<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 29, 2000
[_] 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 68845
(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. [X]
The aggregate market value (based on the closing price of the New York Stock
Exchange) of the Common Stock of the Registrant held by non-affiliates of the
Registrant was $110,328,685.13 on March 31, 2000. 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 6,842,089 shares.
The number of shares outstanding of the Registrant's Common Stock, as of March
31, 2000, was 20,724,621.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement dated April 26, 2000 for Registrant's
2000 Annual Meeting of Shareholders to be held June 2, 2000 are incorporated by
reference in Part III.
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THE BUCKLE, INC.
FORM 10-K
JANUARY 29, 2000
TABLE OF CONTENTS
PAGE
----
PART I
Item 1. Business 3
Item 2. Properties 10
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
Item 5. Market for Registrant's Common Equity and Related 11
Shareholder Matters
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial 11
Condition and Results of Operations
Item 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
2
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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 29, 2000, the
Company operated 248 retail stores in 35 states throughout the central United
States, as well as in the northwest and southwestern states under the names
"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 248 stores by the close of fiscal 1999. The Company changed its
corporate name to The Buckle, Inc. on April 23, 1991. All references herein to
fiscal 1999 refer to the 52-week period ended January 29, 2000. Fiscal 1998 and
fiscal 1997 refer to the 52-week periods ended January 30, 1999 and January 31,
1998, respectively.
The Company's principal executive offices and distribution center are located at
2407 West 24th Street, Kearney, Nebraska 68845. 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 (25% of fiscal 1999 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 1999 net sales). The Company strives to
provide a continually changing selection of the latest casual fashions.
The percentage of net sales over the past three fiscal years of the Company's
major product lines are set forth in the following table.
<TABLE>
<CAPTION>
Percentage of Net Sales
-----------------------
Merchandise Group Fiscal Fiscal Fiscal
----------------- 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Denims ........................................................ 25.0% 27.3% 29.3%
Slacks/Casual Bottoms ......................................... 4.3 4.1 4.0
Tops (including sweaters) ..................................... 34.0 34.0 35.0
Sportswear/Fashion Clothes (including dresses) ................ 7.7 7.5 8.3
Outerwear ..................................................... 2.8 2.3 2.4
Accessories ................................................... 7.1 5.8 4.4
Footwear ...................................................... 16.6 17.3 16.6
Other ......................................................... 2.5 1.7 .0
------ ------ -----
Total ........................................ 100.0% 100.0% 100.0%
====== ====== ======
</TABLE>
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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, Fossil, 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 1999, the Company spent $4.1 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 Buckle Magazine
are used to enhance merchandising presentations, the stores' image and special
events at point of sale.
Magazine advertising in leading teen publications is 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 75% of the Company's markets.
The Company has developed programs to help strengthen relationships with loyal
guests. Seasonal fliers and birthday cards are mailed to guests who have signed
up on the Buckle's in-house mailing list. In addition, the Company will continue
offering the frequent shopper program (the Buckle Primo Card), a rewards program
designed to build customer loyalty. Private label credit card marketing is
another avenue for marketing to loyal guests. The Company offers exclusive
benefits to active Buckle Cardholders such as a seasonal newsletter, coupons and
other special targeted mailings.
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The Company publishes a corporate web site at www.buckle.com. The Company's
website is primarily a marketing tool reaching a growing online audience. It
serves as an interactive, entertaining, informative and brand building
environment where visitors can get the latest Buckle fashion information, play
with a interactive Buckle closet, find out about career opportunities, and read
the latest Buckle financial news online. The Buckle Online Store was launched
April 26, 1999 as a marketing tool, extending the Company's brand beyond the
physical locations. Offering a small sampling of merchandise online, the Company
presents the online store as a "taste test" in new markets as well as a customer
service tool in existing markets.
STORE OPERATIONS
The Company has two Vice Presidents of Sales, two regional managers, nine
district managers, and 47 area managers. Seven of the district managers and all
of the 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 97% of the Company's stores as well as surveillance camera systems in
approximately 50% of the stores. As a result, the Company achieved a merchandise
shrinkage rate of 0.7% of net sales for fiscal 1999, 0.5% of net sales for
fiscal 1998 and 0.4% for fiscal year 1997.
The average store is approximately 4,750 square feet (of which the Company
estimates an average of approximately 80% is selling space), and stores range in
size from 2,450 square feet to 7,900 square feet.
PURCHASING AND DISTRIBUTION
The Company has a very experienced buying team. The buying team includes the
President, Vice President of Men's Merchandising, two head women's
merchandisers, and six women's buyers and three men's buyers. Five members of
this buying team have between 16 and 30 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 1999, Tommy Hilfiger (including purchases from 7 different Tommy
divisions), Lucky Brand Dungarees and Dr. Martens made up 22%, 18%, and 15%,
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.
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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 or the merchandise is
pre-ticketed), 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 to two business days 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.
In fiscal 1999, the Company completed remodeling its corporate headquarters and
during fiscal 1998 finished the expansion of its distribution center. The
current building space and distribution system will allow for handling up to 450
stores. The Company has developed an effective computerized system for tracking
merchandise from the time it is checked in at the Company's distribution center
until it arrives at the stores and is sold to a customer. The system's function
is to insure that store shipments are delivered accurately and promptly, to
account for inventory, and to assist in allocating merchandise among stores.
Management can track on a daily basis which merchandise is selling at specific
locations and directs transfers of merchandise from one store to another as
necessary. This allows stores to carry a reduced inventory while at the same
time satisfying customer demands.
To reduce inter-store shipping costs and to provide more timely restocking of
in-season merchandise, the Company has increased its focus on warehousing a
portion of initial shipments. Sales reports are then used to replenish on a
basis of one to three times each week, those stores that are experiencing the
greatest success selling specific styles, colors, and sizes of merchandise. This
system is also designed to prevent a crowded, cluttered look in the stores at
the beginning of a season.
STORE LOCATIONS AND EXPANSION STRATEGIES
As of April 1, 2000, the Company operated 260 stores in 35 states, including 12
stores opened in 2000. The existing stores are in 5 downtown locations, 9 strip
centers, 2 lifestyle centers and 244 shopping malls. The Company anticipates
opening approximately 16 additional new stores in fiscal 2000 and adding South
Carolina as a new state. All new stores for 2000 will be located in higher
traffic shopping malls. The following table lists the location of existing
stores as of April 1, 2000.
Location of Stores
State Number of Stores State Number of Stores
----- ---------------- ----- ----------------
Alabama 2 Montana 5
Arizona 3 Nebraska 15
Arkansas 5 New Mexico 4
California 2 North Carolina 3
Colorado 10 North Dakota 3
Florida 3 Ohio 12
Georgia 3 Oklahoma 14
Idaho 5 Oregon 1
Illinois 15 Pennsylvania 3
Indiana 11 South Dakota 3
Iowa 21 Tennessee 6
Kansas 15 Texas 26
Kentucky 4 Utah 5
Louisiana 7 Washington 3
Michigan 14 West Virginia 1
Minnesota 7 Wisconsin 12
Mississippi 3 Wyoming 1
Missouri 13 ---
Total 260
===
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The Buckle has grown significantly over the past ten years, with the number of
stores increasing from 66 at the beginning of 1990 to 248 at the end of fiscal
1999. The Company's plan is to continue expansion by developing the geographic
region it currently serves and by expanding into contiguous markets. The Company
intends to open new stores only when management believes there is a reasonable
expectation of satisfactory results.
The following table sets forth information regarding store openings and closings
since the beginning of fiscal 1990 to the end of fiscal 1999:
<TABLE>
<CAPTION>
Total Number of Stores Per Year
Fiscal Open at start Opened in Closed in
Year of year Current Year Current Year Total
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
1999 222 27 1 248
</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
$570,000, including construction costs of approximately $420,000 (which is prior
to any construction allowance received) and inventory costs of approximately
$150,000.
