> <C> <C>
Net sales $ 39,917 $ 43,330 $ 61,073 $ 62,073 $ 206,393
Gross profit $ 11,289 $ 12,443 $ 20,867 $ 21,435 $ 66,034
Income from operations $ 1,921 $ 2,982 $ 7,532 $ 8,081 $ 20,516
Net income $ 1,301 $ 2,022 $ 4,807 $ 5,494 $ 13,624
Basic Income per Share $ 0.09 $ 0.15 $ 0.34 $ 0.40 $ 0.98
Diluted Income per Share $ 0.09 $ 0.14 $ 0.33 $ 0.39 $ 0.95
</TABLE>
23
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth certain financial data expressed as a percentage
of net sales and the percentage change in the dollar amount of such items
compared to the prior period.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES PERCENTAGE INCREASE (DECREASE)
JANUARY 31, FEBRUARY 1, FEBRUARY 3, FISCAL YEAR
1998 1997 1996 1996 to 1997 1995 to 1996
---------------------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net Sales 100.0% 100.0% 100.0% 29.8% 19.8%
Cost of sales (including
buying, distribution and
occupancy costs) 65.1% 68.0% 68.6% 24.2% 18.7%
---------------------------------------------- -------------------------------
Gross profit 34.9% 32.0% 31.4% 41.7% 22.2%
Selling expenses 18.3% 18.6% 19.3% 27.9% 15.7%
General and
administrative expenses 3.3% 3.5% 3.5% 22.6% 17.3%
---------------------------------------------- -------------------------------
Income from operations 13.3% 9.9% 8.6% 74.1% 39.0%
Other income .7% .6% .6% 46.6% -.6%
---------------------------------------------- -------------------------------
Income before
income taxes 14.0% 10.5% 9.2% 72.7% 36.1%
Income taxes 5.3% 3.9% 3.5% 75.1% 32.4%
---------------------------------------------- -------------------------------
Net income 8.7% 6.6% 5.7% 71.3% 38.4%
============================================== ===============================
</TABLE>
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales increased from $206.4 million in fiscal 1996 to $267.9 million in
fiscal 1997, a 29.8% increase. Comparable store sales increased by $36.1
million, or 18.6% for fiscal 1997 compared to the same period in the prior year.
The Company had 5.0% sales growth in fiscal 1997 that was attributable to the
inclusion of a full year of operating results in fiscal 1997 for stores opened
in fiscal 1996 and 6.2% from the opening of 19 new stores in fiscal 1997. The
Company's average retail price of merchandise increased $3.40 per piece in
fiscal 1997 compared to fiscal 1996, primarily due to higher price points in the
guy's denim category and in guy's knit shirts and from the continued growth in
the company's footwear business. Average sales per square foot increased 17.6%
from $255 to $300.
Gross profit after buying, distribution and occupancy costs increased $27.5
million in fiscal 1997 to $93.5 million, a 41.7% increase. As a percentage of
net sales, gross profit increased from 32.0% in fiscal 1996 to 34.9% in fiscal
1997. The increase was primarily attributable to a decrease in occupancy costs
as a percentage of net sales due to leverage provided by the strong increase in
comparable store sales and by improvement in the merchandise margins.
Improvement in the merchandise margin resulted from fewer markdowns and from
several opportunistic purchases during the year. Inventory shrinkage remained at
.7% in fiscal 1997 and fiscal 1996.
24
<PAGE> 16
Selling expenses increased from $38.4 million for fiscal 1996 to $49.0 million
for fiscal 1997, a 27.9% increase. Selling expenses as a percent of net sales
decreased to 18.3% for fiscal 1997 from 18.6% for fiscal 1996. The primary
reason for the improvement in selling expenses as a percentage of net sales is
leverage provided by strong sales to the areas of salaries and advertising
expense.
General and administrative expenses increased from $7.2 million in fiscal 1996
to $8.8 million in fiscal 1997, a 22.6% increase. As a percentage of net sales,
general and administrative expense decreased to 3.3% for fiscal 1997 from 3.5%
for fiscal 1996. Decreases in general and administrative expenses, as a
percentage of net sales, resulted primarily from leverage provided by strong
sales.
As a result of the above changes, the Company's income from operations increased
$15.2 million to $35.7 million for fiscal 1997 compared to $20.5 million for
fiscal 1996, a 74.1% increase. Income from operations was 13.3% as a percentage
of net sales in fiscal 1997 compared to 9.9% in fiscal 1996.
