EX-13 10 c69084ex13.txt 2001 ANNUAL REPORT TO STOCKHOLDERS [PHOTO] CORPORATE OFFICES > 2407 WEST 24TH STREET > KEARNEY NE 68845 > 308.236.8491 -------------------------------------------------------------------------------- [BUCKLE LOGO] www.buckle.com [PHOTO] BUCKLE 2001 > annual report >> -------------------------------------------------------------------------------- FASHION statement [PHOTO] -------------------------------------------------------------------------------- MISSION statement AT the BUCKLE, our mission is to create the most ENJOYABLE shopping EXPERIENCE possible for our GUESTS. -------------------------------------------------------------------------------- >> 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 2001, 2000 or 1999, and has no current plans for cash dividend payments. The number of record holders of the Company's common stock as of March 26, 2002 was 406. Based upon information from the principal market makers, the Company believes there are more than 4,000 beneficial owners. The last reported sales price of the Company's common stock on March 26, 2002 was $23.88. The following table lists the Company's quarterly market range for fiscal years 2001, 2000 and 1999.
2001 2000 1999 ---------------------------------------------------------------------------------------------- QUARTER HIGH LOW HIGH LOW HIGH LOW First 21.55 16.89 17.19 12.38 29.50 18.06 Second 20.59 17.30 14.44 10.81 32.56 19.50 Third 20.48 14.59 16.38 11.19 30.00 16.00 Fourth 22.50 17.41 21.13 15.00 16.81 12.56 -----------------------------------------------------------------------------------------------
> CORPORATE INFORMATION > BOARD OF DIRECTORS Date Founded Daniel J. Hirschfeld William D. Orr 1948 Chairman of the Board Robert E. Campbell Number of Employees Dennis H. Nelson President, Miller & Paine 5,500 President & Chief Executive Director of Development, Officer Madonna Foundation Stock Transfer Agent & Registrar UMB Bank, n.a. Karen B. Rhoads Bruce L. Hoberman P.O. Box 419226 Vice President of Finance, Business Consultant Kansas City, Missouri 64141-6226 Treasurer & Chief (816) 860-7000 Financial Officer David A. Roehr Vice President, Cabela's, Inc. Stock Exchange Listing Ralph M. Tysdal New York Stock Exchange Owner of McDonald's James E. Shada Trading Symbol: BKE restaurant franchises Executive Vice President of Sales Independent Public Accountants Bill L. Fairfield Deloitte & Touche, LLP Chairman, DreamField Omaha, Nebraska Capital Ventures Annual Meeting The Annual Meeting of Shareholders is > EXECUTIVE OFFICERS scheduled for 10:00 a.m. Thursday, May 30, 2002, at the Holiday Inn Kearney, Nebraska Dennis H. Nelson Kari G. Smith President & Chief Executive Vice President of Sales Form 10-K Officer A copy of the 10-K is available to shareholders Kyle L. Hanson without charge upon written request to: Karen B. Rhoads Corporate Secretary & General Karen B. Rhoads, Vice President of Finance Vice President of Finance, Counsel The Buckle, Inc. Treasurer & Chief P.O. Box 1480 Financial Officer Kearney, Nebraska 68848-1480 Brett P. Milkie Vice President of Leasing Trademarks James E. Shada BUCKLE, THE BUCKLE, BKLE, RECLAIM Executive Vice President Patricia K. Whisler and BKE are trademarks of The Buckle, Inc., of Sales Vice President of Gal's which is registered in the United States. Merchandising
-------------------------------------------------------------------------------- >> FINANCIAL HIGHLIGHTS (dollar amounts in thousands, except per share and selected operating data) --------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------- FEBRUARY 2 FEBRUARY 3 JANUARY 29 JANUARY 30 2002 2001 2000 1999 --------------------------------------------------------------------------------------------- INCOME STATEMENT DATA Net sales $387,638 $393,247 $375,526 $337,916 Income before income taxes 52,088 54,961 59,496 54,152 Income taxes 19,226 20,164 22,110 20,123 Net income before cumulative effect of change in accounting $ 32,862 $ 34,797 $ 37,386 $ 34,029 Diluted income per share $ 1.52 $ 1.61 $ 1.64 $ 1.47 Net income as a percentage of net sales 8.5% 8.8% 10.0% 10.1% BALANCE SHEET DATA Working capital $176,911 $135,836 $107,582 $104,035 Total assets $264,657 $230,533 $198,546 $186,113 Long term debt -- -- -- -- Stockholders' equity $233,702 $194,066 $163,260 $146,130 SELECTED OPERATING DATA Number of stores open at year end 295 274 248 222 Average sales per square foot $ 279 $ 309 $ 334 $ 344 Average sales per store (000's) $ 1,352 $ 1,482 $ 1,581 $ 1,603 Comparable store sales change -6.2% -6.0% 0.9% 15.4% ---------------------------------------------------------------------------------------------
