<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 30, 1999
[ ] 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, $.01 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. [ ]
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 $184,739,602.50 on March 31, 1999. 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 8,210,649 shares.
The number of shares outstanding of the Registrant's Common Stock, as of March
31, 1999, was 22,048,861.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement dated April 28, 1999 for Registrant's
1999 Annual Meeting of Shareholders to be held June 4, 1999 are incorporated by
reference in Part III.
<PAGE> 2
THE BUCKLE, INC.
FORM 10-K
JANUARY 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PART I
<S> <C> <C>
Item 1. Business 3
Item 2. Properties 10
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
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 7A. Quantitative and Qualitative Disclosures About Market Risk 11
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
</TABLE>
2
<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 30, 1999, the
Company operated 222 retail stores in 29 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 footwear. 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 56 stores at the start
of 1989 to 222 stores by the close of fiscal 1998. The Company changed its
corporate name to The Buckle, Inc. on April 23, 1991. All references herein to
fiscal 1998 refer to the 52-week period ended January 30, 1999. Fiscal 1997 and
fiscal 1996 refer to the 52-week periods ended January 31, 1998 and February 1,
1997, 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. The Company publishes its corporate web site at
www.buckle.com.
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, sportswear, outerwear, accessories, and footwear. Denim
is a significant contributor to total sales (over 27% of fiscal 1998 net sales)
and is a key to the Company's merchandising concept. The Company believes it
attracts customers with a selection of key brands and a wide variety of fits,
finishes and styles in denim. Shirts and tops are also significant contributors
to the total sales (34% of fiscal 1998 net sales). The Company strives to
provide a continually changing selection of the latest casual fashions. Over the
past five years, footwear has been a significant growth category for the
Company, growing from 3.0% of net sales for fiscal 1994 to 17.3% of fiscal 1998
net sales.
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 Group Fiscal Fiscal Fiscal
----------------- 1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Denims .............................................. 27.3% 29.3% 31.6%
Slacks/Casual Bottoms ............................... 4.1 4.0 3.4
Tops (including sweaters) ........................... 34.0 35.0 34.6
Sportswear/Fashion Clothes (including dresses) ...... 7.5 8.3 10.6
Outerwear ........................................... 2.3 2.4 2.4
Accessories ......................................... 5.8 4.4 4.7
Footwear ............................................ 17.3 16.6 12.6
Other ............................................... 1.7 .0 .1
----- ----- -----
Total ................. 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
3
<PAGE> 4
Brand name merchandise constitutes over 85% 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 Polo Jeans Company. 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 in
February 1997. 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 1998, the Company spent $3.6 million (net co-op reimbursements) or
1.1% of net sales on advertising and in-store point of sale materials. In-store
seasonal sign kits, promotional signage and the Company's own LOOK Magazine are
used to enhance merchandising presentations, the stores' image and special
events at point of sale.
Magazine inserts in leading teen publications are used during key seasons to
introduce new merchandise, build awareness and brand the Buckle's image.
On-screen theatre advertising is utilized in select larger 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 also publishes a corporate web site at www.buckle.com. The Internet
is a great source for providing image and information to investors, customers
and employees.
The Company has developed programs to help strengthen relationships with loyal
guests. Seasonal postcards and birthday cards are direct mailed to loyal
Shoppers. In addition, the Company will continue offering the frequent shopper
program (the Buckle Primo Card), a program designed to build customer loyalty.
4
<PAGE> 5
STORE OPERATIONS
The Company has two Vice Presidents of Sales, two regional managers, eight
district managers, and 42 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. The company also has electronic article surveillance systems
in 95% of the Company's stores as well as surveillance camera systems in
approximately 40% of the stores. As a result, the Company achieved a merchandise
shrinkage rate of 0.5% of net sales for fiscal 1998 and 0.4% for fiscal years
1997 and 1996.
The average store is approximately 4,700 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 14 and 28 years of
experience 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 a long term relationship with an
agent in Hong Kong for the manufacture of The Buckle, Inc.'s private label
merchandise. An agreement with this company was entered into on 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 1998, Tommy Jeans (including purchases from 6 different Tommy
divisions), Lucky Brand Dungarees and Dr. Martens made up 17%, 16%, and 16%,
respectively, 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 Polo Jeans Company. 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, sorted, tagged with
bar-coded tickets, (unless the vendor UPC code can be used), and packaged for
distribution to individual stores primarily 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 and helping create excitement within each store. During fiscal 1998, the
Company began using "pre-packs" to expedite the movement of merchandise through
the distribution center.
The Company is currently in the process of remodeling its corporate headquarters
and has finished the expansion of its distribution center and new office space.
The building space and newly designed distribution system will allow for
handling
5
<PAGE> 6
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 8, 1999, the Company operated 231 stores in 31 states, including 9
stores opened in 1999. The existing stores are in 5 downtown locations, 9 strip
centers, 2 lifestyle centers and 215 shopping malls. The Company anticipates
opening approximately 17 additional new stores in fiscal 1999 and adding 4
additional new states. All new stores for 1999 will be located in higher traffic
shopping malls. The following table lists the location of existing stores as of
April 8, 1999.
Location of Stores
------------------
<TABLE>
<CAPTION>
Number of Number of
State Stores State Stores
----- ------ ----- ---------
<S> <C> <C> C>
Arizona 3 Nebraska 15
Arkansas 5 New Mexico 4
Colorado 10 North Carolina 2
Florida 2 North Dakota 3
Idaho 5 Ohio 8
Illinois 16 Oklahoma 14
Indiana 11 Oregon 1
Iowa 21 South Dakota 3
Kansas 15 Tennessee 5
Kentucky 4 Texas 22
Louisiana 6 Utah 2
Michigan 13 Washington 2
Minnesota 7 West Virginia 1
Mississippi 2 Wisconsin 12
Missouri 11 Wyoming 1
Montana 5
---
Total 231
===
</TABLE>
The Buckle has grown significantly over the past ten years, with the number of
stores increasing from 56 at the beginning of 1989 to 222 at the end of fiscal
1998. 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.
6
<PAGE> 7
The following table sets forth information regarding store openings and closings
since the beginning of fiscal 1989 to the end of fiscal 1998:
Total Number of Stores Per Year
<TABLE>
<CAPTION>
Fiscal Open at start Opened in Closed in
Year of year Current Year Current Year Total
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1989 56 10 - 66
1990 66 6 1 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 1 199
1998 199 24 1 222
</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, 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
$550,000, including construction costs of approximately $400,000 (which is prior
to any construction allowance received) and inventory costs of approximately
$150,000.
The Company anticipates opening approximately 26 new stores during fiscal 1999
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 1999, it is estimated that each will receive full remodeling. The
Company has budgeted a total of $22.5 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 1999.
The Company plans to expand in 1999 by opening stores in six 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.
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; the ability to find suitable malls with acceptable sites on
satisfactory terms; the availability of financing; and the readiness of trained
store managers. 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.
7
<PAGE> 8
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 PC based 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 PC server 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. The Company's discussion regarding Year
2000 issues is included in the Company's Annual Report to Shareholders as part
of Management's Discussion and Analysis of Financial Condition and Results of
Operations.
EMPLOYEES
As of January 30, 1999, the Company had approximately 4800 employees -
approximately 800 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 250 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 30, 1999, 635 employees
participated in the medical plan, 639 in the dental plan, 658 in the life
insurance plan, 590 in the long-term disability plan and 310 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.
8
<PAGE> 9
In the men's merchandise areas, the Company competes with specialty retailers
such as Gap, American Eagle Outfitters, Gadzooks, Pacific Sunwear, and
Abercrombie & Fitch. The men's market also competes with certain department
stores, such as Dillards, Saks, 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, American Eagle Outfitters, Gadzooks, Pacific Sunwear,
Abercrombie & Fitch, Express, Gap, and Vanity. The women's sales also compete
with department stores, such as Dillards, Saks, May Company stores, Federated
stores, and certain local or 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 57. 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 49. 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 40. 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.
SCOTT PORTER, AGE 37. Mr. Porter has served as the Vice President - Men's
Merchandising since April 19, 1991 and was elected as corporate Secretary on May
28, 1998. 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 43. 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 site selection and development and education of personnel as store
managers and as regional and district managers.
GARY LALONE, AGE 49. 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.
9
<PAGE> 10
BRETT P. MILKIE, AGE 39. 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:
<TABLE>
<CAPTION>
During Fiscal Number of expiring
Year leases
------------------- ------------------
<S> <C>
1999 2
2000 19
2001 19
2002 24
2003 39
2004 4
2005 25
2006 and later 99
---
Total 231
===
</TABLE>
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 179,000 square feet of space with over 70%
of the area being allocated for the distribution and returns-to-vendor
departments.
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 1998.
10
<PAGE> 11
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's common stock trades on 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 1998, 1997 or 1996, and has no current plans for
dividend payment. The Company issued a 3-for-2 stock split made in the form of a
stock dividend on June 8, 1998.
The number of record holders of the Company's common stock as of March 31, 1999
was 421. Based upon information from the principal market makers, the Company
believes there are more than 4,200 beneficial owners. The last reported sales
price of the Company's common stock on March 31, 1999 was $22.50.
The remainder of the information required by this item is incorporated by
reference to the information on page 28 of the Company's 1998 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 1998 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 1998 Annual Report
to Shareholders which is attached to this Form 10-K.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has evaluated the disclosure requirements of Item 305 of S-K
"Quantitative and Qualitative Disclosures about Market Risk," and has concluded
that the Company has no market risk sensitive instruments for which these
additional disclosures are required.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements together with the report thereon of Deloitte & Touche
LLP dated February 26, 1999, appearing on pages 12 through 23 of the Company's
1998 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.
11
<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 1999 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
1999 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 1999 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 1999 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 1998 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 30, 1999, and January 31, 1998
Statements of Income for each of the three years in the period
ended January 30, 1999
Statements of Stockholders' Equity for each of the three
years in the period ended January 30, 1999
Statements of Cash Flows for each of the three years in the
period ended January 30, 1999
Notes to Financial Statements for each of the three years in
the period ended January 30, 1999
(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
30, 1999.
(c) EXHIBITS
See index to exhibits on pages 15 and 16.
12
<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 27, 1999 By: /s/ 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 27th day of April, 1999.
/s/ DANIEL J. HIRSCHFELD /s/ ROBERT E. CAMPBELL
- ------------------------------------------- -------------------------
Daniel J. Hirschfeld Robert E. Campbell
Chairman of the Board and Director Director
/s/ DENNIS H. NELSON /s/ WILLIAM D. ORR
- ------------------------------------------- -------------------------
Dennis H. Nelson William D. Orr
President and Chief Executive Officer Director
and Director
/s/ KAREN B. RHOADS
- ------------------------------------------- -------------------------
Karen B. Rhoads Bill L. Fairfield
Vice President of Finance and Director
Chief Financial Officer and Director
-------------------------
Ralph M. Tysdal
Director
13
<PAGE> 14
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS
THE BUCKLE, INC.
We have audited the financial statements of The Buckle, Inc. as of January 30,
1999 and January 31, 1998 and for each of the three years in the period ended
January 30, 1999, and have issued our report thereon dated February 26, 1999;
such financial statements and report are included in your 1998 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 26, 1999
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
Allowance for
Doubtful Accounts
-----------------
<S> <C>
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
Recoveries of amounts previously written off
Write-off of uncollectible accounts (574,987)
-----------
Balance, January 31, 1998 490,567
Amounts charged to costs and expenses 1,132,004
Write-off of uncollectible accounts (1,322,571)
-----------
Balance, January 30, 1999 $ 300,000
===========
</TABLE>
14
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS PAGE NUMBER OR INCORPORATION
BY REFERENCE TO
<S> <C> <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
(3.1.1) Amendment to the Articles of
Incorporation of The Buckle, Inc.
(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
(10.4) Acknowledgment for Dennis H. Nelson
dated April 14, 1999
(10.5) Acknowledgment for Scott M. Porter
dated April 14, 1999
(10.6) Acknowledgment for James E. Shada
dated April 14, 1999
(10.7) Acknowledgment for Gary L. Lalone
dated April 14, 1999
(10.8) Acknowledgment for Brett P. Milkie
dated April 14, 1999
(10.10) Cash or Deferred Profit Sharing Plan Exhibit 10.10 to Form S-1
No. 33-46294
(10.10.1) Non-Qualified Deferred Compensation Plan
(10.11) Programmed Lending Note dated May 11, 1998 for
$5.0 million payable to First National Bank and
Trust Co. of Kearney
</TABLE>
15
<PAGE> 16
<TABLE>
<S> <C>
(10.12) Loan Agreement dated May 11, 1998
between The Buckle, Inc. and First
National Bank and Trust Co. of Kearney,
regarding $5.0 million line of credit.
(10.13) Letter dated May 11, 1998 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
(10.25) 1999 Management Incentive Plan Exhibit A to Proxy Statement
for Annual Meeting to be held
June 4, 1999
(12) Not applicable
(13) 1998 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>
16
<PAGE> 1
EXHIBIT 3.1.1
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
THE BUCKLE, INC.