Other income for fiscal 1997 increased 46.6% from fiscal 1996. The increase was
primarily attributable to an increase in interest income from higher levels of
cash and short term investments in fiscal 1997 compared to fiscal 1996. This
increase was partially offset by a loss on the disposal of assets due to the
upgrade of the corporate computer system.
Income tax expense as a percentage of pre-tax income was 37.6% in fiscal 1997
compared to 37.1% in fiscal 1996. The increase in the income tax percentage rate
was primarily due to the phase out of the surtax exemption due to the increased
level of taxable income.
FISCAL 1996 COMPARED TO FISCAL 1995
Net sales increased from $172.3 million in fiscal 1995 to $206.4 million in
fiscal 1996, a 19.8% increase. Based upon the retail calendar, fiscal 1996 was a
52-week year compared to 53 weeks in the prior year, giving retailers one less
week of sales in fiscal 1996. Comparable store sales increased by $17.8 million,
or 11.1% for the 52 weeks of fiscal 1996 compared to the same 52 week period in
the prior year. The Company had 3.3% sales growth in fiscal 1996 that was
attributable to the inclusion of a full year of operating results in fiscal 1996
for stores opened in fiscal 1995 and 7.3% from the opening of 17 new stores in
fiscal 1996. The remaining difference of 1.9% is due to the $2.2 million in
sales during the extra week of fiscal 1995. The Company's average retail price
of merchandise increased $3.70 per piece in fiscal 1996 compared to fiscal 1995,
primarily due to the growth in the company's footwear business. Average sales
per square foot increased 7.1% from $238 to $255.
Gross profit after buying, distribution and occupancy costs increased $12.0
million in fiscal 1996 to $66.0 million, a 22.2% increase. As a percentage of
net sales, gross profit increased from 31.4% in fiscal 1995 to 32.0% in fiscal
1996. The increase was primarily 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. The card rewards frequent shoppers with a $10 coupon after
each $300 spent. Inventory shrinkage increased to .7% in fiscal 1996 compared to
.6% in fiscal 1995.
Selling expenses increased from $33.2 million for fiscal 1995 to $38.4 million
for fiscal 1996, a 15.7% increase. Selling expenses as a percent of net sales
decreased to 18.6% for fiscal 1996 from 19.3% for fiscal 1995. This decrease was
primarily attributable to improvements in the sales salaries as a percentage of
net sales, partially offset by higher bonus accruals for incentives based upon
net profits.
General and administrative expenses increased from $6.1 million in fiscal 1995
to $7.2 million in fiscal 1996, a 17.3% increase. As a percentage of net sales,
general and administrative expenses remained constant compared to the prior
year, at 3.5%.
25
<PAGE> 17
As a result of the above changes, the Company's income from operations increased
$5.8 million to $20.5 million for fiscal 1996 compared to $14.8 million for
fiscal 1995, a 39.0% increase. Income from operations was 9.9% as a percentage
of net sales in fiscal 1996 compared to 8.6% in fiscal 1995.
Other income for fiscal 1996 decreased .6% from fiscal 1995. Although the
overall change was minimal, other income decreased compared to the previous year
due to an accrual of state tax incentives receivable of approximately $240,000
recorded in the first quarter of fiscal 1995. The decrease was offset by an
increase in interest income from higher levels of cash and short term
investments in fiscal 1996 compared to fiscal 1995.
Income tax expense as a percentage of pre-tax income was 37.1% in fiscal 1996
compared to 38.1% in fiscal 1995. The decrease in the income tax percentage rate
was primarily due to the benefits of certain state investment tax credits and
due to a lower effective state income tax rate.
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 fiscal 1997, 1996,
and 1995 the Company's cash flow from operations was $32.5 million, $18.5
million, and $11.6 million, respectively. As of January 31, 1998, the Company's
working capital was $77.9 million, including $53.6 million of cash and cash
equivalents.
The Company has available an unsecured line of credit of $5.0 million and a $5.0
million letter of credit facility, all with First National Bank and Trust Co. 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. There were no borrowings during
fiscal 1997, 1996 or 1995. The Company had no bank borrowings as of January 31,
1998.