[BAR CODE] no. 1 > The Buckle provides guest with the high-quality merchandise they expect. [PHOTOS] > TO OUR SHAREHOLDERS >> In today's competitive environment, we continue to find ways to distinguish the Buckle from other retailers and to emphasize our uniqueness in the specialty fashion marketplace. By keeping the focus on our service and selection, we fulfilled our Mission Statement, produced relatively consistent financial results and further strengthened our balance sheet. In addition, we have made progress toward the future and continue to develop our strong brand image, while controlling merchandise margins and expenses. Our NET SALES for the 52 weeks of fiscal 2001 were $387.6 MILLION, down 1.4% from the 53 weeks of fiscal 2000. Net income was $32.9 MILLION, or $1.52 per share, a 4.8% decrease from the prior fiscal year. Our net income to sales ratio of 8.5% was down slightly from 8.8% for fiscal 2000. AVERAGE STORE SALES WERE $1.352 MILLION and our average sales per square foot were $279 for the year. Our return on equity for fiscal 2001 was nearly 15% and our five-year average return on equity was 25%. We ended the year with $143.2 MILLION in cash and short-term investments. During fiscal 2001 the company repurchased 79,200 shares of its common stock at an average price of $16.12, pursuant to our corporate stock buy-back plan that was authorized by the board of directors in December of 2000. DENIM continues to be a niche market for the Buckle and our tradition was strong again in fiscal 2001, with the denim category accounting for nearly 29% OF TOTAL SALES. We grew existing brands, private label, and added new brands to the denim mix to produce a 7% INCREASE IN DENIM SALES for the fiscal year. Another department providing growth opportunity during fiscal 2001 was accessories. As a category, ACCESSORY SALES INCREASED MORE THAN 20% in fiscal 2001 compared to fiscal 2000 growing to over 11% as a percentage of fiscal 2001 net sales. Our UNIT SALES WERE UP 4% during fiscal 2001 compared to fiscal 2000, although our total dollar sales saw a decrease for the year. Average price points were down approximately 5% for fiscal 2001, due in part to the decline in footwear sales and price points, and from the increase in the accessory business described above, which is by nature a lower price point category. We are pleased to announce that Jim Shada, our Executive Vice President of Sales, returned to full-time status with the company in October of 2001. With the added leadership of Jim's position, together with Kari Smith, our Vice President of Sales, we are restructuring geographically with District, Regional and Area managers. We believe these changes will strengthen our support for store managers, assisting them and their sales teams toward even greater success, as we continue to build on the Buckle's reputation for great customer service. "IN EVERY AREA, I ATTRIBUTE THE BUCKLE'S SUCCESS TO THE STRENGTH OF OUR RELATIONSHIPS. THESE RELATIONSHIPS ARE BUILT ON THE TRUST AND LOYALTY WE HAVE ESTABLISHED WITH OUR MERCHANDISERS, VENDORS, LEASING PARTNERS, TEAMMATES AND GUESTS." Dennis H. Nelson, President & CEO [BAR CODE] no. 2 > One way to measure our success is through the eyes of our guests. [PHOTOS] We added Virginia to our list of states when we opened in Roanoke, one of 24 NEW STORES during fiscal 2001. In January of 2002 we strategically closed three under-performing stores, ending the fiscal year with 295 RETAIL LOCATIONS IN 37 STATES. Fiscal 2001 also brought 8 major store remodels. In fiscal 2002, we plan to open approximately 12-16 new stores, and remodel 9-12 stores. Over the last several months, we have been working with an award-winning national design firm to develop a completely NEW STORE LOOK. Our goals are to create a MEMORABLE