Pursuant to the provisions of Sec. 21-20,121 of the Business Corporation Act,
the undersigned Corporation has adopted the following amendments to its Articles
of Incorporation:
1. The name of the Corporation is The Buckle, Inc.
2. The text of the amendment is:
Now, THEREFORE, BE IT RESOLVED, that the Articles of Incorporation of
the Company be amended so that Article VI shall read in its entirety
as follows :
VI.
The authorized capital stock of said corporation shall be
$1,000,000, divided into 100,000,000 shares of $.01 par value each. All
presently issued and outstanding shares of Common Stock having a par
value of $.05 per share are automatically converted into an equal
number of shares of Common Stock having a par value of $.01 per share.
The amount of stated capital of the Company is decreased from $729,561
to $145,902.
3. The manner in which any exchange, reclassification or cancellation of
issued shares provided for in the amendment shall be effected is set
forth in the amendment.
4. The date of the amendment's adoption is May 28, 1998.
5. The above amendments were adopted by the shareholders entitled to vote
and represented as follows:
<TABLE>
<CAPTION>
- -------------------------- ------------------------- ---------------------------- ------------------------------------
VOTING GROUP SHARES OUTSTANDING NUMBER OF VOTES ENTITLED UNDISPUTED NUMBER OF VOTES
DESIGNATION TO BE CAST REPRESENTED AT THE MEETING
- -------------------------- ------------------------- ---------------------------- ------------------------------------
<S> <C> <C> <C>
Common 14,592,221 14,592,221 13,803,992
- -------------------------- ------------------------- ---------------------------- ------------------------------------
</TABLE>
6. The shareholders voted as follows on the amendment:
<TABLE>
<CAPTION>
- ---------------------------------------- -------------------------------------- --------------------------------------
VOTING GROUP VOTES FOR VOTES AGAINST
- ---------------------------------------- -------------------------------------- --------------------------------------
DESIGNATION AMENDMENT AMENDMENT
- ---------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Common 11,399,602 2,400,021
- ---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
The number of affirmative votes was sufficient for approval by the voting group.
Dated: May 28, 1998
THE BUCKLE, INC.
BY: /s/ DANIEL J. HIRSCHFELD
----------------------------------
Daniel J. Hirschfeld
Title: Chairman of the Board
<PAGE> 1
EXHIBIT 10.4
ACKNOWLEDGMENT
1. Dennis H. Nelson, currently employed by The Buckle, Inc. ("Company")
of Kearney, Nebraska, will be paid an annual salary of $575,000 for so long as
the employee is employed by the Company during the fiscal year ending January
29, 2000.
2. In addition to the salary outlined in paragraph 1, above, a "Cash
Award" for the above fiscal year will be paid to you provided you are employed
by the Company on the last day of such fiscal year. Your Cash Award will be
calculated based upon the Company's growth in Pre-Bonus Net Income over the
previous year. You are designated a Level I Executive. The incentive multiple
level based on the percentage of change in Pre-Bonus Net Income is tied to your
base salary. The multiples for your fiscal 1999 cash award will be calculated as
follows:
<TABLE>
<CAPTION>
Multiple
of Base
LEVEL I Salary
----------
Change in Pre-Bonus Net Income 1999
- ------------------------------ ----
<S> <C>
>30% decrease 0.00
30% decrease 0.40
20% decrease 0.75
10% decrease 1.00
No Change 1.35
>10% increase 1.74
>20% increase 2.235
>30% increase 2.70
>40% increase 3.20
>50% increase 3.60
</TABLE>
No payment of a Cash Award for the year may be made until the Company's
Pre-Bonus Net Income for the year is certified by the Compensation Committee.
You shall not be entitled to receive payment of a Cash Award unless you are
still in the employ of (and shall not have delivered notice of resignation to)
the Company on the last day of the fiscal year for which the Cash Award is
earned.
The Cash Award will be paid on or before April 15 following the close
of the fiscal year. For calculating this Cash Award, "Pre-Bonus Net Income"
shall be defined as the Company's net income from operations after the deduction
of all expenses, excluding administrative and store manager percentage bonuses
and excluding income taxes, but including draws against such bonuses. Net income
from operations does not include earnings on cash investments. For this purpose,
net income shall be computed by the Company in accordance with the Company's
normal accounting practices, and the Company's calculations will be final and
conclusive.
3. Restricted Stock will be granted based upon a percentage of the
Cash Award and the fair market value of the Company's stock on the date of
certification by the Compensation Committee of the amount of the Cash Award.
Restricted Stock grants will be based upon the following:
<PAGE> 2
<TABLE>
<CAPTION>
Change in Pre-Bonus Net Income Level I Executives
- ------------------------------ ------------------
<S> <C>
Any decrease none
No Change 10%
10% increase 15%
20% increase 20%
30% increase and up 30%
</TABLE>
Restricted Stock granted pursuant to this Plan will vest 20% per year over five
years. Disposal of any vested shares of Restricted Stock will be prohibited for
five years, subject to waiver in the event of death or disability. The effect on
income of all Restricted Stock grants will be included in the calculation of
Pre-Bonus Net Income.
4. Options to purchase 103,500 shares ("Options") of The Buckle, Inc.
common stock at $26.75 per share were granted to you pursuant to the 1997
Executive Stock Option Plan as of the last day of the fiscal year preceding this
Plan (1-30-99). Options granted under the Plan will vest according to the same
terms as the 1997 Management Incentive Plan. Those terms include a performance
feature whereby one-half of the Options granted will vest over three years if a
10% increase in Pre-Bonus Net Income is achieved, and the second one-half of the
Options granted vest over three years if a 30% increase in Pre-Bonus Net Income
is achieved. If the performance goals are not met the Options will ultimately
vest after ten years. This Plan added an "accelerator" feature for the Options
so that vesting may occur sooner than the three or ten years when and if the
market price of the Company's stock doubles from the fair market value of the
stock at the date of the grant. All Options will also include a "reload" feature
under this Plan.
5. You are allowed personal use of a company owned vehicle. You are
also allowed personal use of a corporate owned aircraft for up to 30 hours this
fiscal year.
6. A credit limit of $3,500 has been established on your The Buckle
charge account, subject to annual change as determined by management. Please
make sure your charge account balance does not exceed this limit. You may have
payments made to your charge account via payroll withholding during the year.
Management is committed to reviewing its policies continually.
Accordingly, the statements outlined above are subject to review and change at
any time, with or without notice.
I understand I have the right to terminate my employment with the
Company at any time, with or without notice, and the Company retains the same
right, with or without cause or notice. I recognize, therefore, that I am an "at
will" employee.
This acknowledgment supersedes any prior acknowledgment or agreement
with the Company. This acknowledgment does not constitute an agreement of
employment with the Company.
April 14, 1999
The Buckle, Inc.
Acknowledged by:
----------------------------------
Dennis H. Nelson
<PAGE> 1
EXHIBIT 10.5
ACKNOWLEDGMENT
1. Scott M. Porter, currently employed by The Buckle, Inc. ("Company")
of Kearney, Nebraska, will be paid an annual salary of $325,000 for so long as
the employee is employed by the Company during the fiscal year ending January
29, 2000.
2. In addition to the salary outlined in paragraph 1, above, a "Cash
Award" for the above fiscal year will be paid to you provided you are employed
by the Company on the last day of such fiscal year. Your Cash Award will be
calculated based upon the Company's growth in Pre-Bonus Net Income over the
previous year. You are designated a Level I Executive. The incentive multiple
level based on the percentage of change in Pre-Bonus Net Income is tied to your
base salary. The multiples for your fiscal 1999 cash award will be calculated as
follows:
<TABLE>
<CAPTION>
Multiple
of Base
LEVEL I Salary
------
Change in Pre-Bonus Net Income 1999
- ------------------------------ ----
<S> <C>
>30% decrease 0.00
30% decrease 0.40
20% decrease 0.75
10% decrease 1.00
No Change 1.35
>10% increase 1.74
>20% increase 2.235
>30% increase 2.70
>40% increase 3.20
>50% increase 3.60
</TABLE>
No payment of a Cash Award for the year may be made until the Company's
Pre-Bonus Net Income for the year is certified by the Compensation Committee.
You shall not be entitled to receive payment of a Cash Award unless you are
still in the employ of (and shall not have delivered notice of resignation to)
the Company on the last day of the fiscal year for which the Cash Award is
earned.
The Cash Award will be paid on or before April 15 following the close
of the fiscal year. For calculating this Cash Award, "Pre-Bonus Net Income"
shall be defined as the Company's net income from operations after the deduction
of all expenses, excluding administrative and store manager percentage bonuses
and excluding income taxes, but including draws against such bonuses. Net income
from operations does not include earnings on cash investments. For this purpose,
net income shall be computed by the Company in accordance with the Company's
normal accounting practices, and the Company's calculations will be final and
conclusive.
3. Restricted Stock will be granted based upon a percentage of the Cash
Award and the fair market value of the Company's stock on the date of
certification by the Compensation Committee of the amount of the Cash Award.
Restricted Stock grants will be based upon the following:
<PAGE> 2
<TABLE>
<CAPTION>
Change in Pre-Bonus Net Income Level I Executives
- ------------------------------ ------------------
<S> <C>
Any decrease none
No Change 10%
10% increase 15%
20% increase 20%
30% increase and up 30%
</TABLE>
Restricted Stock granted pursuant to this Plan will vest 20% per year over five
years. Disposal of any vested shares of Restricted Stock will be prohibited for
five years, subject to waiver in the event of death or disability. The effect on
income of all Restricted Stock grants will be included in the calculation of
Pre-Bonus Net Income.
4. Options to purchase 58,500 shares ("Options") of The Buckle, Inc.
common stock at $26.75 per share were granted to you pursuant to the 1997
Executive Stock Option Plan as of the last day of the fiscal year preceding this
Plan (1-30-99). Options granted under the Plan will vest according to the same
terms as the 1997 Management Incentive Plan. Those terms include a performance
feature whereby one-half of the Options granted will vest over three years if a
10% increase in Pre-Bonus Net Income is achieved, and the second one-half of the
Options granted vest over three years if a 30% increase in Pre-Bonus Net Income
is achieved. If the performance goals are not met the Options will ultimately
vest after ten years. This Plan added an "accelerator" feature for the Options
so that vesting may occur sooner than the three or ten years when and if the
market price of the Company's stock doubles from the fair market value of the
stock at the date of the grant. All Options will also include a "reload" feature
under this Plan.
5. A credit limit of $3,500 has been established on your The Buckle
charge account, subject to annual change as determined by management. Please
make sure your charge account balance does not exceed this limit. You may have
payments made to your charge account via payroll withholding during the year.
Management is committed to reviewing its policies continually.
Accordingly, the statements outlined above are subject to review and change at
any time, with or without notice.
I understand I have the right to terminate my employment with the
Company at any time, with or without notice, and the Company retains the same
right, with or without cause or notice. I recognize, therefore, that I am an "at
will" employee.
This acknowledgment supersedes any prior acknowledgment or agreement
with the Company. This acknowledgment does not constitute an agreement of
employment with the Company.
April 14, 1999
The Buckle, Inc.
Acknowledged by:
-----------------------------------
Scott M. Porter
<PAGE> 1
EXHIBIT 10.6
ACKNOWLEDGMENT
1. James E. Shada, currently employed by The Buckle, Inc. ("Company")
of Kearney, Nebraska, will be paid an annual salary of $310,000 for so long as
the employee is employed by the Company during the fiscal year ending January
29, 2000.
2. In addition to the salary outlined in paragraph 1, above, a "Cash
Award" for the above fiscal year will be paid to you provided you are employed
by the Company on the last day of such fiscal year. Your Cash Award will be
calculated based upon the Company's growth in Pre-Bonus Net Income over the
previous year. You are designated a Level I Executive. The incentive multiple
level based on the percentage of change in Pre-Bonus Net Income is tied to your
base salary. The multiples for your fiscal 1999 cash award will be calculated as
follows:
<TABLE>
<CAPTION>
Multiple
of Base
Salary
LEVEL I ---------
Change in Pre-Bonus Net Income 1999
- ------------------------------ ----
<S> <C>
>30% decrease 0.00
30% decrease 0.40
20% decrease 0.75
10% decrease 1.00
No Change 1.35
>10% increase 1.74
>20% increase 2.235
>30% increase 2.70
>40% increase 3.20
>50% increase 3.60
</TABLE>
No payment of a Cash Award for the year may be made until the Company's
Pre-Bonus Net Income for the year is certified by the Compensation Committee.
You shall not be entitled to receive payment of a Cash Award unless you are
still in the employ of (and shall not have delivered notice of resignation to)
the Company on the last day of the fiscal year for which the Cash Award is
earned.
The Cash Award will be paid on or before April 15 following the close
of the fiscal year. For calculating this Cash Award, "Pre-Bonus Net Income"
shall be defined as the Company's net income from operations after the deduction
of all expenses, excluding administrative and store manager percentage bonuses
and excluding income taxes, but including draws against such bonuses. Net income
from operations does not include earnings on cash investments. For this purpose,
net income shall be computed by the Company in accordance with the Company's
normal accounting practices, and the Company's calculations will be final and
conclusive.