The Company anticipates opening approximately 28 new stores during fiscal 2000
and completing the remodeling of approximately nine 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 stores scheduled for remodeling
during fiscal 2000, 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 improvements at the corporate headquarters
during fiscal 2000.
The Company plans to expand in 2000 by opening stores in one new state 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.
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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 29, 2000, the Company had approximately 5500 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 29, 2000, 691 employees
participated in the medical plan, 694 in the dental plan, 713 in the life
insurance plan, 714 in the long-term disability plan and 293 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.
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COMPETITION
The men's and women's apparel industries are highly competitive with fashion,
selection, quality, price, location, store environment and service being the
principal competitive factors. While the Company believes that it is able to
compete favorably with other merchandisers, including department stores and
specialty retailers, with respect to each of these factors, the Company believes
it competes mainly on the basis of customer service and merchandise selection.
In the men's merchandise areas, the Company competes with specialty retailers
such as Gap, 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, as well as with
mail order and internet 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,
as well as with mail order and internet 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
"Bkle" 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 58. 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 50. 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 41. 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 M. PORTER, AGE 38. 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. On February 9, 2000, Mr.
Porter announced that he will step down from his position effective February 3,
2001.
9
<PAGE> 10
JAMES E. SHADA, AGE 44. 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. Mr. Shada will reduce his work
schedule and relinquished his vice president's position as of May 1, 2000.
GARY L. LALONE, AGE 50. 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. On February 16, 2000, Mr. Lalone announced that
he will step down from his position effective February 3, 2001.
BRETT P. MILKIE, AGE 40. Mr. Milkie is Vice President-Leasing. He was elected
Vice President-Leasing on May 30, 1996. Mr. Milkie was a leasing agent for a
national retail mall developer for 6 years prior to joining the company in
January 1992 as director of leasing.
ITEM 2 - PROPERTIES
All of the store locations operated by the Company are leased facilities. Most
of the Company's stores have lease terms of approximately ten years and
generally do not contain renewal options. The Company has not in the past
experienced problems renewing its leases, although no assurance can be given
that the Company can renew existing leases on favorable terms. The Company seeks
to negotiate extensions on leases for stores undergoing remodeling to provide
terms of approximately ten years after completion of remodeling. Consent of the
landlord generally is required to remodel or change the name under which the
Company does business. The Company has not in the past experienced problems in
obtaining such consent. Most leases provide for a fixed minimum rental plus an
additional rental cost based upon a set percentage of sales beyond a specified
breakpoint, plus common area and other charges.
The current terms of the Company's leases, including automatic renewal options,
expire as follows:
During Fiscal Number of expiring
Year leases
---------------------------------------------
2000 1
2001 12
2002 22
2003 27
2004 31
2005 25
2006 30
2007 and later 112
---
Total 260
===
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.
10
<PAGE> 11
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 1999.
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 1999, 1998 or 1997, and has no current plans for
dividend payment.
The number of record holders of the Company's common stock as of March 31, 2000
was 469. 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, 2000 was $16.125.
The remainder of the information required by this item is incorporated by
reference to the information on page 28 of the Company's 1999 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 7 in the Company's 1999 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 23 through 27 in the Company's 1999 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 29, 2000, appearing on pages 8 through 22 of the Company's
1999 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 2000 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
2000 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 2000 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 2000 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 1999 Annual Report to Shareholders, a copy of which appears as
Exhibit 13 to this Form 10-K Report, contains the following on pages 8 through
22 and are hereby incorporated by reference to this report:
Independent Auditors' Report
Balance Sheets as of January 29, 2000, and January 30, 1999
Statements of Income for each of the three years in the period Ended
January 29, 2000
Statements of Stockholders' Equity for each of the three years in the
period ended January 29, 2000
Statements of Cash Flows for each of the three years in the period ended
January 29, 2000
Notes to Financial Statements for each of the three years in the period
ended January 29, 2000
(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
29, 2000.
(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, 2000 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, 2000.
/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 29,
2000 and January 30, 1999 and for each of the three years in the period ended
January 29, 2000, and have issued our report thereon dated February 29, 2000;
such financial statements and report are included in your 1999 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 29, 2000
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Allowance for
Doubtful Accounts
-----------------
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
Recoveries of amounts previously written off
Write-off of uncollectible accounts (1,322,571)
------------
Balance, January 30, 1999 300,000
Amounts charged to costs and expenses 1,095,115
Write-off of uncollectible accounts (1,170,115)
------------
Balance, January 29, 2000 $ 225,000
============
14
<PAGE> 15
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
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 Exhibit 3.1.1 to Form 10-K
Incorporation of The Buckle, Inc. for Year End 1-30-1999
(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 18, 2000
(10.5) Acknowledgment for Scott M. Porter
dated April 18, 2000
(10.6) Acknowledgment for James E. Shada
dated April 18, 2000
(10.7) Acknowledgment for Gary L. Lalone
dated April 18, 2000
(10.8) Acknowledgment for Brett P. Milkie
dated April 18, 2000
(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 Exhibit 10.10.1 to Form 10-K
for Year End 1-30-99
(10.11) Programmed Lending Note dated
May 31, 1999 for $5.0 million payable
to First National Bank and Trust Co.
of Kearney
</TABLE>
15
<PAGE> 16
<TABLE>
<S> <C> <C>
(10.12) Loan Agreement dated May 31, 1999
between The Buckle, Inc. and First
National Bank and Trust Co. of Kearney,
regarding $5.0 million line of credit.
(10.13) Letter dated June 1, 1999 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) 1999 Annual Report to Stockholders
(18) Not applicable
(19) Not applicable
(22) Not applicable
(23) Consent of Deloitte & Touche LLP
(25) Not applicable
(27) Financial Data Schedule
(28) Not applicable
</TABLE>
16
<PAGE> 1
EXHIBIT 10.4
ACKNOWLEDGMENT
1. Dennis Nelson, currently employed by The Buckle, Inc. ("Company") of
Kearney, Nebraska, will be paid an annual salary of $650,000 for so long as the
employee is employed by the Company during the fiscal year ending February 3,
2001.
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 2000 cash award will be calculated as
follows:
Multiple
of Base
Salary
LEVEL I
Change in Pre-Bonus Net Income 2000
------------------------------ ----
>30% decrease 0.00
30% decrease 0.00
20% decrease 0.65
10% decrease 0.95
No Change 1.25
>10% increase 1.60
>20% increase 2.00
>30% increase 2.50
>40% increase 2.90
>50% increase 3.30
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:
Change in Pre-Bonus Net Income Level I Executives
------------------------------ ------------------
Any decrease none
No Change 10%
10% increase 15%
20% increase 20%
17
<PAGE> 2
30% increase and up 30%
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 $16.375 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 (1-29-00). 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 18, 2000
The Buckle, Inc.
Acknowledged by: /s/ DENNIS H. NELSON
--------------------
Dennis H. Nelson
18
<PAGE> 1
EXHIBIT 10.5
ACKNOWLEDGMENT
1. Scott Porter, currently employed by The Buckle, Inc. ("Company") of
Kearney, Nebraska, will be paid an annual salary of $375,000 for so long as the
employee is employed by the Company during the fiscal year ending February 3,
2001.
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 2000 cash award will be calculated as
follows:
Multiple
of Base
Salary
LEVEL I
Change in Pre-Bonus Net Income 2000
------------------------------ ----
>20% decrease 0.00
20% decrease 0.65
10% decrease 0.95
No Change 1.25
>10% increase 1.60
>20% increase 2.00
>30% increase 2.50
>40% increase 2.90
>50% increase 3.30
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:
Change in Pre-Bonus Net Income Level I Executives
------------------------------ ------------------
Any decrease none
No Change 10%
10% increase 15%
20% increase 20%
19
<PAGE> 2
30% increase and up 30%
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 $16.375 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 (1-29-00). 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 18, 2000
The Buckle, Inc.