AND CLEAR IMAGE of the Buckle store in our guests' minds, one that combines the core values of our brand with the energy and excitement of the Buckle shopping experience. The first store to feature our new architectural finishes, innovative fixtures, and enhanced merchandising layout will debut in June 2002. Our MIS department recently completed the rollout of a frame relay network for communications with our stores. During fiscal 2002 we'll realize the benefits of faster transaction times at the cash registers, and email and voice capabilities between the stores and corporate headquarters. This additional investment in store technology will continue to enhance the efficiencies of our store operations. During fiscal 2001, our online store, WWW.BUCKLE.COM, EXPERIENCED REWARDING GROWTH. This initiative absolutely demonstrates the power of partnership, as many Buckle team members coordinated their efforts in making this brand extension a reality. We are exploring additional growth and investment into our eCommerce initiative during fiscal 2002. We believe the site's ongoing development complements our physical store strategy. As we look to the Buckle's future, I am most enthusiastic about our team, an outstanding group of hardworking individuals. It takes many exceptional people, with their unwavering commitment to teamwork, to bring our company to its current accomplishments. I'd like to say a special "Thank You" to all these talented and energetic individuals, who carry out the Buckle Mission Statement each and every day by helping create the most enjoyable shopping experience possible for our guests. Let me also take this opportunity to express our appreciation for the confidence and loyalty of our Shareholders. We plan to build Shareholder value by enhancing our brand image and further differentiating ourselves from other retailers. The team focus on our Mission, combined with a strong balance sheet, will continue to set us apart and position us to take advantage of opportunities for future success. /s/ DENNIS H. NELSON Dennis H. Nelson President and CEO [BAR CODE] no. 3 > Dennis H. Nelson [PHOTO] > GUESTS >> Sometimes the Buckle's combination of people and product surprises first-time customers. They just don't expect fashion and service in one place. But to us, the concept is a natural result of our business values. Everything we do leads back to our guests. The tiniest details, the day-to-day effort, and all the advance planning come together whenever someone shops the Buckle. It's a unique experience we hope they always remember. So it's one we never forget. > TEAMMATES >> Our consistent success belongs to every single Buckle teammate. Passionate and energetic, these individuals each make outstanding contributions which are multiplied by the enthusiasm of their colleagues. In a spirit of creative enterprise, teammates from the home office to the sales floor work in concert toward common goals. Teamwork shapes our decisions. Collaboration defines our process. We believe this approach ensures a vibrant work environment and directly benefits the guests. > LEADERSHIP >> The Buckle has a history of loyalty. Over the years, talented people have worked hard to build the business, develop relationships, and mentor associates. Our teammates can't help but draw from that dedication. Performance is always rewarded, while internal promotions provide incentive and recognition for a job well done. Pulling together, reaching both individual and collective achievements, helps everyone become more successful. "GUESTS FEEL CONFIDENT WHEN THEY SHOP WITH PEOPLE THEY CAN TRUST. THE BEST WAY TO BUILD THAT TRUST IS THROUGH HARD WORK AND DEDICATION TO SERVICE. THESE ARE THE QUALITIES WE VALUE IN OUR TEAMMATES. AS A RESULT, OUR CUSTOMERS EXPERIENCE THE DIFFERENCE WHEN THEY SHOP AT THE BUCKLE." Kari Smith, Vice President of Sales [BAR CODE] no. 4 > In terms of the guest experience, our teammates are as important as our product. [PHOTOS] [PHOTO] -------------------------------------------------------------------------------- TEAM statement For us at the Buckle, CUSTOMER SERVICE isn't a concept. It's a COMMITMENT. Our TEAMMATES are focused, POSITIVE, and dedicated to this COMMON