3. Restricted Stock will be granted based upon a percentage of the Cash
Award and the fair market value of the Company's stock on the date of
certification by the Compensation Committee of the amount of the Cash Award.
Restricted Stock grants will be based upon the following:
<PAGE> 2
<TABLE>
<CAPTION>
Change in Pre-Bonus Net Income Level I Executives
- ------------------------------ ------------------
<S> <C>
Any decrease none
No Change 10%
10% increase 15%
20% increase 20%
30% increase and up 30%
</TABLE>
Restricted Stock granted pursuant to this Plan will vest 20% per year over five
years. Disposal of any vested shares of Restricted Stock will be prohibited for
five years, subject to waiver in the event of death or disability. The effect on
income of all Restricted Stock grants will be included in the calculation of
Pre-Bonus Net Income.
4. Options to purchase 34,650 shares ("Options") of The Buckle, Inc.
common stock at $26.75 per share were granted to you pursuant to the 1997
Executive Stock Option Plan as of the last day of the fiscal year preceding this
Plan (1-30-99). Options granted under the Plan will vest according to the same
terms as the 1997 Management Incentive Plan. Those terms include a performance
feature whereby one-half of the Options granted will vest over three years if a
10% increase in Pre-Bonus Net Income is achieved, and the second one-half of the
Options granted vest over three years if a 30% increase in Pre-Bonus Net Income
is achieved. If the performance goals are not met the Options will ultimately
vest after ten years. This Plan added an "accelerator" feature for the Options
so that vesting may occur sooner than the three or ten years when and if the
market price of the Company's stock doubles from the fair market value of the
stock at the date of the grant. All Options will also include a "reload" feature
under this Plan.
5. A credit limit of $3,500 has been established on your The Buckle
charge account, subject to annual change as determined by management. Please
make sure your charge account balance does not exceed this limit. You may have
payments made to your charge account via payroll withholding during the year.
Management is committed to reviewing its policies continually.
Accordingly, the statements outlined above are subject to review and change at
any time, with or without notice.
I understand I have the right to terminate my employment with the
Company at any time, with or without notice, and the Company retains the same
right, with or without cause or notice. I recognize, therefore, that I am an "at
will" employee.
This acknowledgment supersedes any prior acknowledgment or agreement
with the Company. This acknowledgment does not constitute an agreement of
employment with the Company.
April 14, 1999
The Buckle, Inc.
Acknowledged by:
-----------------------------------
James E. Shada
2
<PAGE> 1
EXHIBIT 10.7
ACKNOWLEDGMENT
1. Gary L. Lalone, currently employed by The Buckle, Inc. ("Company")
of Kearney, Nebraska, will be paid an annual salary of $235,000 for so long as
the employee is employed by the Company during the fiscal year ending January
29, 2000.
2. In addition to the salary outlined in paragraph 1, above, a "Cash
Award" for the above fiscal year will be paid to you provided you are employed
by the Company on the last day of such fiscal year. Your Cash Award will be
calculated based upon the Company's growth in Pre-Bonus Net Income over the
previous year. You are designated a Level I Executive. The incentive multiple
level based on the percentage of change in Pre-Bonus Net Income is tied to your
base salary. The multiples for your fiscal 1999 cash award will be calculated as
follows:
<TABLE>
<CAPTION>
Multiple
of Base
LEVEL I Salary
--------
Change in Pre-Bonus Net Income 1999
- ------------------------------ -----
<S> <C>
>30% decrease 0.00
30% decrease 0.40
20% decrease 0.75
10% decrease 1.00
No Change 1.35
>10% increase 1.74
>20% increase 2.235
>30% increase 2.70
>40% increase 3.20
>50% increase 3.60
</TABLE>
No payment of a Cash Award for the year may be made until the Company's
Pre-Bonus Net Income for the year is certified by the Compensation Committee.
You shall not be entitled to receive payment of a Cash Award unless you are
still in the employ of (and shall not have delivered notice of resignation to)
the Company on the last day of the fiscal year for which the Cash Award is
earned.
The Cash Award will be paid on or before April 15 following the close
of the fiscal year. For calculating this Cash Award, "Pre-Bonus Net Income"
shall be defined as the Company's net income from operations after the deduction
of all expenses, excluding administrative and store manager percentage bonuses
and excluding income taxes, but including draws against such bonuses. Net income
from operations does not include earnings on cash investments. For this purpose,
net income shall be computed by the Company in accordance with the Company's
normal accounting practices, and the Company's calculations will be final and
conclusive.
3. Restricted Stock will be granted based upon a percentage of the Cash
Award and the fair market value of the Company's stock on the date of
certification by the Compensation Committee of the amount of the Cash Award.
Restricted Stock grants will be based upon the following:
<PAGE> 2
<TABLE>
<CAPTION>
Change in Pre-Bonus Net Income Level I Executives
- ------------------------------ ------------------
<S> <C>
Any decrease none
No Change 10%
10% increase 15%
20% increase 20%
30% increase and up 30%
</TABLE>
Restricted Stock granted pursuant to this Plan will vest 20% per year over five
years. Disposal of any vested shares of Restricted Stock will be prohibited for
five years, subject to waiver in the event of death or disability. The effect on
income of all Restricted Stock grants will be included in the calculation of
Pre-Bonus Net Income.
4. Options to purchase 34,650 shares ("Options") of The Buckle, Inc.
common stock at $26.75 per share were granted to you pursuant to the 1997
Executive Stock Option Plan as of the last day of the fiscal year preceding this
Plan (1-30-99). Options granted under the Plan will vest according to the same
terms as the 1997 Management Incentive Plan. Those terms include a performance
feature whereby one-half of the Options granted will vest over three years if a
10% increase in Pre-Bonus Net Income is achieved, and the second one-half of the
Options granted vest over three years if a 30% increase in Pre-Bonus Net Income
is achieved. If the performance goals are not met the Options will ultimately
vest after ten years. This Plan added an "accelerator" feature for the Options
so that vesting may occur sooner than the three or ten years when and if the
market price of the Company's stock doubles from the fair market value of the
stock at the date of the grant. All Options will also include a "reload" feature
under this Plan.
5. A credit limit of $3,500 has been established on your The Buckle
charge account, subject to annual change as determined by management. Please
make sure your charge account balance does not exceed this limit. You may have
payments made to your charge account via payroll withholding during the year.
Management is committed to reviewing its policies continually.
Accordingly, the statements outlined above are subject to review and change at
any time, with or without notice.
I understand I have the right to terminate my employment with the
Company at any time, with or without notice, and the Company retains the same
right, with or without cause or notice. I recognize, therefore, that I am an "at
will" employee.
This acknowledgment supersedes any prior acknowledgment or agreement
with the Company. This acknowledgment does not constitute an agreement of
employment with the Company.
April 14, 1999
The Buckle, Inc.
Acknowledged by:
-----------------------------------
Gary L. Lalone
<PAGE> 1
EXHIBIT 10.8
ACKNOWLEDGMENT
1. Brett P. Milkie, currently employed by The Buckle, Inc. ("Company")
of Kearney, Nebraska, will be paid an annual salary of $167,000 for so long as
the employee is employed by the Company during the fiscal year ending January
29, 2000.
2. In addition to the salary outlined in paragraph 1, above, a "Cash
Award" for the above fiscal year will be paid to you provided you are employed
by the Company on the last day of such fiscal year. Your Cash Award will be
calculated based upon the Company's growth in Pre-Bonus Net Income over the
previous year. You are designated a Level II Executive. The incentive multiple
level based on the percentage of change in Pre-Bonus Net Income is tied to your
base salary. The multiples for your fiscal 1999 cash award will be calculated as
follows:
<TABLE>
<CAPTION>
LEVEL II Multiple
of Base Salary
Change in Pre-Bonus
Net Income 1999
---------- ----
<S> <C>
>30% decrease 0.00
30% decrease 0.35
20% decrease 0.50
10% decrease 0.57
No Change 0.72
>10% increase 1.02
>20% increase 1.25
>30% increase 1.55
>40% increase 1.75
>50% increase 2.00
</TABLE>
No payment of a Cash Award for the year may be made until the Company's
Pre-Bonus Net Income for the year is certified by the Compensation Committee.
You shall not be entitled to receive payment of a Cash Award unless you are
still in the employ of (and shall not have delivered notice of resignation to)
the Company on the last day of the fiscal year for which the Cash Award is
earned.
The Cash Award will be paid on or before April 15 following the close
of the fiscal year. For calculating this Cash Award, "Pre-Bonus Net Income"
shall be defined as the Company's net income from operations after the deduction
of all expenses, excluding administrative and store manager percentage bonuses
and excluding income taxes, but including draws against such bonuses. Net income
from operations does not include earnings on cash investments. For this purpose,
net income shall be computed by the Company in accordance with the Company's
normal accounting practices, and the Company's calculations will be final and
conclusive.
3. Restricted Stock will be granted based upon a percentage of the Cash
Award and the fair market value of the Company's stock on the date of
certification by the Compensation Committee of the amount of the Cash Award.
Restricted Stock grants will be based upon the following:
<PAGE> 2
<TABLE>
<CAPTION>
Change in Pre-Bonus Net Income Level II Executives
- ------------------------------ -------------------
<S> <C>
Any decrease none
No Change 10%
10% increase 10%
20% increase 15%
30% increase and up 20%
</TABLE>
Restricted Stock granted pursuant to this Plan will vest 20% per year over five
years. Disposal of any vested shares of Restricted Stock will be prohibited for
five years, subject to waiver in the event of death or disability. The effect on
income of all Restricted Stock grants will be included in the calculation of
Pre-Bonus Net Income.
4. Options to purchase 25,200 shares ("Options") of The Buckle, Inc.
common stock at $26.75 per share were granted to you pursuant to the 1997
Executive Stock Option Plan as of the last day of the fiscal year preceding this
Plan (1-30-99). Options granted under the Plan will vest according to the same
terms as the 1997 Management Incentive Plan. Those terms include a performance
feature whereby one-half of the Options granted will vest over three years if a
10% increase in Pre-Bonus Net Income is achieved, and the second one-half of the
Options granted vest over three years if a 30% increase in Pre-Bonus Net Income
is achieved. If the performance goals are not met the Options will ultimately
vest after ten years. This Plan added an "accelerator" feature for the Options
so that vesting may occur sooner than the three or ten years when and if the
market price of the Company's stock doubles from the fair market value of the
stock at the date of the grant. All Options will also include a "reload" feature
under this Plan.
5. A credit limit of $3,500 has been established on your The Buckle
charge account, subject to annual change as determined by management. Please
make sure your charge account balance does not exceed this limit. You may have
payments made to your charge account via payroll withholding during the year.
Management is committed to reviewing its policies continually.
Accordingly, the statements outlined above are subject to review and change at
any time, with or without notice.
I understand I have the right to terminate my employment with the
Company at any time, with or without notice, and the Company retains the same
right, with or without cause or notice. I recognize, therefore, that I am an "at
will" employee.
This acknowledgment supersedes any prior acknowledgment or agreement
with the Company. This acknowledgment does not constitute an agreement of
employment with the Company.
April 14, 1999
The Buckle, Inc.
Acknowledged by:
-----------------------------------
Brett P. Milkie
<PAGE> 1
THE BUCKLE, INC.
DEFERRED COMPENSATION PLAN
AND TRUST AGREEMENT
(EFFECTIVE FEBRUARY 1, 1999)
<PAGE> 2
THE BUCKLE, INC.
DEFERRED COMPENSATION PLAN
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
INTRODUCTION 1
ARTICLE I GENERAL DEFINITIONS 2
ARTICLE II PARTICIPATION 8
ARTICLE III DEFERRED COMPENSATION PLAN CONTRIBUTIONS FOR
ELIGIBLE EMPLOYEES 9
ARTICLE IV GENERAL PROVISIONS REGARDING CONTRIBUTIONS 11
ARTICLE V ALLOCATIONS TO PARTICIPANTS'ACCOUNTS 12
ARTICLE VI DEEMED INVESTMENT OF CONTRIBUTIONS TO PLAN 13
ARTICLE VII VESTING 14
ARTICLE VIII PAYMENT OF BENEFITS 16
ARTICLE IX DESIGNATION OF BENEFICIARY 18
ARTICLE X FUNDING 19
ARTICLE XI ADMINISTRATION 20
ARTICLE XII AMENDMENTS. ACTION BY COMPANY, AND TERMINATION 24
ARTICLE XIII MISCELLANEOUS PROVISIONS 26
APPENDIX A SCHEDULE OF EMPLOYEES ELIGIBLE TO PARTICIPATE
IN DEFERRED COMPENSATION PLAN
</TABLE>
2
<PAGE> 3
THE BUCKLE, INC.
DEFERRED COMPENSATION PLAN
INTRODUCTION
The Buckle, Inc. (the "Company") hereby establishes The Buckle, Inc.
Deferred Compensation Plan (the "Plan") effective as of February 1, 1999, in
order to provide additional deferred compensation opportunities to certain key
employees. The Plan is an unfunded plan maintained primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees. As such, the Plan is not intended to meet the
qualification requirements of Section 401(a) of the Internal Revenue Code.