Acknowledged by: /s/ SCOTT M. PORTER
-------------------
Scott M. Porter
20
<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 through April
29, 2000 and then $103,332 beginning April 30, 2000 and for so long as the
employee is employed by the Company during the fiscal year ending February 3,
2001.
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 2000 cash award will be calculated as
follows:
Multiple
of Base
Salary
--------
LEVEL I
Change in Pre-Bonus Net Income 2000
------------------------------ ----
>20% decrease 0.00
20% decrease 0.65
10% decrease 0.95
No Change 1.25
>10% increase 1.60
>20% increase 2.00
>30% increase 2.50
>40% increase 2.90
>50% increase 3.30
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
Change in Pre-Bonus Net Income Level I Executives
------------------------------ ------------------
Any decrease none
No Change 10%
10% increase 15%
20% increase 20%
30% increase and up 30%
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 11,550 shares ("Options") of The Buckle, Inc.
common stock at $16.375 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 (1-29-00). 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 18, 2000
The Buckle, Inc.
Acknowledged by:
----------------------------------
James E. Shada
<PAGE> 1
EXHIBIT 10.7
ACKNOWLEDGMENT
1. Gary Lalone, currently employed by The Buckle, Inc. ("Company") of
Kearney, Nebraska, will be paid an annual salary of $270,000 for so long as the
employee is employed by the Company during the fiscal year ending February 3,
2001.
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 2000 cash award will be calculated as
follows:
Multiple
of Base
Salary
LEVEL I
Change in Pre-Bonus Net Income 2000
------------------------------ ----
>30% decrease 0.00
30% decrease 0.00
20% decrease 0.65
10% decrease 0.95
No Change 1.25
>10% increase 1.60
>20% increase 2.00
>30% increase 2.50
>40% increase 2.90
>50% increase 3.30
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:
Change in Pre-Bonus Net Income Level I Executives
------------------------------ ------------------
Any decrease none
No Change 10%
10% increase 15%
20% increase 20%
21
<PAGE> 2
30% increase and up 30%
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 11,550 shares ("Options") of The Buckle, Inc.
common stock at $16.375 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 (1-29-00). 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 18, 2000
The Buckle, Inc.
Acknowledged by: /s/ GARY L. LALONE
------------------
Gary L. Lalone
22
<PAGE> 1
EXHIBIT 10.8
ACKNOWLEDGMENT
1. Brett Milkie, currently employed by The Buckle, Inc. ("Company") of
Kearney, Nebraska, will be paid an annual salary of $184,000 for so long as the
employee is employed by the Company during the fiscal year ending February 3,
2001.
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 2000 cash award will be calculated as
follows:
LEVEL II Multiple
of Base
Change in Pre-Bonus Salary
Net Income 2000
------------------- -------
>20% decrease 0.00
20% decrease 0.45
10% decrease 0.55
No Change 0.70
>10% increase 0.95
>20% increase 1.15
>30% increase 1.35
>40% increase 1.60
>50% increase 1.85
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:
23
<PAGE> 2
Change in Pre-Bonus Net Income Level II Executives
------------------------------ -------------------
Any decrease none
No Change 10%
10% increase 10%
20% increase 15%
30% increase and up 20%
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 $16.375 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 (1-29-00). 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 18, 2000
The Buckle, Inc.
Acknowledged by: /s/ BRETT P. MILKIE
-------------------
Brett P. Milkie
24
<PAGE> 1
EXHIBIT 10.11
PROGRAMMED LENDING NOTE
$5,000,000.00 MAY 31, 1999
- ------------- ------------
The undersigned jointly and severally promise(s) to pay to the order of
FIRST NATIONAL BANK AND TRUST CO. OF KEARNEY ("Lender") the sum of FIVE MILLION
AND NO/100 DOLLARS,
-------------------------------------------------------------
or so much thereof as may be advanced from time to time, with interest at the
rate set forth below (calculated on the basis of actual days elapsed in a 365
day year) on the unpaid principal balance until this Note is fully paid.
Principal and interest shall be payable at Lender's office, or at such other
place as the holder hereof may designate, in lawful money of the United States.
Unless otherwise provided herein all payments shall be applied first to accrued
interest and the balance to principal.
The interest rate of this Note shall be:
an annual rate of %.
an annual rate Lender's Reference Rate as
established from time to time,
each change in the interest rate to be effective on the day of a
change in the Reference Rate. The initial interest rate
shall be %.
an annual rate Lender's Reference Rate,
to be adjusted on the day of each during the
term of this Note. The initial interest rate shall be %.
X an annual rate 0.00% ABOVE NEW YORK PRIME AS PUBLISHED
IN THE WALL STREET JOURNAL AS ESTABLISHED FROM TIME TO TIME . The
initial rate shall be 8.50 %. Interest after maturity (whether this Note matures
by demand, acceleration or lapse of time) shall be charged on the outstanding
principal of default at % above the rate at maturity or X 16.0% ("Default
Rate"). In no event shall the interest charged on this Note exceed the maximum
rate, if any, allowed by law.
Principal and interest shall be due in a single payment on N/A or as
follows: MONTHLY INTEREST PAYMENTS DUE BEGINNING JULY 1, 1999, AND CONTINUING
MONTHLY THEREAFTER; and, if not sooner paid, all unpaid principal and accrued
interest shall be due and payable on MAY 31, 2000
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
25
<PAGE> 2
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 5-31-99
(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
-------------------------------
26
<PAGE> 1
EXHIBIT 10.12
LOAN AGREEMENT
This LOAN AGREEMENT ("Agreement") is made as of the 31st day of MAY ,
1999 , 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.
27
<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 act
ion 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.
28
<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: 5-31-99 BY: LARRY L. JEPSON
---------------------- ---------------
Title: CHAIRMAN AND CEO
----------------
THE BUCKLE, INC
------------------------------------
Borrower
Date: 5-31-99 BY; DENNIS H. NELSON, PRESIDENT
---------------------- ------------------------------------
Borrower
Date:
---------------------- ------------------------------------
Borrower
STATE OF )
--------------------
) ss.
COUNTY OF )
--------------------
The foregoing Agreement was acknowledged before me this day
of, . by
- -------------------------------------------------------------------------------
-----------------------------------
Notary Public
29
<PAGE> 1
EXHIBIT 10.13
June 1, 1999
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 effective
on the expiration of our existing loan commitment on May 31, 1999. 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,
2000, 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.
Congratulations on your outstanding financial performance in both growth and
profitability this past year. 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 L. JEPSON
Larry L. Jepson
Chairman & CEO
ACKNOWLEDGMENT
The Undersigned acknowledges and accepts this loan commitment with attendant
terms and conditions as stated, this 1st day of June, 1999.
THE BUCKLE, INC.
BY: DENNIS NELSON, PRESIDENT & CEO June 1, 1999
------------------------------ ------------
Dennis Nelson, President & CEO Date
30
<PAGE> 1
to our shareholders
The end of fiscal year 1999 marks another year of growth for The Buckle. Net
sales reached a record $375.5 million and net earnings delivered a 9.9%
increase, growing to $37.4 million. Our net earnings to sales ratio of 10.0% was
second only to last year's 10.1%. Average store sales were $1.581 million and
our average sales per square foot were $334 for the year.
During fiscal 1999, the company repurchased over 1.5 million shares of its
common stock at an average price of $15.90 per share. This buy-back supports our
strong Return on Equity, averaging over 25% for the past 5 years.
Our strong performance over the years is a result of our constant dedication to
serving our guests. Our merchandisers, working with our vendors, continue to
develop great new product and expand our private label sources - all targeted to
make The Buckle a unique and fun place to shop.