objective. [PHOTO] -------------------------------------------------------------------------------- BRAND statement VARIETY is the key to our BRAND STRATEGY. This provides FLEXIBILITY, allowing us to RESPOND quickly to change and DISTINGUISH ourselves in the marketplace. > PRODUCT >> Buckle guests trust us to deliver quality, selection, value, and exclusivity. In order to meet those expectations - with every single shopping experience - we must be agile enough to anticipate and act on trends. Because our buyers make purchases as a team, we're uniquely able to offer a head-to-toe look for all sorts of lifestyles, including Urban, All-American, Trend, and West Coast. Whether they're choosing a name brand or private label, customers feel as comfortable wearing our clothes as they do visiting our stores. > VENDORS >> Our buyers know exactly how to fine-tune the details, and vendors work hard to provide the special products we want. These relationships are forged over time, solidified with achievement and enhanced with mutual respect. Few other retailers expect and receive so much from their suppliers. But these exchanges are absolutely crucial to our brand-driven strategy. > DENIM >> Take our approach to denim, one that is consistently the Buckle's flagship category. It's a perfect example of how teamwork becomes fashion. From the cut to the fabric treatment to the stitching, we're engaged in all points of the process. While the products are in development with vendors, merchandisers work with store associates to maximize sales with display, fitting, and outfitting techniques. Then Marketing rolls out brand support. In the stores, what guests experience is a perfect fit, just the right denim look, and personal attention that makes them feel special. "THE DEPTH OF OUR SELECTION SERVES OUR GUESTS. THE BUCKLE IS UNIQUELY POSITIONED TO OFFER THE MOST DESIRABLE BRANDS - INCLUDING OUR OWN - ALL IN ONE STORE. VARIETY SUPPORTS AGILITY, SO WE'RE ABLE TO ADAPT QUICKLY TO EMERGING DESIGNERS, LOOKS, AND LABELS. A WIDE RANGE OF MERCHANDISE ALSO ENSURES VALUE AT ALL PRICE POINTS." Bob Carlberg, Men's Merchandiser [BAR CODE] no. 7 > When the look comes together, guests get excited. And that's what sets us apart. [PHOTOS] > GROWTH >> The Buckle considers growth a balanced strategy. We focus on clear goals such as brand development and marketing innovation, always mindful of the most effective ways to enhance our existing stores and expand in new markets. Only strength creates lasting value for our guests, teammates and shareholders. In the current economic environment, growth plans require a well-reasoned approach. This philosophy provides yet another way for us to distinguish ourselves in a competitive marketplace. > STORE DESIGN >> With a completely different look for new stores and remodels, we're laying a foundation for the future. Working with a nationally recognized design firm, the Buckle will more clearly translate its personality to the physical retail environment. New fixtures simplify merchandise presentations, featuring displays that improve visuals and better project product details. An overall eclectic atmosphere will reinforce our message of uniqueness. We embrace the coming change with enthusiasm, knowing that this evolution advances the goal of our Mission and strengthens the power of our brand. > BUCKLE.COM >> One of this year's most rewarding performances came from our online store. With a sensible financial commitment, we realized higher-than-expected sales. Based on this positive response, the web site has been identified as an area for future investment. Because our guests expect the virtual experience to be as unique as shopping Buckle stores, we are striving to enliven the functionality and diversify the inventory while continuing to provide excellent online service. "THE BUCKLE'S STRATEGY IS ONE OF REASONED AND STEADY GROWTH. THIS APPROACH ALLOWS US TO CONCENTRATE ON OUR STRENGTHS WITHOUT THE DISTRACTIONS OF A FINITE PLAN THAT DOESN'T ALLOW FLEXIBILITY. IN OTHER WORDS, WE PLAN TO EXPAND, CHANGE, AND GROW IN WAYS THAT PUT US IN THE BEST POSITION TO TAKE ADVANTAGE OF PROFITABLE OPPORTUNITIES FOR THE LONG TERM." Brett Milkie, Vice President of Leasing [BAR CODE] no. 