ARTICLE I
GENERAL DEFINITIONS
SECTION 1.01. Account. The account maintained for a Participant to
record his or her share of the Company Contributions and Deferral Contributions
and adjustments relating thereto.
SECTION 1.02. Administration Committee or Committee. The persons
appointed pursuant to Article XI to administer the Plan in accordance with said
Article.
SECTION 1.03. Beneficiary. Any person designated under Article IX by
the Participant to receive any benefit payable under the Plan by reason of the
Participant's death.
SECTION 1.04. Board of Directors or Board. The Board of Directors of
the Company.
SECTION 1.05. Change in Control. Change in Control means:
(a) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) of the
Securities and Exchange Act of 1934, as amended, and the
rules and regulations thereunder (the "Exchange Act"))
other than (1) an employee benefit plan (or related
trust) sponsored or maintained by the Company or any of
its affiliates or (2) Dan Hirschfeld or any member of
his family (including his spouse, or any lineal
descendent) or The Hirschfeld Family Foundation or any
of his or their affiliates, of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 25 percent or more of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors or of equity
securities having a value equal to 25 percent or more of
the total value of all equity securities of the Company,
if, at the time of such acquisition Dan Hirschfeld,
members of his family, The Hirschfeld Family Foundation
and his or their affiliates own less than 50 percent of
the outstanding voting securities of the Company or less
than 50 percent of the total value of all equity
securities
<PAGE> 4
of the Company or less than 50 percent of the total
value of all equity securities of the Company;
(b) individuals who, as of the effective date of the Plan,
constitute the Board, and subsequently elected members
of the Board whose election is approved or recommended
by at least a majority of such current members or their
successors whose election was so approved or
recommended, cease for any reason to constitute at least
a majority of such Board; or
(c) approval by the stockholders of the Company of (1) a
merger, reorganization or consolidation with respect to
which the individuals and entities who were the
respective beneficial owners of the Common Stock and
voting securities of the Company immediately before such
merger, reorganization or consolidation do not, after
such merger, reorganization or consolidation,
beneficially own, directly or indirectly, more than 50
percent of, respectively, the then outstanding common
shares and the combined voting power of the then
outstanding voting securities entitled to vote generally
in the election of directors of the corporation
resulting from such merger, reorganization or
consolidation, (2) a liquidation or dissolution of the
Company or (3) the sale or other disposition of all or
substantially all of the assets of the Company.
SECTION 1.06. Company. The Buckle, Inc.
SECTION 1.07. Company Contribution. The credits made to the Plan by
the Company under Section 3.02 hereof.
SECTION 1.08. Compensation. The total cash compensation actually
paid to a Participant during a Plan Year, including pre-tax contributions made
on behalf of the Participant under the Profit Sharing Plan, including deferrals
under Section 125 or similar provisions of the Internal Revenue Code and
deferrals under this Plan, including base salary, hourly wages, bonuses,
overtime compensation, commissions and incentives, but excluding the value of
any non-cash fringe benefits.
SECTION 1.09. "Deemed Investment" shall mean an investment medium
permitted by the Employer in which a Participant may direct the Employer as to
how the Participant's Account is deemed invested.
SECTION 1.10. Deferral Contribution. The credits made to the Plan by
the Company under Section 3.01 hereof on behalf of an Eligible Employee in
accordance with such Participant's election.
SECTION 1.11. Disability. A physical or mental condition which, in
the judgment of the Administration Committee, based upon medical reports and
other evidence satisfactory to the Administration Committee, permanently
prevents an Employee from satisfactorily performing his or her usual duties for
the Company or the
<PAGE> 5
duties of such other position or job which the Company makes available to him or
her and for which such Employee is qualified by reason of his or her training,
education or experience.
SECTION 1.12. Eligible Employee. An Employee who is part of a select
group of highly compensated or management employees and (a) who is identified on
Appendix A attached hereto; or (b) who is declared eligible to participate in a
resolution hereafter duly adopted by the Board of Directors.
SECTION 1.13. Employee. Any person who is employed by the Company.
SECTION 1.14. Former Participant. A Participant whose employment
with the Company has terminated or who has otherwise ceased to be an Eligible
Employee, but who has a vested Account balance under the Plan which has not been
paid in full and, therefore, is continuing to participate in the allocation of
Trust Fund Income.
SECTION 1.15. Good Cause. Good cause shall be deemed to exist if,
and only if:
(a) The Participant engages in acts or omissions
constituting dishonesty, intentional breach of fiduciary
obligation or intentional wrongdoing or malfeasance;
(b) The Participant is convicted of a criminal violation
involving fraud or dishonesty; or
(c) The Participant materially breaches the terms of any
Agreement between the Participant and the Company
relating to the Participant's employment, or materially
fails to satisfy the conditions and requirements of the
Participant's employment with the Company, and such
breach or failure by its nature is incapable of being
cured, or such breach or failure remains uncured for
more than thirty days following receipt by the
Participant of written notice from the Company
specifying the nature of the breach or failure and
demanding the cure thereof. For purposes of this
paragraph, inattention by the Participant to the
Participant's duties shall be deemed a breach or failure
incapable of cure. Notwithstanding anything herein to
the contrary, in the event the Company shall terminate
the employment of the Participant for Good Cause
hereunder, the Company shall give at least thirty days
prior written notice to the Participant specifying in
detail the reason or reasons for the Participant's
termination.
SECTION 1.16. Good Reason. Good Reason shall exist if:
(a) There is a significant reduction in the scope of the
Participant's authority;
(b) There is a reduction in the Participant's rate of base
pay;
(c) The Company changes the principal location in which the
Participant is required to perform services; or
(d) The Company terminates or amends any Incentive Plan or
Retirement Plan so that, when considered in the
aggregate with any substitute Plan or Plans, the
Incentive Plans and Retirement Plans in which the
Participant is participating fail to provide the
Participant with a level of benefits equivalent to at
least 90 percent of the value of the level of benefits
provided in the aggregate by such incentive Plans or
Retirement Plans at the date of a Change in Control.
"Incentive Plans" shall mean any incentive, bonus,
deferred compensation or similar plan or arrangement
currently or hereafter made available by the
<PAGE> 6
Company in which the Participant is eligible to participate. For
purposes of the 90 percent test, the level of the value of benefits
shall be compared based on comparable levels of performance, and a
reduction in benefits resulting from a failure to meet performance
targets shall not constitute Good Reason, so long as the performance
targets are comparable and the level of benefits would not have been
reduced by more than 10 percent had the performance targets been
achieved. "Retirement Plans" shall mean any qualified or
supplemental defined benefit retirement plan or defined contribution
retirement plan, currently or hereinafter made available by the
Company in which the Participant is eligible to participate, or any
private arrangement maintained by the Company solely for the
Participant, including, but not limited to The Buckle, Inc. Cash or
Deferred Profit Sharing Plan.
SECTION 1.17. Income. The net gain or loss from Deemed Investments,
as reflected by deemed interest payments, dividends, realized and unrealized
gains and losses on securities, other investment transactions and expenses on
the Deemed Investments. In determining the Income of the Trust Fund as of any
date, assets shall be valued on the basis of their then fair market value.
SECTION 1.18. Participant. Any person participating in the Plan in
accordance with the provisions of Article II.
SECTION 1.19. Plan. The Buckle, Inc. Deferred Compensation Plan, the
plan set forth herein, as amended from time to time.
SECTION 1.20. Plan Year. The twelve-month period commencing February
1 and ending January 31.
SECTION 1.21. Quarter. The first, second, third and fourth
three-month periods of the Plan Year.
SECTION 1.22. Retirement. Termination of employment for reasons
other than death or Disability.
SECTION 1.23. Profit Sharing Plan. The Buckle, Inc. Cash or Deferred
Profit Sharing Plan, as amended from time to time.
SECTION 1.24. Trust or Trust Fund. The Trust or Trust Fund
maintained in accordance with the terms of the Trust Agreement, as from time to
time amended.
SECTION 1.25. Trust Agreement. The Trust Agreement dated as of
February 1, 1999, as amended, substituted, or replaced from time to time,
entered into between the Company and the Trustee, under which Company
Contributions and Deferral Contributions will be received, held, invested, and
disbursed for purposes of the Plan.
<PAGE> 7
SECTION 1.26. Trustee. National Bank of Commerce Trust and Savings
Association, or any successor trustee appointed pursuant to the Trust Agreement.
SECTION 1.27. Valuation Date. The last business day of any Quarter.
ARTICLE II
PARTICIPATION
SECTION 2.01. Commencement of Participation. Each Eligible Employee
listed in Appendix A shall commence participation in this Plan as of February 1,
1999. Any Employee who hereafter becomes an Eligible Employee shall commence
participation in this Plan as of the date specified by the Board of Directors in
the resolution declaring such Employee to be eligible to participate in the
Plan.
ARTICLE III
DEFERRED COMPENSATION PLAN CONTRIBUTIONS FOR ELIGIBLE EMPLOYEES
SECTION 3.01. Deferral Contributions for Eligible Employees. Each
Participant who is an Eligible Employee may elect, on forms furnished by the
Company, to reduce his or her Compensation otherwise payable to said Participant
by the percentage(s) specified by the Participant in an appropriate election
form; provided, however, that a Participant may not defer more than twelve
percent (12%) of his or her Compensation. For an Eligible Employee who is a
participant in the Profit Sharing Plan, reductions in Compensation will not
begin until the amount of elective deferrals under the Profit Sharing Plan has
reached the maximum amount of elective deferrals permissible for such Eligible
Employee under the terms of said Profit Sharing Plan. The amounts of such
reductions in Compensation shall be credited to the Plan on behalf of such
Participant by the Company. Each such election shall be made prior to the period
of deferral specified in the election and shall be irrevocable as to such period
of deferral. A period of deferral shall commence on February 1 and shall not be
shorter than twelve months; provided, an Eligible Employee who becomes eligible
to participate in the Plan on February 1, 1999 as a result of the initial
adoption of this Plan may make an election pursuant to this paragraph within 45
days after February 1, 1999, but
<PAGE> 8
such election shall apply only to Compensation earned subsequent to the
election. All amounts credited on behalf of a Participant under this paragraph
shall be called "Deferral Contributions," and shall be in addition to any
credits due pursuant to paragraph 3.02 hereof with respect to the same
Participant.
SECTION 3.02. Company Contributions for Participants. The Company
will credit an annual matching credit to the Plan for the Account of each
Participant for whom a Deferral Contribution is made and who is employed on the
last day of the Plan Year to which the Deferral Contribution relates. All
credits due under this Paragraph shall be "Company Contributions" and shall be
in an amount calculated as a percentage of the Deferral Contribution made on
behalf of a Participant. The percentage shall be as stated on Appendix A or as
set forth in a Board resolution hereafter adopted identifying an additional
Eligible Employee. However, the Company shall not make Company Contributions
with respect to a Participant's Deferral Contributions which exceed 6 percent of
the Participant's Compensation. For example, if a Participant's Deferral
Contributions total 8 percent of his or her Compensation and the Participant's
Company Contribution percentage on Appendix A is 50 percent, the maximum Company
Contribution will be 3 percent of the Participant's Compensation.
ARTICLE IV
GENERAL PROVISIONS REGARDING CONTRIBUTIONS
SECTION 4.01. Time of Payment of Company Contribution and Deferral
Contribution Amounts. Amounts equal to Company Contributions and Deferral
Contributions shall be paid to the Trustee as soon as administratively possible,
but in no case later than April 15 following the close of the Plan Year for
which they are made.
SECTION 4.02. Withholding Payroll Taxes. To the extent required by
the laws in effect at the time contributions are made, the Company shall reduce
such contributions made hereunder by the amount of any taxes required to be
withheld from the Participant's Compensation for federal, state or local
government purposes, and an amount equal to the reduction shall be withheld from
the Participant's Compensation otherwise paid.
<PAGE> 9
ARTICLE V
ALLOCATIONS TO PARTICIPANTS' ACCOUNTS
SECTION 5.01. Accounts. The Administration Committee shall create
and maintain adequate records to disclose the interest in the Trust of each
Participant, Former Participant and Beneficiary. Such records shall be in the
form of individual Accounts, and credits and charges shall be made to such
Accounts in the manner herein described. The maintenance of individual Accounts
is only for accounting purposes, and a segregation of the assets of the Trust
Fund to each Account shall not be required.
SECTION 5.02. Allocations to Accounts. The Accounts of Participants,
Former Participants and Beneficiaries shall be adjusted in accordance with the
following:
(a) Income. All Income of the Trust Fund for each Quarter
attributable to the Deemed Investments made pursuant to
Article VI hereof shall be allocated to Accounts of
Participants in accordance with the Deemed Investments
made for such Participants' Accounts pursuant to Article
VI hereof and in proportion to their previous Account
balances.
(b) Company Contributions. As of the end of each Plan Year,
the Company Contribution for such Plan Year shall be
allocated to the Accounts of Participants. Such
allocations shall be in the amounts specified in Section
3.02.
(c) Deferral Contributions. As of the end of each Quarter,
the Deferral Contributions for such Quarter shall be
allocated to the Accounts of the Participants who have
elected to have Deferral Contributions made on their
behalf, in accordance with the amounts indicated by such
elections.