With great locations in great malls, real estate continues to be a core
strength. Our operations department oversaw construction of 27 new stores and
10 major store remodels, while also completing the expansion and remodel of our
corporate offices and closing one store. We ended the year with 248 stores in
35 states, adding six new states during fiscal 1999. In fiscal 2000, we plan to
open approximately 28 new stores, add one new state, and remodel nine stores.
Our MIS team supervised the successful rollout of new cash register hardware and
software in all of our stores - a significant upgrade that not only resolved
Y2K issues, but enhanced functionality and helped prepare us for future growth.
They were also prepared for Y2K and we experienced no significant problems.
We launched our online store in April,1999. Although online sales represent only
a small part of our business, our website is a valuable marketing tool. Online
guests have access to the latest fashion updates, interactive entertainment and
corporate information. Buckle.com - created entirely by talented in-house staff
- - is establishing even stronger relationships with our guests.
With growth comes change, and we'd like to take this opportunity to say
"thank-you" for the contributions of vice-presidents Scott Porter, Gary Lalone,
and Jim Shada. As previously announced, Scott and Gary will be leaving the
company at the end of FY2000, while Jim's role in day-to-day management will be
reduced. Their contributions have helped us grow significantly and, just as
importantly, they have helped develop Buckle leaders from within the
organization who will continue to propel our company to greater heights.
I'd like to recognize and thank our valued Teammates for providing great service
and establishing an excellent reputation for The Buckle. Our success would not
be possible without these Teammates, whose shared vision and enthusiasm helps
create the most enjoyable shopping experience possible for our guests.
Additionally, I would like to thank our shareholders and guests for their
continued support and confidence in The Buckle. We remain intently focused on
the future, building on the strength of our people and the strength of our
balance sheet, positioning The Buckle for long term consistent growth.
/s/ Dennis H. Nelson
- -------------------------------
Dennis H. Nelson
President and CEO
<PAGE> 2
<TABLE>
<CAPTION>
financial highlights
Jan. 29, 2000 Jan. 30, 1999 Jan. 31, 1998 Feb. 1, 1997
(dollar amounts in thousands, except per share and sales per sq.ft.)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net Sales $375,526 $337,916 $267,921 $206,393
Income before income taxes 59,496 54,152 37,417 21,667
Income taxes 22,110 20,123 14,086 8,043
Net income $ 37,386 $ 34,029 $ 23,331 $ 13,624
Diluted income per share $ 1.64 $ 1.47 $ 1.05 $ 0 .63
Net income as a percentage
of net sales 10.0% 10.1% 8.7% 6.6%
SELECTED FINANCIAL DATA
Working capital $107,582 $104,035 $ 77,448 $ 54,904
Total assets $198,546 $186,113 $144,460 $102,017
Long term debt 0 0 0 0
Stockholders equity $163,260 $146,130 $107,881 $ 78,043
Number of stores open at year end 248 222 199 181
Average sales per square foot $ 334 $ 344 $ 300 $ 255
Average sales per store $ 1,581 $ 1,603 $ 1,400 $ 1,183
Comparable store sales change 0.9% 15.4% 18.6% 11.1%
</TABLE>
<PAGE> 3
who we are on the inside makes us
a distinct brand of speciality store BRAND
At The Buckle, our core beliefs and philosophy have created a culture of
innovation, resourcefulness and passion. Our distinct approach to retailing is
reflected in everything from our genuine desire to help our guests, to an
inviting store design and a merchandise selection that represents our
commitment to great style and quality. There is simply no question of who we are
and who we're here to serve.
<PAGE> 4
our style is more than great fashion
it's how we deliver it
Our daily challenge is to deliver a fresh and unique presentation to each guest.
To meet that challenge, we have a management team with an innate talent for
discovering opportunity and merchandisers with a keen sense of fashion. The
result: great-looking stores overflowing with exciting name brands, innovative
styles and private label lines with our trademark attention to quality and
detail.
<PAGE> 5
FIT success is about developing
relationships that fit
It starts on the sales floor with knowledgeable teammates helping our guests
find the right fashion and the right fit. This personalized approach to service
builds valuable relationships. The relationships we have with our guests, as
well as our vendors and developers, are based on trust and performance. Through
these strong relationships, we've earned a reputation as a leading specialty
retailer and positioned ourselves to grow and prosper.
<PAGE> 6
assessing opportunity and
FINISH having the strength to
capitalize on it, for a strong finish
year after year
At the center of The Buckle is a sense of personal responsibility to our
employees and our shareholders. Our fiscal policies and discipline lead to
steady growth without the burden of long-term debt. The results are reflected in
the following financial pages: another record year of net sales, a strong
balance sheet and years of consistent profitability. This outward show of
strength stems from our inner resolve to continually improve.
<PAGE> 7
store locations
WASHINGTON
[ ] 1999
[ ] 2000
(STAR) Corporate Headquarters
Kearney, Nebraska
MONTANA
OREGON
NORTH DAKOTA
MINNESOTA
IDAHO
WISCONSIN
SOUTH DAKOTA
WYOMING
MICHIGAN
NEBRASKA (STAR)
IOWA
CALIFORNIA
UTAH
PENNSYLVANIA
OHIO
WEST VIRGINIA
ILLINOIS
COLORADO
INDIANA
KANSAS
MISSOURI
KENTUCKY
ARIZONA
NORTH
CAROLINA
TENNESSEE
NEW MEXICO
OKLAHOMA
ARKANSAS
SOUTH
CAROLINA
GEORGIA
MISS.
ALABAMA
TEXAS
LOUISIANA
FLORIDA
<PAGE> 8
EXHIBIT 13
SELECTED FINANCIAL DATA
===============================================================================
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------------------
JANUARY 29, JANUARY 30, JANUARY 31, FEBRUARY 1, FEBRUARY 3,
2000 1999 1998 1997 1996
-------------------------------------------------------------------
(dollar amounts in thousands, except per share
and selected operating data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net Sales $375,526 $337,916 $267,921 $206,393 $172,291
Cost of sales
(including buying,
distribution and
occupancy costs) 243,517 216,668 174,379 140,359 118,262
-------------------------------------------------------------------
Gross profit 132,009 121,248 93,542 66,034 54,029
Selling expenses 64,876 59,557 49,040 38,361 33,166
General and
administrative
expenses 10,101 9,820 8,772 7,157 6,101
-------------------------------------------------------------------
Income from operators 57,032 51,871 35,730 20,516 14,762
Other income 2,464 2,281 1,687 1,151 1,158
-------------------------------------------------------------------
Income before
income taxes 59,496 54,152 37,417 21,667 15,920
Provision for income
taxes 22,110 20,123 14,086 8,043 6,073
-------------------------------------------------------------------
Net income $ 37,386 $ 34,029 $ 23,331 $ 13,624 $ 9,847
=================================================================
Basic income
per share $ 1.72 $ 1.55 $ 1.10 $ 0.65 $ 0.48
Diluted income
per share $ 1.64 $ 1.47 $ 1.05 $ 0.63 $ 0.47
SELECTED OPERATING DATA
Stores open at end
of period 248 222 199 181 164
Average sales per
square foot $ 334 $ 344 $ 300 $ 255 $ 238
Average sales per
store (000's) $ 1,581 $ 1,603 $ 1,400 $ 1,183 $ 1,094
Comparable store
sales change 0.9% 15.4% 18.6% 11.1% 7.5%
BALANCE SHEET DATA
Working capital $107,582 $104,035 $ 77,448 $ 54,904 $ 37,794
Total assets $198,546 $186,113 $144,460 $102,017 $ 81,683
Long term debt - - - - -
Stockholders' equity $163,260 $146,130 $107,881 $ 78,043 $ 61,629
</TABLE>
==============================================================================
7
<PAGE> 9
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 29, 2000 and January 30, 1999, and the related statements of income,
stockholders' equity and cash flows for each of the three fiscal years in the
period ended January 29, 2000. 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 auditing standards generally accepted
in the United States of America. 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 29, 2000 and
January 30, 1999, and the results of its operations and its cash flows for each
of the three fiscal years in the period ended January 29, 2000 in conformity
with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 29, 2000
==============================================================================
8
<PAGE> 10
BALANCE SHEETS
(Dollar Amounts in Thousands Except Per Share Amounts)
===============================================================================
JANUARY 29, JANUARY 30,
2000 1999
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 37,205 $ 61,705
Investments (Note B):
Held-to-maturity 40,357 26,691
Available-for-sale 4,002 -
Accounts receivable, net of allowance of $225
and $300, respectively 3,430 3,980
Inventory 55,045 49,411
Prepaid expenses and other assets (Note E) 2,387 2,231
-----------------------
Total current assets 142,426 144,018
-----------------------
PROPERTY AND EQUIPMENT (Note C): 91,735 74,041
Less accumulated depreciation (38,168) (34,798)
-----------------------
53,567 39,243
-----------------------
OTHER ASSETS (Notes E and F) 2,553 2,852
-----------------------
$198,546 $186,113
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 15,773 $ 16,817
Accrued employee compensation 12,587 16,919
Accrued store operating expenses 3,491 3,317
Gift certificates redeemable 1,925 1,593
Income taxes payable 1,068 1,337
-----------------------
Total current liabilities 34,844 39,983
DEFERRED COMPENSATION (Note H) 442 -
-----------------------
Total liabilities 35,286 39,983
-----------------------
COMMITMENTS (Notes D and G)
STOCKHOLDERS' EQUITY (Note I):
Common stock, authorized 100,000,000 shares of
$.01 par value; issued and outstanding;
20,726,149 and 21,968,921 shares, respectively 207 220
Additional paid-in capital 17,131 37,431
Retained earnings 146,920 109,534
Unearned compensation - restricted stock (791) (1,055)
Accumulated other comprehensive income (loss) (207) -
-----------------------
Total stockholders' equity 163,260 146,130
-----------------------
$198,546 $186,113
=======================
See notes to financial statements.