During fiscal 1997, 1996, and 1995, the Company invested $5.3 million, $4.3
million, and $5.4 million, respectively, in new store construction, store
renovation and upgrading store technology, net of any construction allowances
received from landlords. The Company also spent $3.7 million, $200,000, and
$800,000, in fiscal 1997, 1996, and 1995, respectively, in capital expenditures
for the corporate headquarters. During fiscal 1997, the Company began an
expansion to the corporate headquarters and distribution facility. The addition
will be approximately 122,000 square feet, added to the current 55,000 square
foot building. The majority of the space will be used for the distribution
center. The total cost of the project is currently estimated to be $7.5 million,
with completion of the distribution system in the second quarter of fiscal 1998
and completion of the office expansion by the end of fiscal 1998. Also in fiscal
1997, the Company upgraded its corporate aircraft at a cost of $3.1 million, net
of trade-in.
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 fiscal 1998, the Company anticipates completing approximately 26 store
construction projects, including approximately 20 new stores and approximately 6
stores to be remodeled and/or relocated. As of March 1998, leases for 5 new
stores have been signed, and leases for 2 additional locations are under
negotiation; however, exact new store openings, remodels and relocations may
vary from those anticipated. The average cost of opening a new store is
approximately $485,000, including construction costs of approximately $365,000
and inventory costs of approximately $120,000. Management estimates that total
capital expenditures during fiscal 1998 will be approximately $13 million,
before landlord allowances, estimated to be $1.5 million.
26
<PAGE> 18
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 1997, 1996, 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 past
three fiscal years. Quarterly results may vary depending on the timing and
amount of sales and costs associated with the opening of new stores and the
remodeling of existing stores.
YEAR 2000 MATTERS
The Buckle recognizes that the arrival of the year 2000 poses a unique worldwide
technological challenge as all computer information systems will require the
ability to recognize the date change from December 31, 1999 to January 1, 2000
and forward to properly process transactions. The company has assessed its
systems and is updating its computer applications and business processes to
provide for their continued functionality.
The Company is utilizing internal resources to reprogram most of its software
that is not year 2000 compliant. The costs of reprogramming are minimal and are
being expensed as incurred. The Company does plan to utilize external resources
to assist in the development and rollout of a new point-of-sale system. The
purchased hardware and software for the new point-of-sale system will be
capitalized in accordance with normal policy. The Company expects its Year 2000
conversion project to be completed on a timely basis; however, failure to do so
or failure on the part of third parties with whom the Company does business
could materially impact operations and financial results.
FORWARD LOOKING STATEMENTS
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.
27
<PAGE> 19
STOCK PRICES BY QUARTER
The Company's common stock trades on the New York Stock Exchange under the
symbol BKE. The Company did not pay any cash dividends in fiscal 1997, 1996 or
1995, and has no plans for cash dividend payments in the foreseeable future.
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.
Following is the Company's quarterly market range for fiscal years 1997, 1996
and 1995
<TABLE>
<CAPTION>
1997 1996 1995
HIGH LOW High Low High Low
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Quarter
First 16.50 12.00 15.00 9.38 8.25 6.75
Second 24.50 15.75 20.75 11.63 9.50 7.38
Third 31.00 21.25 19.00 12.50 9.13 7.63
Fourth 37.88 26.75 16.25 11.00 9.75 8.13
---------------------------------------------------------------------------------------------------------
All stock prices reflect the Company's 2:1 stock split issued on April 24, 1997
</TABLE>
BUCKLE STOCK PRICES
Effective January 31 of each year.
[BAR GRAPH]
NOTES:
28
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-07227, 33-48402 and 33-4104 on Form S-8 of our reports dated February 27,