ARTICLE VI
DEEMED INVESTMENT OF CONTRIBUTIONS TO PLAN
SECTION 6.01. Allocation to Investment Funds. Any amounts credited
to a Participant's Account shall be deemed invested as the Participant directs
among various funds or other investment vehicles or options as the Employer or
Committee may allow in its sole discretion for such deemed investments.
SECTION 6.02. Changes in Investment Elections. The Employer or the
Committee will specify the manner and frequency in which a Participant may make
or change his or her deemed investment elections. Until such time as the
Employer or Committee shall direct further, Participants may change their deemed
investment
<PAGE> 10
elections effective as soon as administratively possible following the
commencement of the Quarter following the Committee's receipt of the
Participant's changed investment election.
ARTICLE VII
VESTING
SECTION 7.01. Vesting Defined. The term "vested" or "vested
interest" shall mean a nonforfeitable, noncontingent right of the Participant or
his Beneficiaries to a present or future enjoyment of any allocation to the
Participant's Account, including subsequent Company Contributions and Deferral
Contributions and deemed investment Income allocated thereto.
SECTION 7.02. Deferral Contributions Account. A Participant shall be
100 percent vested in his or her Deferral Contributions Account at all times.
SECTION 7.03. Company Contributions Account. A Participant shall be
vested in the percentage of his or her Company Contributions Account as is equal
to the percentage that he or she is vested in his or her Employer Contribution
Account under the Profit Sharing Plan; provided however that a Participant shall
forfeit his or her entire Company Contributions Account balance upon the
occurrence of one of the following events:
(a) Participation in any fraud, commission of any felony or the
intentional destruction or misappropriation of property belonging to
the Company,
(b) The Participant makes any materially disparaging statements
concerning the Company following his or her termination of
employment with the Company,
(c) The Participant uses any of the Company's proprietary
information following termination of employment with the Company,
(d) Upon termination of employment, the Participant fails to
execute, deliver to the Company and perform in accordance with the
terms of, a confidentiality and nondisclosure agreement in form
satisfactory to the Company in which the Participant agrees to
maintain and keep all nonpublic information strictly confidential
and to not disclose the same in any form to any person, firm or
entity, or use the same for any purpose whatsoever except as such
disclosures may be required by any governmental agency or at any
time by law. Nonpublic information shall include, but not be limited
to, all trade secrets and other information pertaining to or in any
way connected with present or future products or services or any
component parts thereof; the Company's routines, standards, and
procedures, and all information undertaken or made in connection
therewith; all information relating to customer, personnel and/or
employee relations, marketing, business plans, business or marketing
research; all information relating to financial and/or other
business affairs; and all files, documents, contracts, materials,
listings, computer programs, printouts, source codes, drawings,
specifications, processes, applications, techniques, routines,
formulas and information of every
<PAGE> 11
name, nature or description, whether or not the same is in machine
readable form or reduced to writing, which pertain thereto; or
(e) The Participant's failure to give not less than nine months'
advance written notice to the Company's Chairman of the Board of the
Participant's voluntary termination of employment with the Company,
unless such notice is waived in writing by said Chairman of the
Board.
Forfeitures of a Participant's Employer Contribution Account pursuant to this
section shall not inure to the benefit of the other Plan Participants. At the
direction of the Company, the Trustee will apply any Trust assets that were
allocated for record keeping purposes to a Participant's forfeited Employer
Contribution Account as an offset to contributions which the Company would
otherwise make to the Trust after the time the forfeiture occurs.
ARTICLE VIII
PAYMENT OF BENEFITS
SECTION 8.01. Time of Distribution. Distribution of a Participant's
Account balance shall be made or commence as soon as administratively practical
following (but in no case later than the 60th day following the close of a Plan
Year in which there occurs) the earliest of the following events:
(a) The later of the termination of employment of an
actively employed Participant or such Participant's
attainment of age 59 1/2.
(b) Disability of a Participant.
(c) Death of a Participant.
(d) Following a Change in Control and within 12 months
thereof, the Participant's termination of employment by
the Employer for any reason other than Good Cause or the
Participant's voluntary termination of employment with
the Company for Good Reason.
SECTION 8.02. Method of Payments. The Participant may elect in
accordance with Section 8.03 hereof to receive payment under either of the
following alternate methods:
(a) A single lump sum payment, or
(b) Periodic payments of substantially equal amounts for ten
years remaining from the benefit commencement date, in
which event the unpaid balance as of each Valuation Date
shall share in the allocation of Trust Fund Income in
accordance with the provisions of Section 5.02. Such
periodic payments shall be made not less frequently than
annually. If Participant's death occurs before all
periodic payments have been made, the remaining amounts
shall be paid to Participant's beneficiary in a lump sum
on the next installment payment date following
Participant's death, unless the Participant specifies in
his or her election form that the periodic payments
shall continue.
<PAGE> 12
If the Participant fails to elect a method of payment, benefits shall be
paid in a single lump sum payment.
Notwithstanding the foregoing, the Committee may, in its sole
discretion and in accordance with uniform procedures as it may adopt, direct the
Trustee to distribute any Account balance in less frequent periodic payments
than those elected by the Participant or Beneficiary or in a single lump sum, so
as to avoid the payment of anything less than a nominal amount per period as
determined by the Committee.
SECTION 8.03. Participant Elections. Elections as to the time and
method of distribution in accordance with this Article may be made by a
Participant on a form prescribed by the Administration Committee. To be
effective, such election form must be filed by the Participant at least six
months prior to the date his or her benefit payments would become due under the
Plan. An election shall become irrevocable and unalterable no later than the
date benefits have become due and payable in accordance with Section 8.01.
ARTICLE IX
DESIGNATION OF BENEFICIARY
SECTION 9.01. Designation. Each Participant or Former Participant
from time to time may designate any person or persons (who may be designated
contingently or successively and who may be an entity other than a natural
person) as his or her Beneficiary or Beneficiaries to whom his or her Plan
benefits are paid if he or she dies before receipt of all such benefits. Each
Beneficiary designation shall be in the form prescribed by the Administration
Committee and will be effective only when filed with the Administration
Committee during the Participant's lifetime. Each Beneficiary designation filed
with the Administration Committee will cancel all Beneficiary designations
previously filed with the Administration Committee.
SECTION 9.02. Disposition of Death Benefits on Failure to Designate
Beneficiary. If any Participant or Former Participant fails to designate a
Beneficiary in the manner provided above, or if the Beneficiary designated by a
deceased Participant dies before the Participant or before complete distribution
of the Participant's benefits, benefits shall be paid to the Personal
Representative of the Participant's estate.
<PAGE> 13
ARTICLE X
FUNDING
SECTION 10.01. Obligation of the Company. Benefits under this Plan
shall be payable out of the general assets of the Company. The obligation of the
Company to make benefit payments under this Plan constitutes merely the
unsecured, but legally enforceable, promise of the Company to make such
payments, and no Participant, Former Participant or Beneficiary shall have any
lien, prior claim, or other security interest in any property of the Company.
SECTION 10.02. Trust Fund. The Trust Fund shall for all purposes be
part of the general assets of the Company, and no person other than the Company
shall have any interest in the Trust Fund. To the extent that any person
acquires a right to receive payment from the Company under this Plan, such right
shall be no greater than the right of any unsecured general creditor of the
Company.
ARTICLE XI
ADMINISTRATION
SECTION 11.01. Administration Committee and Expenses. The Plan shall
be administered by an Administration Committee consisting of at least three
persons who shall be appointed by and serve at the pleasure of the Board of
Directors of the Company. All usual and reasonable expenses of the
Administration Committee may be paid in whole or in part by the Company. Any
members of the Administration Committee who are Employees shall not receive
compensation with respect to their services for the Administration Committee.
SECTION 11.02. Claims Procedure. The Administration Committee shall
make all determinations as to the right of any person to a benefit. Any denial
by the Administration Committee of the claim for benefits under the Plan by a
Participant or Beneficiary shall be stated in writing by the Administration
Committee and delivered or mailed to the Participant or Beneficiary, and such
notice shall set forth the specific reasons for the denial, written to the best
of the Administration Committee's ability in a manner that may be understood
without legal counsel. In addition, the Administration Committee shall afford a
reasonable opportunity to any Participant or Beneficiary whose claim for
benefits has been denied for a review of the decision denying the claim.
<PAGE> 14
SECTION 11.03. Duties and Powers. The Administration Committee shall
have such duties and powers as it deems necessary for the administration of the
Plan including, but not by way of limitation, the following:
(a) to construe and interpret the Plan, decide all
questions of eligibility and determine the amount,
manner and time of payment of any benefits hereunder;
(b) to prescribe procedures to be followed by
Participants, Former Participants or Beneficiaries
filing applications for benefits;
(c) to prepare and distribute, in such manner as the
Administration Committee determines to be
appropriate, information explaining the Plan;
(d) to receive from the Company and from Participants,
Former Participants or Beneficiaries such information
as shall be necessary for the proper administration
of the Plan;
(e) to furnish the Company, upon request, such annual
reports with respect to the administration of the
Plan as are reasonable and appropriate;
(f) to receive, review and keep on file (as it deems
convenient and proper) reports of benefit payments by
the Trustee and reports of disbursements for expenses
directed by the Administration Committee;
(g) to appoint or employ individuals to assist in the
administration of the Plan and any other agents it
deems advisable, including legal counsel.
Except as otherwise expressly provided in this Plan, the
Administration Committee shall have no power to add to, subtract from or modify
any of the terms of the Plan, or to change or add to any benefits provided by
the Plan, or to waive or fail to apply any requirements or eligibility for a
benefit under the Plan.
SECTION 11.04. Rules. The Administration Committee may adopt such
rules as it deems necessary, desirable or appropriate. All rules and decisions
of the Administration Committee shall be uniformly and consistently applied to
all Participants, Former Participants or Beneficiaries in similar circumstances.
When making a determination or calculation, the Committee shall be entitled to
rely upon information furnished by a Participant, Former Participant or
Beneficiary, the Company, the legal counsel of the Company, or the Trustee.
SECTION 11.05. Action by Committee. The Administration Committee may
act at a meeting or in writing without a meeting. The Administration Committee
shall elect one of its members as chairman, appoint a secretary, who may or may
not be an Administration Committee member, and advise the Trustee of such
actions in writing. The secretary shall keep a record of all meetings and
forward all necessary communications to the Company or the Trustee. The
Administration Committee may adopt such bylaws and regulations as it deems
desirable for the
<PAGE> 15
conduct of its affairs. All decisions of the Administration Committee shall be
made by the vote of the majority including actions in writing taken without a
meeting.
SECTION 11.06. Directions to Trustee. The Administration Committee
shall issue directions to the Trustee concerning all benefits which are to be
paid from the Trust Fund pursuant to the provisions of the Plan and warrants
that all such directions are in accordance with this Plan.
SECTION 11.07. Applications for Benefits. The Administration
Committee may require a Participant, Former Participant or Beneficiary to
complete and file with the Administration Committee an application for a benefit
and all other forms approved by the Administration Committee and to furnish all
pertinent information requested by the Administration Committee. The
Administration Committee may rely upon all such information so furnished it,
including the Participant's, Former Participant's or Beneficiary's current
mailing address.
SECTION 11.08. Benefits to Persons Under Legal Disability. Whenever,
in the Administration Committee's opinion, a person entitled to receive any
payment of a benefit or installment thereof hereunder is under a legal
disability or is incapacitated in any way so as to be unable to manage his or
her financial affairs, the Administration Committee may direct the Trustee to
make payments to such person or to his or her legal representative or to a
relative or friend of such person for his or her benefit, or the Administration
Committee may direct the Trustee to apply the payment for the benefit of such
person in such manner as the Administration Committee considers advisable. Any
payment of a benefit or installment thereof in accordance with the provisions of
this Article shall be a complete discharge of any liability for the making of
such payment under the provisions of the Plan.
SECTION 11.09. Indemnification. The Administration Committee and the
individual members thereof shall be indemnified by the Company and not from the
Trust Fund against any and all liabilities arising by reason of any act or
failure to act made in good faith pursuant to the provisions of the Plan,
including expenses reasonably incurred in the defense of any claim relating
thereto.
<PAGE> 16
ARTICLE XII
AMENDMENTS, ACTION BY COMPANY, AND TERMINATION
SECTION 12.01. Amendments. The Company reserves the right to make
from time to time any amendment or amendments to this Plan and, subject to the
provisions of Section 12.05 hereof, to terminate the Plan.
SECTION 12.02. Action by Company. Any action by the Company under
this Plan may be by resolution of its Board of Directors or by any person or
persons duly authorized by resolution of said Board to take such action.
SECTION 12.03. Successor Company. In the event of the dissolution,
merger, consolidation or reorganization of the Company, provision may be made by
which the Plan and Trust will be continued by the successor; and, in that event,
the successor shall be substituted for the Company under the Plan. The
substitution of the successor shall constitute an assumption of Plan liabilities
by the successor, and the successor shall have all of the powers, duties and
responsibilities of the Company under the Plan.