================================================================================
9
<PAGE> 11
STATEMENTS OF INCOME
(Dollar Amounts in Thousands Except Per Share Amounts)
==============================================================================
FISCAL YEARS ENDED
---------------------------------------
JANUARY 29, JANUARY 30, JANUARY 31,
2000 1999 1998
SALES, Net of returns and
allowances of $26,420,
$22,683 and $18,424,
respectively $375,526 $337,916 $267,921
COST OF SALES (Including buying,
distribution and occupancy costs) 243,517 216,668 174,379
---------------------------------------
Gross profit 132,009 121,248 93,542
---------------------------------------
OPERATING EXPENSES:
Selling 64,876 59,557 49,040
General and administrative 10,101 9,820 8,772
-------------------------------------
74,977 69,377 57,812
INCOME FROM OPERATIONS 57,032 51,871 35,730
OTHER INCOME, Net 2,464 2,281 1,687
-------------------------------------
INCOME BEFORE INCOME TAXES 59,496 54,152 37,417
PROVISION FOR INCOME TAXES (Note E) 22,110 20,123 14,086
-------------------------------------
NET INCOME $ 37,386 $ 34,029 $ 23,331
=====================================
BASIC INCOME PER SHARE $ 1.72 $ 1.55 $ 1.10
=====================================
DILUTED INCOME PER SHARE $ 1.64 $ 1.47 $ 1.05
=====================================
See notes to financial statements.
==============================================================================
10
<PAGE> 12
STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollar Amounts in Thousands)
==============================================================================
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
ADDITIONAL COMPREHENSIVE
COMMON PAID-IN RETAINED UNEARNED INCOME COMPREHENSIVE
STOCK CAPITAL EARNINGS COMPENSATION (LOSS) TOTAL INCOME
<S> <C> <C> <C> <C> <C> <C> <C>
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 $ 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 $ 34,029
------------------------------------------------------------------------- ==========
BALANCE, January 30, 1999 220 37,431 109,534 (1,055) -- 146,130
Comprehensive income:
Net income -- -- 37,386 -- -- 37,386 $ 37,386
Unrealized loss on available-for-sale
securities, net of taxes of $125 (207) (207) (207)
---------
Total comprehensive income $ 37,179
=========
Common stock (199,812 shares)
issued on exercise of stock options 1 1,075 -- -- -- 1,076
Restricted stock issuance
(77,636 shares) 1 1,755 -- -- -- 1,756
Amortization of restricted stock
issuance -- -- -- 264 -- 264
Common stock (1,520,220 shares)
purchased and retired (15) (24,228) -- -- -- (24,243)
Tax benefit related to exercise of
employee stock options -- 1,098 -- -- -- 1,098
-------------------------------------------------------------------------
BALANCE, January 29, 2000 $ 207 $ 17,131 $ 146,920 $ (791) $ (207) $ 163,260
=========================================================================
</TABLE>
See notes to financial statements.
================================================================================
11
<PAGE> 13
STATEMENTS OF CASH FLOWS
(Dollar Amounts in Thousands)
================================================================================
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------------
JANUARY 29, JANUARY 30, JANUARY 31,
2000 1999 1998
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 37,386 $ 34,029 $ 23,331
Adjustments to reconcile net income to net cash flows from operating
activities:
Depreciation 9,624 6,968 5,309
Amortization of unearned compensation - restricted stock 264 264 --
Deferred taxes (545) (842) (225)
Loss on disposal of assets 902 253 191
Changes in operating assets and liabilities:
Accounts receivable 550 (1,613) (980)
Inventory (5,634) (7,072) (11,233)
Prepaid expenses 1,331 3,092 3,113
Accounts payable (1,044) (431) 7,841
Accrued employee compensation (2,576) 2,400 4,954
Accrued store operating expenses 174 910 729
Gift certificates redeemable 332 236 251
Deferred compensation 442 -- --
Income taxes payable (269) 289 (691)
------------------------------------
Net cash flows from operating activities 40,937 38,483 32,590
------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (24,963) (17,052) (12,087)
Proceeds from sale of property and equipment 113 -- 133
Increase (decrease) in other assets 580 (1,157) (361)
Purchase of investments (33,150) (22,910) (11,428)
Proceeds from maturities of investments 15,150 10,232 5,870
------------------------------------
Net cash flows from investing activities (42,270) (30,887) (17,873)
------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercise of stock options 1,076 2,452 3,390
Purchases of common stock (24,243) (1,936) --
------------------------------------
Net cash flows from financing activities (23,167) 516 3,390
------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (24,500) 8,112 18,107
CASH AND CASH EQUIVALENTS, Beginning of year 61,705 53,593 35,486
------------------------------------
CASH AND CASH EQUIVALENTS, End of year $ 37,205 $ 61,705 $ 53,593
====================================
</TABLE>
See notes to financial statements
================================================================================
12
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
==============================================================================
FISCAL YEARS ENDED JANUARY 29, 2000, JANUARY 30, 1999 AND JANUARY 31, 1998
(Dollar Amounts are in Thousands Except Share and 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 1999, 1998 and 1997 represent the 52-week periods ended
January 29, 2000, January 30, 1999 and January 31, 1998, 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 248 stores located in 35 states throughout the central,
northwestern and southern regions of the United States, as of January 29,
2000.
During fiscal 1999, the Company opened twenty-seven new stores,
substantially renovated ten stores, and closed one store. 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.
REVENUE RECOGNITION -- The Company operates on a cash and carry basis, so
revenue is recognized at the time of sale. Merchandise returns are
estimated and accrued at the end of the period.
INVESTMENTS -- The Company accounts for investments in accordance with
Statement of Financial Accounting Standards Board (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
Held-to-maturity securities are carried at amortized cost.