8 > With a new store design, the Buckle is clarifying its brand statement. [ART WORK] [PHOTO] -------------------------------------------------------------------------------- STRATEGY statement Part of the EXCITEMENT in this industry is CHANGING with the times. We're committed to PROGRESS that builds on the HIGH standards our guests EXPECT. >> STORE LOCATIONS > After adding Virginia to our list of states, opening a total of 24 stores and strategically closing three locations, the Buckle finished the fiscal year with 295 retail locations in 37 states. [MAP OF THE UNITED STATES] AL 2 NC 6 AR 5 ND 3 AZ 5 NE 15* CA 6 NM 4 CO 10 OH 13 FL 3 OK 13 GA 3 OR 2 IA 20 PA 4 ID 5 SC 1 IL 16 SD 3 IN 12 TN 7 KS 15 TX 32 KY 5 UT 8 LA 7 VA 1 MI 18 WA 5 MN 10 WI 12 MO 12 WV 2 MS 4 WY 1 MT 5 * CORPORATE HEADQUARTERS 295 STORES IN 37 STATES -------------------------------------------------------------------------------- FINANCIAL statement The Buckle's NUMBERS reveal the STRENGTH of our EXPERIENCE and the power of our BRAND. Our financial position gives us the CONFIDENCE to seize future opportunities. -------------------------------------------------------------------------------- >> SELECTED FINANCIAL DATA (dollar amounts in thousands, except per share and selected operating data) --------------------------------------------------------------------------------
FISCAL YEARS ENDED ------------------------------------------------------------------------------------------------------------- FEBRUARY 2, FEBRUARY 3, JANUARY 29, JANUARY 30, JANUARY 31, 2002 2001 (a) 2000 1999 1998 ------------------------------------------------------------------------- INCOME STATEMENT DATA Net sales $ 387,638 $ 393,247 $ 375,526 $ 337,916 $ 267,921 Cost of sales (including buying, distribution and occupancy costs) 259,645 262,146 243,517 216,668 174,379 ------------------------------------------------------------------------- Gross profit 127,993 131,101 132,009 121,248 93,542 Selling expenses 69,786 69,635 64,876 59,557 49,040 General and administrative expenses 10,939 10,365 11,004 10,073 8,962 ------------------------------------------------------------------------- Income from operations 47,268 51,101 56,129 51,618 35,540 Other income 4,820 3,860 3,367 2,534 1,877 ------------------------------------------------------------------------- Income before income taxes and cumulative effect of change in accounting 52,088 54,961 59,496 54,152 37,417 Provision for income taxes 19,226 20,164 22,110 20,123 14,086 ------------------------------------------------------------------------- Income before cumulative effect of change in accounting 38,862 34,797 37,386 34,029 23,331 Cumulative effect of change in accounting, net of taxes -- (270)(b) -- -- -- ------------------------------------------------------------------------- Net income $ 32,862 $ 34,527 $ 37,386 $ 34,029 $ 23,331 ========================================================================= Basic income per share $ 1.59 $ 1.68 $ 1.72 $ 1.55 $ 1.10 ========================================================================= Diluted income per share $ 1.52 $ 1.61 $ 1.64 $ 1.47 $ 1.05 ========================================================================= SELECTED OPERATING DATA Stores open at end of period 295 274 248 222 199 Average sales per square foot, (gross sq. ft.) $ 279 $ 309 $ 334 $ 344 $ 300 Average sales per store (000's) $ 1,352 $ 1,482 $ 1,581 $ 1,603 $ 1,400 Comparable store sales change -6.2% -6.0% 0.9% 15.4% 18.6% BALANCE SHEET DATA Working capital $ 176,911 $ 135,836 $ 107,582 $ 104,035 $ 77,448 Total assets $ 264,657 $ 230,533 $ 198,546 $ 186,113 $ 144,460 Long term debt -- -- -- -- -- Stockholders' equity $ 233,702 $ 194,066 $ 163,260 $ 146,130 $ 107,881 -------------------------------------------------------------------------------------------------------------
(a) consists of 53 weeks (b) In Fiscal 2000, the Company changed its method of revenue recognition for layaway sales in accordance with the guidance and interpretations provided by the SEC's SAB No. 101-Revenue Recognition. [BAR CODE] no. 11 -------------------------------------------------------------------------------- >> 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.