SECTION 12.04. Termination of Plan. The Company may terminate its
participation in the Plan at any time. In the event of the dissolution, merger,
consolidation or reorganization of the Company, the Plan shall terminate unless
the Plan is continued by a successor to the Company in accordance with Section
12.03.
SECTION 12.05. Distribution of Trust Fund. Upon termination or
partial termination of the Plan, the Committee may direct the Trustee: (a) to
continue to administer the Trust Fund and pay account balances in accordance
with Article VIII to Participants affected by the termination upon their
termination of employment, or to their Beneficiaries upon such Participant's
death, until the Trust Fund has been liquidated and (b) to distribute the assets
remaining in the Trust Fund, after payment of any expenses properly chargeable
thereto and all benefits provided by the Plan, to the Company.
<PAGE> 17
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.01. No Employment Contract. Nothing contained in the Plan
shall be construed as a contract of employment between the Company and any
Employee, or as a right of any Employee to be continued in the employment of the
Company, or as a limitation of the right of the Company to discharge any of its
Employees, with or without cause.
SECTION 13.02. Rights of Participants and Beneficiaries. No
Participant, Former Participant or Beneficiary shall have any right to, or
interest in, any assets of the Trust Fund at any time, except as provided from
time to time under this Plan, and then only to the extent of the benefits
payable under the Plan to such Participant, Former Participant or Beneficiary
out of the assets of the Trust Fund.
SECTION 13.03. Benefits Not Assignable. Benefits payable under this
Plan shall not be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment, execution or
levy of any kind, either voluntary or involuntary, including any such liability
which is for alimony or other payments for the support of a spouse or former
spouse or for any other relative of the Participant, Former Participant or
Beneficiary, prior to actually being received by the person entitled to the
benefit under the terms of the Plan; and any attempt to otherwise dispose of any
right to benefits payable hereunder shall be void.
The Trust Fund shall not in any manner be liable for, or subject to,
the debts, contracts, liabilities, engagements or torts of any person entitled
to benefits hereunder.
SECTION 13.04. Suspension of Benefits Upon Re-employment. If a
Former Participant who is in receipt of periodic payments hereunder in
accordance with Section 8.02 is re-employed by a Company, such payments shall be
suspended during the period of such re-employment, and the Participant may make
a new election in accordance with Section 8.02 with respect to the distribution
of his or her Account balance to be made at the time of his or her subsequent
Retirement, death or Disability.
<PAGE> 18
SECTION 13.05. Gender and Number. The masculine pronoun whenever
used herein will include the feminine gender, and the singular number as used
herein will include the plural and the plural the singular unless the context
clearly indicates a different meaning.
SECTION 13.06. Construction. The provisions of this Plan shall be
construed according to the federal laws governing employee benefit plans of this
type, and to the extent applicable, according to the laws of the State of
Nebraska.
IN WITNESS WHEREOF, The Buckle, Inc. Deferred Compensation Plan is
hereby adopted by the Company effective as of February 1, 1999.
THE BUCKLE, INC. (the "Company")
By: /s/ DANIEL J. HIRSCHFELD
-----------------------------------
Title: CHAIRMAN OF BOARD
-------------------------------
<PAGE> 19
APPENDIX A
THE BUCKLE, INC. DEFERRED COMPENSATION PLAN
SCHEDULE OF EMPLOYEES ELIGIBLE TO PARTICIPATE
IN DEFERRED COMPENSATION PLAN
<TABLE>
<CAPTION>
STATED PERCENTAGE
OF EMPLOYER
NAME CONTRIBUTIONS
---- -------------
<S> <C>
Dennis Nelson 65%
Scott Porter 50%
Jim Shada 50%
Gary Lalone 50%
Brett Milkie 50%
Karen Rhoads 50%
</TABLE>
<PAGE> 1
EXHIBIT 10.11
PROGRAMMED LENDING NOTE
$5,000,000.00 MAY 11, 1998
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:
[ ] 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, 1999
[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 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 5-11-98
(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 11th day of MAY,
1998, 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 PURSUANT 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, WARRANTIES 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, 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.
2
<PAGE> 3
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: 5-11-98 BY: LARRY L. JEPSON
-------------------------------------
Title: CHAIRMAN AND CEO
----------------------------------
THE BUCKLE, INC
-------------------------------------
Borrower
Date: 5-11-98 BY: DENNIS H. NELSON, PRESIDENT
-------------------------------------
Borrower
Date: -------------------------------------
Borrower
STATE OF ILLINOIS______________)
)ss.
COUNTY OF______________________)
The foregoing Agreement was acknowledged before me this _____ day of, _____
by _____________________________________________________________________________
-------------------------
Notary Public
3
<PAGE> 1
EXHIBIT 10.13
May 11, 1998
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,
1999, 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 11th day of May, 1998.
THE BUCKLE, INC.
BY: DENNIS NELSON, PRESIDENT & CEO May 11, 1998
------------------------------ ------------
Dennis Nelson, President & CEO Date
<PAGE> 1
TO OUR SHAREHOLDERS
Once again our Buckle team raised the standard and worked diligently to
produce outstanding results in 1998 on top of a great year in 1997. We
appreciate the continued efforts of our growing team and the loyalty of our
guests who helped make 1998 a success. Our net sales increased 26.1% over the
prior year with total sales nearing $338 million for the year ended January 30,
1999. Comparable store sales grew 15.4% and net income rose 45.9% to $34.0
million.
I'd like to share some additional highlights from our 1998 fiscal year:
- We opened 24 new stores to end the year with 222 stores in 29
states
- Cash and short-term investments grew to $88.4 million
- Average store sales grew to $1.6 million and average sales per
square foot increased to $344
- In June of 1998, we completed a 3 for 2 stock split
- We repurchased 120,600 shares of our common stock at an average
price per share of $16
- The average return on equity over the past five years is
approximately 24%
In 1999, we plan to open approximately 26 new stores and enter six new
states. We have at least five expansion/remodel projects planned for 1999 as
well. In 1998, we added 124,000 square feet to our corporate headquarters,
expanding the facility to 179,000 square feet. In July of 1998, we began
shipping from our new distribution center that grew from 30,000 square feet to
120,000 square feet, allowing us to service up to 450 stores.
Our diverse merchandise mix allows us to satisfy the fashion demands of
our guests. Through key vendors, such as Lucky Brand, Dr. Martens, Tommy Jeans,
Silver, Polo Jeans Company, FUBU, Mecca, O'Neill and Quiksilver, we offer a
variety of looks. We enjoy strong relationships with vendors that share our
commitment to quality and service. Our private label merchandise complements the
brand names we carry. Last year our private label brands accounted for
approximately 10% of our sales.
As we invest in the company's future, we consistently focus on ways to
exceed our already high level of service. In 1999, we will complete the rollout
of our new point of sale software and hardware, enabling us to process
transactions more efficiently and assisting us in the Y2K transition. Through
our website we have been promoting our company image for several years and
anticipate marketing a limited selection of merchandise on our newly developed
online store.
Our goal is to continue to be the best specialty store in the
marketplace. As we strive to achieve outstanding results over the short term, we
intend to focus on the investments we are making in the long term goals of the
company. Our investment in talented and experienced people combined with our
excellent reputation and our blue chip balance sheet will help prepare us for
new opportunities and allow us to continue to grow our business in 1999.
The Buckle's consistent results are based on strong relationships built
upon communication, teamwork and trust. Our guests make the Buckle their
shopping destination because our team is dedicated to investing in relationships
that make a difference. Thank you for your investment in the Buckle's success.
/s/ DENNIS H. NELSON
--------------------
DENNIS H. NELSON
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
<PAGE> 2
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------------
JANUARY 30, January 31, February 1, February 3, January 28,
1999 1998 1997 1996 1995
---------------------------------------------------------------------
(dollar amounts in thousands, except per share and selected operating data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net Sales $ 337,916 $ 267,921 $ 206,393 $ 172,291 $ 145,038
Cost of sales (including
buying, distribution and
occupancy costs) 216,668 174,379 140,359 118,262 100,578
---------------------------------------------------------------------
Gross profit 121,248 93,542 66,034 54,029 44,460
Selling expenses 59,557 49,040 38,361 33,166 27,840
General and administrative expenses 9,820 8,772 7,157 6,101 4,848
---------------------------------------------------------------------
Income from operations 51,871 35,730 20,516 14,762 11,772
Other income 2,281 1,687 1,151 1,158 510
---------------------------------------------------------------------
Income before provision
for income taxes 54,152 37,417 21,667 15,920 12,282
Income taxes 20,123 14,086 8,043 6,073 4,586
---------------------------------------------------------------------
Net income $ 34,029 $ 23,331 $ 13,624 $ 9,847 $ 7,696
=====================================================================
Basic income per share $ 1.55 $ 1.10 $ 0.65 $ 0.48 $ 0.37
Diluted income per share $ 1.47 $ 1.05 $ 0.63 $ 0.47 $ 0.37
SELECTED OPERATING DATA
Stores open at end of period 222 199 181 164 147
Average sales per square foot $ 344 $ 300 $ 255 $ 238 $ 225
Average sales per store (000's) $ 1,603 $ 1,400 $ 1,183 $ 1,094 $ 1,029
Comparable store sales change 15.4% 18.6% 11.1% 7.5% (1.8%)
BALANCE SHEET DATA
Working capital $ 104,035 $ 77,448 $ 54,904 $ 37,794 $ 28,704
Total assets $ 186,113 $ 144,460 $ 102,017 $ 81,683 $ 65,051
Long term debt -- -- -- -- --
Stockholders' equity $ 146,130 $ 107,881 $ 78,043 $ 61,629 $ 51,782
</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 30, 1999 and January 31, 1998, and the related statements of income,
stockholders' equity and cash flows for each of the three fiscal years in the
period ended January 30, 1999. 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 30, 1999 and
January 31, 1998 and the results of its operations and its cash flows for each
of the three fiscal years in the period ended January 30, 1999 in conformity
with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 26, 1999
12
<PAGE> 4
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS JANUARY 30, JANUARY 31,
1999 1998
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 61,705 $ 53,593
Short-term investments 26,691 14,013
Accounts receivable, net of allowance of $300 and $491, respectively 3,980 2,367
Inventory 49,411 42,339
Prepaid expenses and other assets (Note D) 2,231 1,715
-----------------------
Total current assets 144,018 114,027
-----------------------
PROPERTY AND EQUIPMENT (NOTE B): 74,041 59,100
Less accumulated depreciation (34,798) (29,688)
-----------------------
39,243 29,412
-----------------------
OTHER ASSETS (NOTES D AND E) 2,852 1,021
-----------------------
$ 186,113 $ 144,460
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 16,817 $ 17,248
Accrued employee compensation 16,919 14,519
Accrued store operating expenses 3,317 2,407
Gift certificates redeemable 1,593 1,357
Income taxes payable 1,337 1,048
-----------------------
Total current liabilities 39,983 36,579
-----------------------
COMMITMENTS (NOTES C AND F)
STOCKHOLDERS' EQUITY (NOTE H):
Common stock, authorized 100,000,000 shares of $.01 par value;
issued and outstanding; 21,968,921 and 21,659,604 shares,
respectively 220 143
Additional paid-in capital 37,431 33,783
Retained earnings 109,534 75,505
Unearned compensation - restricted stock (1,055) (1,550)
-----------------------
Total stockholders' equity 146,130 107,881
-----------------------
$ 186,113 $ 144,460
=======================
</TABLE>
See notes to financial statements.
13
<PAGE> 5
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------------
JANUARY 30, JANUARY 31, FEBRUARY 1,
1999 1998 1997
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
SALES, Net of returns and allowances of
$22,683, $18,424 and $13,650, respectively $337,916 $267,921 $206,393
COST OF SALES (Including buying, distribution
and occupancy costs) 216,668 174,379 140,359
----------------------------------------
Gross profit 121,248 93,542 66,034
----------------------------------------
OPERATING EXPENSES:
Selling 59,557 49,040 38,361
General and administrative 9,820 8,772 7,157
----------------------------------------
69,377 57,812 45,518
----------------------------------------
INCOME FROM OPERATIONS 51,871 35,730 20,516
OTHER INCOME, Net 2,281 1,687 1,151
----------------------------------------
INCOME BEFORE INCOME TAXES 54,152 37,417 21,667
PROVISION FOR INCOME TAXES (Note D) 20,123 14,086 8,043
----------------------------------------
NET INCOME $ 34,029 $ 23,331 $ 13,624
========================================
BASIC INCOME PER SHARE $ 1.55 $ 1.10 $ 0.65
========================================
DILUTED INCOME PER SHARE $ 1.47 $ 1.05 $ 0.63
========================================
</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 IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE, February 3, 1996 $ 68 $ 23,011 $ 38,550 $ -- $ 61,629
Common stock (136,781 shares) issued on exercise
of stock options 1 2,047 -- -- 2,048
Tax benefit related to exercise of employee stock options -- 742 -- -- 742
Net income -- -- 13,624 -- 13,624
----------------------------------------------------------------
BALANCE, February 1, 1997 69 25,800 52,174 -- 78,043
2-for-1 stock split 69 (69) -- -- --
Common stock (425,924 shares) issued on exercise
of stock options 4 3,386 -- -- 3,390
Tax benefit related to exercise of employee stock options -- 3,117 -- -- 3,117
Restricted stock issuance (50,000 shares) 1 1,549 -- (1,550) --
Net income -- -- 23,331 -- 23,331
----------------------------------------------------------------
BALANCE, January 31, 1998 143 33,783 75,505 (1,550) 107,881
3-for-2 stock split 74 (74) -- -- --
Common stock (347,550 shares) issued on exercise
of stock options 4 2,448 -- -- 2,452
Amortization of restricted stock issuance -- -- -- 264 264
Cancellation of restricted stock -- (231) -- 231 --
Common stock (120,600 shares) purchased and retired (1) (1,935) -- -- (1,936)
Tax benefit related to exercise of employee stock options -- 3,440 -- -- 3,440
Net income -- -- 34,029 -- 34,029
----------------------------------------------------------------
BALANCE, January 30, 1999 $ 220 $ 37,431 $ 109,534 $ (1,055) $ 146,130
================================================================
</TABLE>
See notes to financial statements.