Available-for-sale securities are reported at fair value, with unrealized
gains and losses excluded from earnings and reported as a separate
component of stockholders' equity (net of the effect of income taxes) until
they are sold. Trading securities are reported at fair value, with
unrealized gains and losses included in earnings.
INVENTORIES -- Inventories are stated at the lower of cost or market. Cost
is determined on the average cost 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.
PRE-OPENING EXPENSES -- Costs related to opening new stores are expensed as
incurred.
ADVERTISING COSTS -- Advertising costs are expensed as incurred and
amounted to $4,065, $3,513 and $3,218 for fiscal years 1999, 1998 and 1997,
respectively.
==============================================================================
13
<PAGE> 15
==============================================================================
STOCK-BASED COMPENSATION -- The Company accounts for its stock-based
compensation under provisions of Accounting Principles Board 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, 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.
The Company's financial instruments have a fair value approximating the
carrying value.
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.
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.
The earnings per share and the average weighted shares outstanding for the
prior periods presented have also been restated to reflect the impact of
the Company's 2-for-1 stock split made in the form of a 100 percent stock
dividend issued on April 24, 1997.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America 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.
COMPREHENSIVE INCOME -- During fiscal 1999, the Company implemented
Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income, which establishes reporting requirements for the
display of comprehensive income and its components. The adoption had no
impact on net income. Unrealized gains and losses on the Company's
available-for-sale securities are included in accumulated other
comprehensive income (loss) and are separately included as a component of
stockholders' equity, net of related taxes.
ACCOUNTING PRONOUNCEMENTS -- In June 1998, the Financial Accounting
Standards Board (FASB) issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, that would have been effective January
30, 2000. In June 1999, the FASB issued SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities-Deferral of the Effective
Date of FASB Statement No. 133, postponing the effective date for
implementing SFAS No. 133 to fiscal years beginning after June 15, 2000.
The Company will adopt this Statement effective February 4,
==============================================================================
14
<PAGE> 16
==============================================================================
2001. At this time, the Company believes the impact of adopting this
Statement should not be significant to the results of operations or
financial position.
Effective at the beginning of fiscal 2000, the Company will change its
revenue recognition policy related to layaway sales in accordance with the
guidance and interpretations provided by the Securities and Exchange
Commission's Staff Accounting Bulletin (SAB) No. 101 -- Revenue
Recognition. This SAB will affect the Company's recognition of layaway
sales, which will require recognition of revenue from sales made under its
layaway program upon delivery of the merchandise to the customer. The
Company will record a cumulative effect adjustment as a change in
accounting principles in accordance with APB Opinion No. 20, Accounting
Changes. The Company does not expect the impact of this change in revenue
recognition policy to be material to the statement of financial position
or results of operations.
B. INVESTMENTS
The following is a summary of investments as of January 29, 2000:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
Available-for-Sale Securities:
U.S. corporate securities $ 4,334 $ - $ (332) $ 4,002
==================================================
Held-to-Maturity Securities:
State and municipal bonds $ 36,014 $ 4 $ (329) $ 35,689
U.S. corporate bonds 2,848 - (6) 2,842
U.S. treasuries 1,495 - (24) 1,471
--------------------------------------------------
$ 40,357 $ 4 $ (359) $ 40,002
==================================================
Trading Securities:
Mutual funds $ 411 $ 31 $ - $ 442
==================================================
</TABLE>
The following is a summary of investments as of January 30, 1999:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
Held-to-Maturity Securities:
State and municipal bonds $ 24,088 $ 5 $ (23) $ 24,070
U.S. treasuries 502 - - 502
U.S. corporate bonds 2,101 - - 2,101
--------------------------------------------------
$ 26,691 $ 5 $ (23) $ 26,673
==================================================
</TABLE>
Trading securities have been classified in other assets. These trading
securities are held in a Rabbi Trust and are intended to fund the Company's
deferred compensation plan (See Note H).
==============================================================================
15
<PAGE> 17
==============================================================================
C. PROPERTY AND EQUIPMENT
A summary of the cost of property and equipment follows:
JANUARY 29, JANUARY 30,
2000 1999
Land $ 908 $ 639
Building and improvements 7,567 6,370
Office equipment 2,479 2,252
Transportation equipment 7,758 4,118
Leasehold improvements 30,687 25,711
Furniture and fixtures 36,131 30,647
Shipping/receiving equipment 4,055 3,736
Screenprinting equipment 102 102
Construction-in-progress 2,048 466
-----------------------
$ 91,735 $ 74,041
=======================
D. 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 29, 2000 and January
30, 1999. There were immaterial bank borrowings during fiscal 1999, and
there were no borrowings at any time during fiscal 1998 and 1997. The
Company had outstanding letters of credit totaling $1,459 and $1,304 at
January 29, 2000 and January 30, 1999, respectively.
E. INCOME TAXES
The provision for income taxes consists of:
FISCAL YEAR
1999 1998 1997
Current:
Federal $ 19,247 $ 17,747 $ 11,763
State 3,408 3,218 2,548
Deferred (545) (842) (225)
-------------------------------------
Total $ 22,110 $ 20,123 $ 14,086
=====================================
==============================================================================
16
<PAGE> 18
==============================================================================
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:
FISCAL YEAR
-------------------------------------
1999 1998 1997
Statutory rate 35.0% 35.0% 35.0%
State income tax effect 4.3 4.0 4.9
Tax exempt interest income (1.8) (1.6) (2.0)
Expenses not deductible 0.1 0.1 0.1
Benefits of state tax credits (0.4) (0.3) (0.4)
-------------------------------------
37.2% 37.2% 37.6%
=====================================
Deferred tax assets and liabilities are comprised of the following:
JANUARY 29, JANUARY 30,
2000 1999
Deferred tax assets:
Unearned compensation - restricted stock $ 953 $ 758
Inventory 874 789
Option compensation 437 438
Accrued vacation 318 270
Unrealized loss on available-for-sale
securities 125 -
Other 304 201
-----------------------
$ 3,011 $ 2,456
=======================
Deferred tax liabilities:
Depreciation $ 116 $ 243
Unrealized gain on trading securities 12 -
-----------------------
$ 128 $ 243
=======================
At January 29, 2000 and January 30, 1999, respectively, the net current
deferred tax assets of $1,868 and $1,479 are classified in prepaid expenses
and the net noncurrent deferred tax assets of $1,015 and $734 are
classified in other assets.
Cash paid for income taxes was $19,814, $18,003 and $10,678 in fiscal years
1999, 1998 and 1997, respectively.
==============================================================================
17
<PAGE> 19
==============================================================================
F. RELATED PARTY TRANSACTIONS
Included in other assets is a note receivable of $735 and $600 at January
29, 2000 and January 30, 1999, respectively, from a life insurance trust
fund controlled by the Company's Chairman. The note is secured by a life
insurance policy on the Chairman.
G. LEASE COMMITMENTS
The Company conducts its operations in leased facilities under numerous
noncancellable operating leases expiring at various dates through 2013.
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 1999, 1998 and 1997 was $18,710, $15,049 and $13,108,
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 1999, 1998 and 1997 were $2,318, $2,457 and
$1,479, respectively. Total future minimum rental commitments under these
operating leases are as follows:
FISCAL YEAR
2000 $ 18,414
2001 21,396
2002 22,093
2003 21,145
2004 19,098
Thereafter 72,990
--------
Total minimum payments required $175,136
========
H. EMPLOYEE BENEFITS
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 may contribute to the plan at its discretion. The
total expense under the profit sharing plan was $783, $1,001 and $792 for
fiscal years 1999, 1998 and 1997, respectively.
During fiscal 1999, the Company established The Buckle, Inc. Deferred
Compensation Plan. The plan covers the Company's executive officers. The
plan is funded by participant contributions and a specified annual Company
matching contribution not to exceed 6% of the participant's compensation.