1998, appearing in and incorporated by reference in the Annual Report on Form
10-K of The Buckle, Inc. for the year ended January 31, 1998.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Omaha, Nebraska
April 24, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000885245
<NAME> THE BUCKLE, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-02-1997
<PERIOD-END> JAN-31-1998
<CASH> 53,593
<SECURITIES> 14,013
<RECEIVABLES> 2,640
<ALLOWANCES> 491
<INVENTORY> 42,339
<CURRENT-ASSETS> 114,464
<PP&E> 59,100
<DEPRECIATION> 29,688
<TOTAL-ASSETS> 144,837
<CURRENT-LIABILITIES> 36,579
<BONDS> 0
0
0
<COMMON> 722
<OTHER-SE> 107,159
<TOTAL-LIABILITY-AND-EQUITY> 144,837
<SALES> 267,921
<TOTAL-REVENUES> 267,921
<CGS> 174,379
<TOTAL-COSTS> 232,191
<OTHER-EXPENSES> (1,687)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 37,417
<INCOME-TAX> 14,086
<INCOME-CONTINUING> 23,331
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,331
<EPS-PRIMARY> 1.65
<EPS-DILUTED> 1.57
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000885245
<NAME> THE BUCKLE, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> FEB-01-1997
<CASH> 35,486
<SECURITIES> 8,455
<RECEIVABLES> 1,699
<ALLOWANCES> 312
<INVENTORY> 31,106
<CURRENT-ASSETS> 78,399
<PP&E> 49,248
<DEPRECIATION> 26,290
<TOTAL-ASSETS> 102,017
<CURRENT-LIABILITIES> 23,495
<BONDS> 0
0
0
<COMMON> 349
<OTHER-SE> 77,694
<TOTAL-LIABILITY-AND-EQUITY> 102,017
<SALES> 206,393
<TOTAL-REVENUES> 206,393
<CGS> 140,359
<TOTAL-COSTS> 185,877
<OTHER-EXPENSES> (1,151)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 21,667
<INCOME-TAX> 8,043
<INCOME-CONTINUING> 13,624
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,624
<EPS-PRIMARY> 0.98
<EPS-DILUTED> 0.95
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000885245
<NAME> THE BUCKLE, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-START> JAN-29-1995
<PERIOD-END> FEB-03-1996
<CASH> 22,499
<SECURITIES> 5,485
<RECEIVABLES> 1,216
<ALLOWANCES> 240
<INVENTORY> 27,057
<CURRENT-ASSETS> 57,346
<PP&E> 45,282
<DEPRECIATION> 21,422
<TOTAL-ASSETS> 81,683
<CURRENT-LIABILITIES> 19,552
<BONDS> 0
0
0
<COMMON> 342
<OTHER-SE> 61,287
<TOTAL-LIABILITY-AND-EQUITY> 81,683
<SALES> 172,291
<TOTAL-REVENUES> 172,291
<CGS> 118,262
<TOTAL-COSTS> 157,529
<OTHER-EXPENSES> (1,158)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 15,920
<INCOME-TAX> 6,073
<INCOME-CONTINUING> 9,847
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,847
<EPS-PRIMARY> 0.72
<EPS-DILUTED> 0.71
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000885245
<NAME> THE BUCKLE, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> MAY-04-1996
<CASH> 17,060
<SECURITIES> 4,615
<RECEIVABLES> 1,513
<ALLOWANCES> 220
<INVENTORY> 29,404
<CURRENT-ASSETS> 53,728
<PP&E> 46,633
<DEPRECIATION> 22,562
<TOTAL-ASSETS> 78,282
<CURRENT-LIABILITIES> 14,232
<BONDS> 0
0
0
<COMMON> 351
<OTHER-SE> 63,197
<TOTAL-LIABILITY-AND-EQUITY> 78,282
<SALES> 39,917
<TOTAL-REVENUES> 39,917
<CGS> 28,628
<TOTAL-COSTS> 37,996
<OTHER-EXPENSES> (170)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,091
<INCOME-TAX> 790
<INCOME-CONTINUING> 1,301
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,301
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000885245
<NAME> THE BUCKLE, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> MAY-05-1996
<PERIOD-END> AUG-03-1996
<CASH> 20,145
<SECURITIES> 6,925
<RECEIVABLES> 2,344
<ALLOWANCES> 220
<INVENTORY> 32,656
<CURRENT-ASSETS> 63,256
<PP&E> 47,377
<DEPRECIATION> 23,837
<TOTAL-ASSETS> 87,517
<CURRENT-LIABILITIES> 20,611
<BONDS> 0
0
0
<COMMON> 354
<OTHER-SE> 66,050
<TOTAL-LIABILITY-AND-EQUITY> 87,517
<SALES> 43,330
<TOTAL-REVENUES> 43,330
<CGS> 30,887
<TOTAL-COSTS> 40,348
<OTHER-EXPENSES> (248)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,230
<INCOME-TAX> 1,208
<INCOME-CONTINUING> 2,022
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,022
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.14
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000885245
<NAME> THE BUCKLE, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> AUG-04-1996
<PERIOD-END> NOV-02-1996
<CASH> 31,051
<SECURITIES> 5,930
<RECEIVABLES> 2,245
<ALLOWANCES> 274
<INVENTORY> 31,898
<CURRENT-ASSETS> 72,184
<PP&E> 48,667
<DEPRECIATION> 25,144
<TOTAL-ASSETS> 96,428
<CURRENT-LIABILITIES> 24,146
<BONDS> 0
0
0
<COMMON> 349
<OTHER-SE> 71,431
<TOTAL-LIABILITY-AND-EQUITY> 96,428
<SALES> 61,073
<TOTAL-REVENUES> 61,073
<CGS> 40,206
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