15
<PAGE> 7
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
JANUARY 30, JANUARY 31, FEBRUARY 1,
----------------------------------
1999 1998 1997
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 34,029 $ 23,331 $ 13,624
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation 6,968 5,309 5,346
Amortization of unearned compensation - restricted stock 264 -- --
Deferred taxes (842) (225) 167
Loss on disposal of assets 253 191 --
Changes in operating assets and liabilities:
Accounts receivable (1,613) (980) (411)
Inventory (7,072) (11,233) (4,049)
Prepaid expenses 3,092 3,113 (84)
Accounts payable (431) 7,841 745
Accrued employee compensation 2,400 4,954 2,882
Accrued store operating expenses 910 729 481
Gift certificates redeemable 236 251 185
Income taxes payable 289 (691) (351)
----------------------------------
Net cash flows from operating activities 38,483 32,590 18,535
----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (17,052) (12,087) (4,489)
Proceeds from sale of property and equipment -- 133 45
Increase in other assets (1,157) (361) (182)
Purchase of short-term investments (22,910) (11,428) (6,786)
Proceeds from maturities of short-term investments 10,232 5,870 3,816
----------------------------------
Net cash flows from investing activities (30,887) (17,873) (7,596)
----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock and exercise of stock options 2,452 3,390 2,048
Purchases of common stock (1,936) -- --
----------------------------------
Net cash flows from financing activities 516 3,390 2,048
----------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 8,112 18,107 12,987
CASH AND CASH EQUIVALENTS, Beginning of year 53,593 35,486 22,499
----------------------------------
CASH AND CASH EQUIVALENTS, End of year $ 61,705 $ 53,593 $ 35,486
==================================
</TABLE>
See notes to financial statements.
16
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS ENDED JANUARY 30,1999, JANUARY 31,1998 AND FEBRUARY 1,1997
(DOLLAR AMOUNTS ARE IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
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 1998, 1997 and 1996 represent the 52-week periods
ended January 30, 1999, January 31, 1998 and February 1, 1997,
respectively.
NATURE OF OPERATIONS - The Company is a retailer of medium to better
priced casual apparel and footwear for fashion conscious young men and
women operating 222 stores located in 29 states throughout the central,
northwestern and southern regions of the United States, as of January 30,
1999.
During fiscal 1998, the Company opened twenty-four new stores,
substantially renovated six stores, and closed one store. 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.
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 an original
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 30, 1999.
PRE-OPENING EXPENSES - Costs related to opening new stores are expensed as
incurred.
ADVERTISING COSTS - Advertising costs are expensed as incurred and
amounted to $3,513, $3,218 and $2,757 for fiscal years 1998, 1997 and
1996, 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, 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 - 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.
STOCK-SPLIT - On May 28, 1998, the Company obtained shareholder approval
to increase the number of common shares from 20 million shares to 100
million shares and decrease the par value from $.05 to $.01 per share. All
share and per share data have been restated to reflect this change in the
form of a 5-for-1 stock split. This change was made to allow for the
Company's 3-for-2 stock split made in the form of a stock dividend issued
on June 8, 1998. The weighted average shares outstanding and per share
data for all periods have also been restated to reflect this stock
dividend.
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 1998, the Financial Accounting
Standards Board (FASB) issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, which will be effective for fiscal
years beginning after June 15, 1999. The Company will adopt this Statement
effective January 30, 2000. At this time, the Company believes the impact
of adopting this Statement should not be significant to the results of
operations or financial position.
RECLASSIFICATION - Certain reclassifications have been made to 1997
balances to conform to the 1998 presentation.
B. PROPERTY AND EQUIPMENT
A summary of the cost of property and equipment follows:
<TABLE>
<CAPTION>
JANUARY 30, JANUARY 31,
1999 1998
<S> <C> <C>
Land $ 639 $ 634
Building and improvements 6,370 1,210
Office equipment 2,252 1,869
Transportation equipment 4,118 4,118
Leasehold improvements 25,711 21,366
Furniture and fixtures 30,647 25,890
Shipping/receiving equipment 3,736 1,183
Screenprinting equipment 102 102
Construction-in-progress 466 2,728
-----------------------
$74,041 $59,100
=======================
</TABLE>
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 30, 1999 and January
31, 1998 or at any time during fiscal 1998, 1997 and 1996. The Company had
outstanding letters of credit totalling $1,304 and $626 at January 30,
1999 and January 31, 1998, respectively.
18
<PAGE> 10
D. INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------
1998 1997 1996
<S> <C> <C> <C>
Current:
Federal $ 17,747 $ 11,763 $ 6,456
State 3,218 2,548 1,420
Deferred (842) (225) 167
----------------------------------------
Total $ 20,123 $ 14,086 $ 8,043
========================================
</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
------------------------------
1998 1997 1996
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 35.0%
Surtax exemption -- -- (0.5)
State income tax effect 4.0 4.9 5.0
Tax exempt interest income (1.6) (2.0) (1.9)
Expenses not deductible 0.1 0.1 0.1
Benefits of state tax credits (0.3) (0.4) (0.6)
------------------------------
37.2% 37.6% 37.1%
==============================
</TABLE>
Deferred tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
JANUARY 30, JANUARY 31,
1999 1998
<S> <C> <C>
Deferred tax assets:
Inventory $ 789 $ 660
Option compensation 438 579
Restricted stock/unearned compensation 758 --
Accrued vacation 270 232
Allowance for doubtful accounts 97 172
Gift certificates 61 62
Other 43 43
------------------
$2,456 $1,748
------------------
Deferred tax liabilities - depreciation $ 243 $ 377
==================
</TABLE>
The net current deferred tax asset is classified in prepaid expenses and
the net noncurrent deferred tax asset is classified in other assets.
Cash paid for income taxes was $18,003, $10,678 and $6,433 in fiscal years
1998, 1997 and 1996, respectively.
19
<PAGE> 11
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
29, 2111. 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 1998, 1997 and 1996 was $15,049, $13,108
and $11,493, 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 1998, 1997 and 1996 were $2,457,
$1,479 and $847, respectively. Total future minimum rental commitments
under these operating leases are as follows:
<TABLE>
<S> <C>
FISCAL YEAR
1999 $ 14,957
2000 17,578
2001 17,449
2002 17,389
2003 16,152
Thereafter 50,443
--------
Total minimum payments required $133,968
========
</TABLE>
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
$1,001, $792 and $638 for fiscal years 1998, 1997 and 1996, 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 30, 1999, 1,257,350 shares of common stock were
available for grant under the various option plans of which 500,300 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 is
being 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), which utilizes the intrinsic value
method. Compensation cost related to stock-based compensation was $2,022,
$-0- and $1,400 for the fiscal years ended 1998, 1997 and 1996,
respectively.
20
<PAGE> 12
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>
1998 1997 1996
--------------------------------
<S> <C> <C> <C> <C>
Net income As reported $ 34,029 $ 23,331 $ 13,624
Pro forma $ 30,167 $ 22,482 $ 13,362
Basic income per share As reported $ 1.55 $ 1.10 $ 0.65
Pro forma $ 1.37 $ 1.06 $ 0.64
Diluted income per share As reported $ 1.47 $ 1.05 $ 0.63
Pro forma $ 1.30 $ 1.01 $ 0.62
</TABLE>
The weighted average fair value of options granted during the year under
the SFAS No. 123 methodology was $15.75, $4.10 and $3.10 per option for
1998, 1997 and 1996, 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>
1998 1997 1996
------------------------------------
<S> <C> <C> <C>
Risk-free interest rate 6.00 % 6.00 % 6.00 %
Dividend yield 0.00 % 0.00 % 0.00 %
Expected volatility 58.0 % 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>
1998 1997 1996
------------------------------------------------------------------------------------
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 3,259,055 $ 6.21 3,107,703 $ 5.31 2,949,810 $ 5.03
Granted 1,241,310 22.80 818,550 8.95 652,200 6.38
Expired/terminated (154,495) 18.06 (28,312) 7.01 (83,967) 5.75
Exercised (440,124) 5.52 (638,886) 5.32 (410,340) 5.01
------------------------------------------------------------------------------------
Outstanding - end of year 3,905,746 $11.09 3,259,055 $ 6.21 3,107,703 $ 5.31
====================================================================================
</TABLE>
21
<PAGE> 13
There were 2,509,213; 2,404,767; and 1,468,679 options exercisable at
January 30, 1999, January 31, 1998 and February 1, 1997, respectively. The
following table summarizes information about stock options outstanding as
of January 30, 1999:
<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>
$ 3.000 $ 3.000 757,100 2.88 years $ 3.00 757,100 $ 3.00
$ 4.167 $ 4.750 262,798 5.99 4.59 262,798 4.59
$ 4.958 $ 5.583 221,475 5.01 5.41 221,475 5.41
$ 6.000 $ 6.667 425,273 6.67 6.32 399,467 6.31
$ 8.500 $ 9.292 1,100,735 6.47 9.11 833,960 9.15
$ 11.500 $ 12.250 1,725 8.45 11.96 1,125 11.95
$ 20.500 $ 34.083 1,136,640 8.97 22.80 33,288 33.99
-------------------------------------------------------------- -----------------------
3,905,746 6.41 $ 11.09 2,509,213 $ 6.37
============================================================== =======================
</TABLE>
I. EARNINGS PER SHARE
The following table provides a reconciliation between basic and diluted
earnings per share:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------- -------------------------- --------------------------
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 $34,029 21,964 $ 1.55 $23,331 21,211 $ 1.10 $13,624 20,857 $ 0.65
Effect of Dilutive Securities
Stock Options 1,172 1,093 704
-------------------------- -------------------------- --------------------------
Diluted EPS $34,029 23,136 $ 1.47 $23,331 22,304 $ 1.05 $13,624 21,561 $ 0.63
========================== ========================== ==========================
</TABLE>
22
<PAGE> 14
J. SEGMENT INFORMATION
The Company is a retailer of medium to better priced casual apparel and
footware. The Company operates 222 stores located in 29 states throughout
the central, northwestern and southern regions of the United States at
January 30, 1999. The Company operates their business as one reportable
industry segment.
The following is information regarding the Company's major product lines
and are stated as a percentage of the Company's net sales:
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
FISCAL YEAR
---------------------------
MERCHANDISE GROUP 1998 1997 1996
---------------------------
<S> <C> <C> <C>
Denims 27.3% 29.3% 31.6%
Slacks/Casual Bottoms 4.1 4.0 3.4
Tops (including sweaters) 34.0 35.0 34.6
Sportswear/Fashion Clothes (including dresses) 7.5 8.3 10.6
Outerwear 2.3 2.4 2.4
Accessories 5.8 4.4 4.7
Shoes 17.3 16.6 12.6
Little Guys/Gals 1.3 -- --
Other 0.4 -- 0.1
---------------------------
100.0% 100.0% 100.0%
===========================
</TABLE>
K. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial information for fiscal 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
QUARTER
FISCAL 1998 FIRST SECOND THIRD FOURTH TOTAL
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES $ 67,028 $ 70,506 $ 96,818 $103,564 $337,916
GROSS PROFIT $ 22,741 $ 24,266 $ 35,567 $ 38,674 $121,248
INCOME FROM OPERATIONS $ 7,564 $ 9,313 $ 16,454 $ 18,540 $ 51,871
NET INCOME $ 5,013 $ 6,038 $ 10,592 $ 12,386 $ 34,029
BASIC INCOME PER SHARE $ 0.23 $ 0.27 $ 0.48 $ 0.56 $ 1.55
DILUTED INCOME PER SHARE $ 0.21 $ 0.26 $ 0.46 $ 0.53 $ 1.47
<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 $ 0.11 $ 0.17 $ 0.38 $ 0.45 $ 1.10
Diluted Income per Share $ 0.10 $ 0.16 $ 0.36 $ 0.43 $ 1.05
</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 30, January 31, February 1, Fiscal Year
1999 1998 1997 1997 to 1998 1996 to 1997
------------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net Sales 100.0% 100.0% 100.0% 26.1% 29.8%
Cost of sales (including buying, distribution
and occupancy costs) 64.1% 65.1% 68.0% 24.3% 24.2%
------------------------------------- ---------------------------
Gross profit 35.9% 34.9% 32.0% 29.6% 41.7%
Selling expenses 17.6% 18.3% 18.6% 21.4% 27.9%
General and administrative expenses 2.9% 3.3% 3.5% 11.9% 22.6%
------------------------------------- ---------------------------
Income from operations 15.4% 13.3% 9.9% 45.2% 74.1%
Other income .7% .7% .6% 35.2% 46.6%
Income before income taxes 16.1% 14.0% 10.5% 44.7% 72.7%
------------------------------------- ---------------------------
Income taxes 6.0% 5.3% 3.9% 42.9% 75.1%
------------------------------------- ---------------------------
Net income 10.1% 8.7% 6.6% 45.9% 71.3%
===================================== ===========================
</TABLE>
FISCAL 1998 COMPARED TO FISCAL 1997
Net sales increased from $267.9 million in fiscal 1997 to $337.9 million in
fiscal 1998, a 26.1% increase. Comparable store sales increased by $39.0
million, or 15.4% for fiscal 1998 compared to the same period in the prior year.