The Company's contributions for fiscal 1999 were $182.
==============================================================================
18
<PAGE> 20
==============================================================================
I. 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 29, 2000, 787,860 shares of common stock were available
for grant under the various option plans of which 427,410 shares were not
available to executive officers of the Company.
The Company granted 75,000 shares of restricted common stock in December
1997 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.
Pursuant to the 1998 Management Incentive Plan, compensation expense of
$1,756 associated with the fiscal 1998 bonus was recorded as accrued
employee compensation at January 30, 1999. During fiscal year 1999, the
Company granted 77,636 shares of restricted common stock related to this
amount upon approval of the Board of Directors. The Company has recorded
accrued employee compensation of $254 at January 29, 2000 for the fiscal
1999 restricted stock award.
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 $519,
$2,022 and $-0- for the fiscal years ended 1999, 1998 and 1997,
respectively.
If compensation cost for the Company's stock-based compensation plan had
been determined based on the fair value at the grant dates for awards under
the plans consistent with the method of SFAS No. 123, Accounting for
Stock-Based Compensation, the Company's net income and net income per share
would have been reduced to the pro forma amounts indicated below:
1999 1998 1997
---------------------------------------------
Net income As reported $37,386 $34,029 $23,331
Pro forma $31,854 $30,167 $22,482
Basic income per share As reported $ 1.72 $ 1.55 $ 1.10
Pro forma $ 1.46 $ 1.37 $ 1.06
Diluted income per share As reported $ 1.64 $ 1.47 $ 1.05
Pro forma $ 1.40 $ 1.30 $ 1.01
==============================================================================
19
<PAGE> 21
==============================================================================
The weighted average fair value of options granted during the year under
the SFAS No. 123 methodology was $17.87, $15.75 and $4.10 per option for
fiscal 1999, 1998 and 1997, 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:
1999 1998 1997
------------------------------------------
Risk-free interest rate 6.00% 6.00% 6.00%
Dividend yield 0.00% 0.00% 0.00%
Expected volatility 60.0% 58.0% 40.0%
Expected life (years) 6.0 years 6.0 years 6.0 years
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>
1999 1998 1997
---------------------------------------------------------------------
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 3,905,746 $ 11.09 3,259,055 $ 6.21 3,107,703 $5.31
Granted 483,540 26.05 1,241,310 22.80 818,550 8.95
Expired/terminated (26,094) 26.37 (154,495) 18.06 (28,312) 7.01
Exercised (199,812) 5.38 (440,124) 5.52 (638,886) 5.32
---------------------------------------------------------------------
Outstanding - end of year 4,163,380 $ 13.01 3,905,746 $ 11.09 3,259,055 $6.21
=====================================================================
</TABLE>
There were 2,743,868; 2,509,213; and 2,404,767 options exercisable at
January 29, 2000, January 30, 1999 and January 31, 1998, respectively.
==============================================================================
20
<PAGE> 22
================================================================================
The following table summarizes information about stock options outstanding
as of January 29, 2000:
<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 $ 3.000 647,450 1.88 years $ 3.00 647,450 $ 3.00
$ 4.167 $ 4.750 256,199 4.99 4.59 256,199 4.59
$ 4.958 $ 5.583 219,375 4.00 5.42 219,375 5.42
$ 6.000 $ 6.667 406,240 5.69 6.32 406,240 6.32
$ 8.500 $ 9.292 1,034,103 5.37 9.11 1,004,010 9.13
$ 11.500 $ 12.250 1,725 7.45 11.96 1,725 11.96
$ 20.500 $ 23.250 1,081,088 8.03 21.41 149,094 22.37
$ 26.750 $ 34.083 517,200 8.80 28.42 59,775 33.93
---------------------------------------------------------------------------------
4,163,380 5.88 $ 13.01 2,743,868 $ 7.81
=================================================================================
</TABLE>
J. EARNINGS PER SHARE
The following table provides a reconciliation between basic and diluted
earnings per share (amounts in thousands except per share amounts):
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------------------------------------------------------------------------
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 $ 37,386 21,777 $ 1.72 $ 34,029 21,964 $ 1.55 $ 23,331 21,211 $ 1.10
EFFECT OF DILUTIVE
SECURITIES
Stock Options 1,076 1,172 1,093
-------------------------------------------------------------------------------------------------
DILUTED EPS $ 37,386 22,853 $ 1.64 $ 34,029 23,136 $ 1.47 $ 23,331 22,304 $ 1.05
=================================================================================================
</TABLE>
Options to purchase 977,288, 131,340 and -0- shares of common stock in
fiscal 1999, 1998 and 1997, respectively, are not included in the
computation of diluted earnings per share because the options would be
considered anti-dilutive.
================================================================================
21
<PAGE> 23
================================================================================
K. SEGMENT INFORMATION
The Company is a retailer of medium to better priced casual apparel and
footwear. The Company operates 248 stores located in 35 states throughout
the central, northwestern and southern regions of the United States at
January 29, 2000. 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:
PERCENTAGE OF NET SALES
------------------------------
FISCAL YEAR
------------------------------
MERCHANDISE GROUP 1999 1998 1997
Denims 25.0% 27.3% 29.3%
Slacks/Casual Bottoms 4.3 4.1 4.0
Tops (including sweaters) 34.0 34.0 35.0
Sportswear/Fashion Clothes (including dresses) 7.8 7.5 8.3
Outerwear 2.7 2.3 2.4
Accessories 7.1 5.8 4.4
Shoes 16.6 17.3 16.6
Little Guys/Gals 2.4 1.3 -
Other 0.1 0.4 -
----------------------------
100.0% 100.0% 100.0%
============================
L. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial information for fiscal 1999 and 1998 are as
follows:
QUARTER
----------------------------------------------------
FISCAL 1999 FIRST SECOND THIRD FOURTH TOTAL
Net sales $ 79,688 $ 79,584 $107,463 $108,791 $375,526
Gross profit $ 27,101 $ 26,626 $ 38,558 $ 39,724 $132,009
Income from operations $ 9,793 $ 9,870 $ 17,955 $ 19,414 $ 57,032
Net income $ 6,469 $ 6,375 $ 11,552 $ 12,990 $ 37,386
Basic Income per Share $ 0.29 $ 0.29 $ 0.54 $ 0.61 $ 1.72
Diluted Income per Share $ 0.28 $ 0.27 $ 0.51 $ 0.58 $ 1.64
QUARTER
----------------------------------------------------
FISCAL 1998 FIRST SECOND THIRD FOURTH TOTAL
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
Basic and diluted shares outstanding are computed independently for each of
the quarters presented and, therefore, may not sum to the totals for the
year.
================================================================================
22
<PAGE> 24
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)
FOR FISCAL YEARS ENDED
JANUARY 29, JANUARY 30, JANUARY 31, FISCAL YEAR
2000 1999 1998 1998 TO 1999 1997 TO 1998
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net Sales 100.0% 100.0% 100.0% 11.1% 26.1%
Cost of sales (including buying,
distribution and occupancy costs) 64.8% 64.1% 65.1% 12.4% 24.3%
---------------------------------------------------------------------
Gross profit 35.2% 35.9% 34.9% 8.9% 29.6%
Selling expenses 17.3% 17.6% 18.3% 8.9% 21.4%
General and
administrative expenses 2.7% 2.9% 3.3% 2.9% 11.9%
---------------------------------------------------------------------
Income from operations 15.2% 15.4% 13.3% 9.9% 45.2%
Other income .7% .7% .7% 8.0% 35.2%
---------------------------------------------------------------------
Income before income taxes 15.9% 16.1% 14.0% 9.9% 44.7%
Provision for income taxes 5.9% 6.0% 5.3% 9.9% 42.9%
---------------------------------------------------------------------
Net income 10.0% 10.1% 8.7% 9.9% 45.9%
=====================================================================
</TABLE>
FISCAL 1999 COMPARED TO FISCAL 1998
Net sales increased from $337.9 million in fiscal 1998 to $375.5 million in
fiscal 1999, an 11.1% increase. Comparable store sales increased by $2.9
million, or 0.9% for fiscal 1999 compared to the same period in the prior year.
The Company had 4.2% sales growth in fiscal 1999 that was attributable to the
inclusion of a full year of operating results in fiscal 1999 for stores opened
in fiscal 1998 and 6.0% from the opening of 27 new stores in fiscal 1999. The
Company's average retail price per piece of merchandise remained consistent in
fiscal 1999 compared to fiscal 1998 prices. The Company saw slightly higher
price points in the denim, casual bottoms and shoe categories which were offset
by lower price points in sportswear and little guys/gals categories. Average
sales per square foot decreased 2.9% from $344 to $334.
Gross profit after buying, distribution and occupancy costs increased $10.8
million in fiscal 1999 to $132.0 million, an 8.9% increase. As a percentage of
net sales, gross profit decreased from 35.9% in fiscal 1998 to 35.2% in fiscal
1999. The decrease was primarily attributable to higher occupancy costs as a
percentage of net sales due to a decline in leverage provided by comparable
store sales. Gross margin was also impacted by the increase in the merchandise
shrinkage which rose to 0.7% in fiscal 1999 compared to 0.5% in fiscal 1998.
================================================================================
23
<PAGE> 25
================================================================================
Selling expenses increased from $59.6 million for fiscal 1998 to $64.9 million
for fiscal 1999, an 8.9% increase. Selling expenses as a percent of net sales
decreased to 17.3% for fiscal 1999 from 17.6% for fiscal 1998. The primary
reason for the improvement in selling expenses as a percentage of net sales is
due to the implementation of the Company's 1999 Management Incentive Program,
which reduced management's bonus accrual.
General and administrative expenses increased from $9.8 million in fiscal 1998
to $10.1 million in fiscal 1999, a 2.9% increase. As a percentage of net sales,
general and administrative expense decreased to 2.7% for fiscal 1999 from 2.9%
for fiscal 1998. Decreases in general and administrative expenses, as a
percentage of net sales, resulted primarily from the implementation of the
Company's 1999 Management Incentive Program, which reduced the bonus accrual for
management.
As a result of the above changes, the Company's income from operations increased
$5.2 million to $57.0 million for fiscal 1999, a 9.9% increase compared to
fiscal 1998. Income from operations was 15.2% as a percentage of net sales in
fiscal 1999 compared to 15.4% in fiscal 1998.
Other income for fiscal 1999 increased 8.0% from fiscal 1998 to $2.5 million.
The increase is primarily due to additional interest income, as the average
level of cash and short-term investments was greater than in the same period of
fiscal 1998.
Income tax expense as a percentage of pre-tax income was 37.2% in both fiscal
1999 and fiscal 1998, bringing net earnings to $37.4 million for fiscal 1999
versus $34.0 million for fiscal 1998, an increase of 9.9%.
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
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.
================================================================================
24
<PAGE> 26
==============================================================================
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.
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.
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 1999, 1998,
and 1997 the Company's cash flow from operations was $40.9 million, $38.5
million, and $32.6 million, respectively. During fiscal 1999 and 1998, the
Company also used cash for repurchasing shares of the Company's common stock. In
fiscal 1999, the Company purchased 1,520,220 shares at a cost of $24.2 million
and 120,600 shares in fiscal 1998 at a cost of $1.9 million. 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 29, 2000, the Company's working
capital was $107.6 million, including $37.2 million of cash and cash
equivalents.
The Company has, from time to time, borrowed against these lines of credit
during periods of peak inventory build-up. There were minor borrowings during
fiscal 1999 and no borrowing during fiscal 1998 or 1997. The Company had no bank
borrowings as of January 29, 2000.
During fiscal 1999, 1998, and 1997, the Company invested $18.6 million, $10.4
million, and $5.3 million, respectively, in new store construction, store
renovation and upgrading store technology, net of any construction allowances
received from landlords. The Company also spent $2.8 million, $6.7 million, and
$3.7 million, in fiscal 1999, 1998, and 1997, respectively, in capital
expenditures for the corporate headquarters and distribution facility. 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 existing 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 center 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
==============================================================================
25
<PAGE> 27
==============================================================================
conference room space. The remodel of this phase was completed in March 1999.
The next remodeling phase included remodeling and reorganization of the existing
office space and was completed during the third quarter of fiscal 1999. The
final phase of the remodel project was completed during the fourth quarter of
fiscal 1999. The total cost of the expansion plus all phases of the remodel
project is approximately $8.5 million, of which approximately $6.5 million was
incurred during fiscal 1998. Also during the second quarter of fiscal 1999, the
Company purchased a second corporate aircraft at a cost of $3.6 million.
During fiscal 2000, the Company anticipates completing approximately 37 store
construction projects, including approximately 28 new stores and approximately 9
stores to be remodeled and/or relocated. As of March 2000, 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 1999 was approximately $570,000, including construction costs of
approximately $420,000 and inventory costs of approximately $150,000. Management
estimates that total capital expenditures during fiscal 2000 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 1999, 1998, and 1997, 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 arrival of year 2000 posed a unique worldwide
technological challenge as all computer information systems required 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 have resulted 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 following is a summary of actions taken by the Company during the years
preceding January 1, 2000 in anticipation of the year 2000 transition and the
potential problems that computer systems could experience handling dates beyond
the year 1999.
==============================================================================
26
<PAGE> 28
==============================================================================
The Company assessed its business computer systems, such as general ledger,
payroll, accounts payable and inventory control, including distribution center
functions. These internally developed systems were then corrected. With the
construction and remodel of our distribution center and corporate headquarters,
the Company modified certain critical systems, including the conveyor system and
security functions.
The stores' Point-of-Sale systems operate via third-party software systems.
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. The rollout of this system was
completed by July of 1999.
Year 2000 Costs - Total costs of this project were approximately $5 million and
were expensed or capitalized in the normal course of operations of the Company.
The majority of such cost was for the purchase of new software and hardware for
replacement of all stores' Point-of-Sale systems and has been 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.
Risk Assessment - At this time, the Company believes it will not experience any
material adverse affects from the Y2K issue. If some unforeseen problem did
occur, it most likely would be: (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 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 has not experienced any significant Y2K issues subsequent to 1999's
fiscal year end. Although the Company believes it has taken the appropriate
steps to address Y2K readiness, there is no guarantee that the Company's effort
will prevent a material adverse impact on the results of operations and
financial condition.
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> 29
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 1999, 1998 or
1997, and has no current plans for cash dividend payments.
The number of record holders of the Company's common stock as of March 31, 2000
was 469. 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, 2000 was $16.125.
Following is the Company's quarterly market range for fiscal years 1999, 1998
and 1997
1999 1998 1997
-------------------------------------------------------------------------------
HIGH LOW HIGH LOW HIGH LOW
Quarter
First 29.50 18.06 36.25 23.25 11.00 8.00
Second 32.56 19.50 39.13 23.06 16.33 10.50
Third 30.00 16.00 28.19 12.25 20.67 14.17
Fourth 16.81 12.56 30.50 18.00 25.25 17.83
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:
==============================================================================
28
<PAGE> 30
corporate information
Date Founded
1948
Number of Employees
5,500
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 2,
2000, 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 and BKLE are trademarks 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
Chairman, DreamField Capital Ventures
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
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 29, 2000, appearing in and incorporated by reference in the Annual
Report on Form 10-K of The Buckle, Inc. for the year ended January 29, 2000.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
April 24, 2000
31
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<S> <C>
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<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> JAN-29-2000
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<RECEIVABLES> 3,655
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0
0
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<SALES> 375,526
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<INCOME-PRETAX> 59,496
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