The Company had 4.2% sales growth in fiscal 1998 that was attributable to the
inclusion of a full year of operating results in fiscal 1998 for stores opened
in fiscal 1997 and 6.5% from the opening of 24 new stores in fiscal 1998. The
Company's average retail price of merchandise increased $.70 per piece in fiscal
1998 compared to fiscal 1997, primarily due to higher price points in the denim
jeans and knit shirt categories. Average sales per square foot increased 14.7%
from $300 to $344.
Gross profit after buying, distribution and occupancy costs increased $27.7
million in fiscal 1998 to $121.2 million, a 29.6% increase. As a percentage of
net sales, gross profit increased from 34.9% in fiscal 1997 to 35.9% in fiscal
1998. 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. Merchandise shrinkage increased to .5% in fiscal 1998
compared to .4% in fiscal 1997.
Selling expenses increased from $49.0 million for fiscal 1997 to $59.6 million
for fiscal 1998, a 21.4% increase. Selling expenses as a percent of net sales
decreased to 17.6% for fiscal 1998 from 18.3% for fiscal 1997. 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 $8.8 million in fiscal 1997
to $9.8 million in fiscal 1998, an 11.9% increase. As a percentage of net sales,
general and administrative expense decreased to 2.9% for fiscal 1998 from 3.3%
for fiscal 1997. Decreases in general and administrative expenses, as a
percentage of net sales, resulted primarily from leverage provided by strong
comparable sales growth.
24
<PAGE> 16
As a result of the above changes, the Company's income from operations increased
$16.1 million to $51.9 million for fiscal 1998 compared to $35.7 million for
fiscal 1997, a 45.2% increase. Income from operations was 15.4% as a percentage
of net sales in fiscal 1998 compared to 13.3% in fiscal 1997. Other income for
fiscal 1998 increased 35.2% from fiscal 1997 to $2.3 million. The increase was
primarily attributable to an increase in interest income from higher levels of
cash and short-term investments in fiscal 1998 compared to fiscal 1997.
Income tax expense as a percentage of pre-tax income was 37.2% in fiscal 1998
compared to 37.6% in fiscal 1997. The decrease in the income tax percentage rate
was primarily due to a lower effective state income tax rate.
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
.4% in fiscal 1997 and fiscal 1996.
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.
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 1998, 1997,
and 1996 the Company's cash flow from operations was $38.5 million, $32.6
million, and $18.5 million, respectively. 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.
As of January 30, 1999, the Company's working capital was $104.0 million,
including $61.7 million of cash and cash equivalents.
25
<PAGE> 17
The Company has, from time to time, borrowed against these lines of credit
during periods of peak inventory build-up. There were no borrowings during
fiscal 1998, 1997 or 1996. The Company had no bank borrowings as of January 30,
1999.
During fiscal 1998, 1997, and 1996, the Company invested $10.4 million, $5.3
million, and $4.3 million, respectively, in new store construction, store
renovation and upgrading store technology, net of any construction allowances
received from landlords. The Company also spent $6.7 million, $3.7 million, and
$200,000, in fiscal 1998, 1997, and 1996, respectively, in capital expenditures
for the corporate headquarters. The Company also spent $3.1 million on the
purchase of a new aircraft during fiscal 1997. During fiscal 1998, the Company
completed its expansion to the corporate headquarters and distribution facility.
The addition is approximately 124,000 square feet, added to the current 55,000
square foot building. The majority of the space is used for the distribution
center, with approximately 7,800 square feet of new office space. The
distribution system was completed in June 1998 and the new office space was
completed in December 1998. The former distribution area was remodeled for use
as store supply warehousing and offices, merchandising and advertising offices
as well as new workroom, showroom and conference room space. The remodel of this
phase was completed in March 1999. The next remodeling phase in progress as of
March 1999 includes remodeling and reorganizing of the existing office space.
The final phase of the remodel project is estimated to be complete during fiscal
1999. The total costs of the expansion plus all phases of the remodel project
are estimated to be $8.5 million.
During fiscal 1999, the Company anticipates completing approximately 31 store
construction projects, including approximately 26 new stores and approximately 5
stores to be remodeled and/or relocated. As of March 1999, leases for 16 new
stores have been signed, and leases for 10 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 during
fiscal 1998 was approximately $550,000, including construction costs of
approximately $400,000 and inventory costs of approximately $150,000. Management
estimates that total capital expenditures during fiscal 1999 will be
approximately $22.5 million, before landlord allowances, estimated to be $1.5
million. 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.
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 1998, 1997, and 1996, 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
YEAR 2000 BACKGROUND - The Company 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. Computer
programs and hardware as well as software products that are date sensitive may
recognize a date using "00" as the Year 1900 rather than the Year 2000. This
could result in system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions or engage in normal business activities.
The Company's goal is to be Year 2000 compliant, meaning critical systems,
devices, applications or business relationships have been evaluated and are
expected to be suitable for continued use into and beyond the Year 2000, or
contingency plans are in place.
The Company has assessed its business computer systems, such as general ledger,
payroll, accounts payable and inventory control, including distribution center
functions. The majority of these systems, which are internally developed
computer programs, have been corrected. This does not include the stores'
Point-of-Sale systems, which operate via third-party software systems. With the
construction and remodel of our distribution center and corporate headquarters,
the company has modified certain critical systems, including the conveyor system
and security functions. The Company presently believes these critical systems
will not pose significant operational problems for the Company in Year 2000.
26
<PAGE> 18
During August, 1997, the Company entered into an agreement with a third-party
provider to prepare the customized software necessary to bring the stores'
Point-of-Sale system into Year 2000 compliance. This system is currently being
rolled out to the retail outlets and is scheduled to be complete by July of
1999.
The Company presently believes that with modifications to its internally
developed programs and with new third-party software, the Year 2000 issue will
not pose significant operational problems for the Company. However, if such
modification and replacements are not made, are not completed on time or fail to
function properly, the Year 2000 issue could have a material impact on the
company.
YEAR 2000 COSTS - Total costs of this project to date have been approximately
$2.6 million and were incurred and expensed or capitalized in the normal course
of operations of the Company. The total remaining cost of the Year 2000 project
is estimated at less than $4 million. The majority of such cost is for the
purchase of new software and hardware for replacement of all stores'
Point-of-Sale systems and will be capitalized and paid for with cash flow from
operations. The hardware and software replacement would have been done
regardless of the Year 2000 issue to improve the technology in the retail
stores. The costs of the project and the date on which the Company plans to
complete the Year 2000 modifications are based upon the management's best
estimates, using currently available information and making assumptions
regarding future events including the continued availability of certain
resources, third-party readiness and other factors.
RISK ASSESSMENT - At this time, the Company believes its most reasonably likely
worst case scenarios are: (1) the stores are unable to authorize bankcard sales
electronically at the Point-of-Sale terminals nor verify checks tendered; and
(2) that principal suppliers are not Year 2000 ready and cannot timely deliver
their products. Although the Company does not believe that this scenario will
occur, it has assessed the effect of such an event and does not expect that it
would have a material adverse effect on the Company's financial condition and
results of operations.
The Company currently operates over 230 retail stores in 31 states, has many
suppliers, and believes that this will help mitigate any adverse impact. The
company assessed this risk and believes that its contingency plans would
mitigate the long-term effect of this scenario. In the event that a temporary
disruption does occur, the Company does not expect that it would have a material
adverse effect on its financial condition and results of operations.
CONTINGENCY PLANS - Contingency plans will be prepared so that the Company's
critical business processes can be expected to continue to function on January
1, 2000 and beyond. The Company's contingency plans will be structured to
address both remediation of systems and their components and overall business
operating risk. These plans are intended to mitigate both internal risks and
potential risks in the supply chain of the Company's suppliers. The Company
believes that the contingency planning process is an ongoing process which will
require flexibility as the Company obtains additional information regarding the
status of third-party Year 2000 readiness.
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, any impact from Year 2000 matters 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 1998, 1997 or
1996, and has no current plans for cash dividend payments.
The number of record holders of the Company's common stock as of March 31, 1999
was 421. Based upon information from the principal market makers, the Company
believes there are more than 4,200 beneficial owners. The last reported sales
price of the Company's common stock on March 31, 1999 was $22.50.
Following is the Company's quarterly market range for fiscal years 1998, 1997
and 1996
<TABLE>
<CAPTION>
1998 1997 1996
HIGH LOW HIGH LOW HIGH LOW
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Quarter
First 36.25 23.25 11.00 8.00 10.00 6.25
Second 39.13 23.06 16.33 10.50 13.83 7.75
Third 28.19 12.25 20.67 14.17 12.67 8.33
Fourth 30.50 18.00 25.25 17.83 10.83 7.33
- --------------------------------------------------------------------------------
</TABLE>
All stock prices reflect the Company's 2:1 stock split issued on April 24, 1997
and the 3:2 stock split issued on June 8, 1998.
NOTES:
<PAGE> 20
CORPORATE INFORMATION
Date Founded
1948
Number of Employees
4,800
Stock Transfer Agent & Registrar
UMB Bank, n.a.
P.O. Box 419226
Kansas City, Missouri 64141-6226
(816) 860-7000
Stock Exchange Listing
New York Stock Exchange
Trading Symbol: BKE
Independent Public Accountants
Deloitte & Touche, LLP
Omaha, Nebraska
General Corporate Counsel
Kyle L. Hanson
The Buckle Inc.
Kearney, Nebraska
Annual Meeting
The Annual Meeting of Shareholders is scheduled
for 10:00 a.m. Friday June 4, 1999, at the Ockinga Center,
University of Nebraska at Kearney
Kearney, Nebraska
Form 10-K
A copy of the 10-K is available to shareholders
without charge upon written request to:
Karen B. Rhoads, Vice President of Finance
The Buckle, Inc.
P.O. Box 1480
Kearney, Nebraska 68848-1480
Trademarks
The Buckle is a trademark of The Buckle, Inc.,
which is registered in the United States.
BOARD OF DIRECTORS
Daniel J. Hirschfeld
Chairman of the Board
Dennis H. Nelson
President & Chief Executive Officer
Karen B. Rhoads
Vice President of Finance, Treasurer
& Chief Financial Officer
Ralph M. Tysdal
Owner of McDonald's restaurant franchises
Bill L. Fairfield
President & CEO, Inacom Corp.
William D. Orr
Robert E. Campbell
President, Miller & Paine
(Real Estate Management)
EXECUTIVE OFFICERS
Dennis H. Nelson
President & Chief Executive Officer
Karen B. Rhoads
Vice President of Finance, Treasurer
& Chief Financial Officer
James E. Shada
Vice President of Sales
Gary L. Lalone
Vice President of Sales
Scott M. Porter
Vice President of Men`s Merchandising
& Secretary
Brett P. Milkie
Vice President of Leasing
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-48402, 33-70633,33-70641 and 33-70643 on Form S-8 of our reports dated
February 26, 1999, appearing in and incorporated by reference in the Annual
Report on Form 10-K of The Buckle, Inc. for the year ended January 30, 1999.
DELOITTE & TOUCHE LLP
Omaha Nebraska
April 15, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-30-1999
<CASH> 61,705
<SECURITIES> 26,691
<RECEIVABLES> 4,280
<ALLOWANCES> 300
<INVENTORY> 49,411
<CURRENT-ASSETS> 144,018
<PP&E> 74,041
<DEPRECIATION> 34,798
<TOTAL-ASSETS> 186,113
<CURRENT-LIABILITIES> 39,983
<BONDS> 0
0
0
<COMMON> 220
<OTHER-SE> 145,910
<TOTAL-LIABILITY-AND-EQUITY> 186,113
<SALES> 337,916
<TOTAL-REVENUES> 337,916
<CGS> 216,668
<TOTAL-COSTS> 69,377
<OTHER-EXPENSES> (2,281)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 54,152
<INCOME-TAX> 20,123
<INCOME-CONTINUING> 34,029
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,029
<EPS-PRIMARY> 1.55
<EPS-DILUTED> 1.47
</TABLE>