PERCENTAGE OF NET SALES PERCENTAGE INCREASE FOR FISCAL YEARS ENDED (DECREASE) --------------------------------------------------------------------------------------------------------------------- FEBRUARY 2, FEBRUARY 3, JANUARY 29, FISCAL YEAR 2002 2001 2000 2000 TO 2001 1999 TO 2000 ------------------------------------------------------------------------------ INCOME STATEMENT DATA Net sales 100.0% 100.0% 100.0% -1.4% 4.7% Cost of sales (including buying, distribution and occupancy costs) 67.0% 66.7% 64.8% -1.0% 7.7% ------------------------------------------------------------------------------ Gross profit 33.0% 33.3% 35.2% -2.4% -0.7% Selling expenses 18.0% 17.7% 17.3% 0.2% 7.4% General and administrative expenses 2.8% 2.6% 2.9% 5.5% -5.8% ------------------------------------------------------------------------------ Income from operations 12.2% 13.0% 15.0% -7.5% -9.0% Other Income 1.2% 1.0% .9% 24.8% 14.7% ------------------------------------------------------------------------------ Income before income taxes 13.4% 14.0% 15.9% -5.2% -7.6% Provision for income taxes 4.9% 5.1% 5.9% -4.7% -8.8% ------------------------------------------------------------------------------ Net Income 8.5% 8.8% 10.0% -4.8% -6.9% ==============================================================================
> FISCAL 2001 COMPARED TO FISCAL 2000 >> Based upon the retail calendar, fiscal 2001 was a 52-week year compared to 53 weeks in fiscal 2000. Net sales decreased from $393.2 million in fiscal 2000 to $387.6 million in fiscal 2001, a 1.4 % decrease. Comparable store sales decreased by $22.4 million, or 6.2% for the 52 weeks ended February 2, 2002 compared to the same 52-week period in the prior year. The Company had 1.6% sales growth in fiscal 2001 that was attributable to the inclusion of a full year of operating results in fiscal 2001 for stores opened in fiscal 2000 and 4.5% from the opening of 24 new stores in fiscal 2001. The remaining 1.3% of the sales decrease came from $5.0 million in sales during the extra week of fiscal 2000. The Company's average retail price per piece of merchandise decreased $2.11 per piece in fiscal 2001 compared to fiscal 2000, primarily due to lower price points in nearly every category, as well as, from a decline in footwear sales as a percentage of net sales. Average sales per square foot decreased 9.7% from $309 to $279. Gross profit after buying, distribution and occupancy costs decreased $3.1 million in fiscal 2001 to $128.0 million, a 2.4% decrease. As a percentage of net sales, gross profit decreased from 33.3% in fiscal 2000 to 33.0% in fiscal 2001. The decrease was primarily attributable to higher occupancy costs partially offset by an improvement in the actual merchandise margins. Gross margin was also impacted by the increase in merchandise shrinkage which rose to 0.7% in fiscal 2001 compared to 0.6% in fiscal 2000. Selling expenses increased from $69.6 million for fiscal 2000 to $69.8 million for fiscal 2001, a 0.2% increase. Selling expenses as a percent of net sales increased to 18.0% for fiscal 2001 from 17.7% for fiscal 2000. The increase was primarily attributable to higher sales salaries and higher travel expenses as a percentage of net sales due to a decline in leverage provided by comparable store sales. [BAR CODE] no. 12 General and administrative expenses increased from $10.4 million in fiscal 2000 to $10.9 million in fiscal 2001, a 5.5% increase. As a percentage of net sales, general and administrative expense increased to 2.8% for fiscal 2001 from 2.6% for fiscal 2000. Increases in general and administrative expenses, as a percentage of net sales, resulted primarily from increases in travel as well as other expense categories due to a decline in leverage provided by comparable store sales. As a result of the above changes, the Company's income from operations decreased $3.8 million to $47.3 million for fiscal 2001, a 7.5% decrease compared to fiscal 2000. Income from operations was 12.2% as a percentage of net sales in fiscal 2001 compared to 13.0% in fiscal 2000. Other income for fiscal 2001 increased 24.8% from fiscal 2000 to $4.8 million. The increase is primarily due to additional interest income as well as income received from state tax incentive programs compared to fiscal 2000. Income tax expense as a percentage of pre-tax income was 36.9% in fiscal 2001 compared to 36.7% in fiscal 2000, bringing net income to $32.9 million for fiscal 2001 versus $34.5 million for fiscal 2000, a decrease of 4.8%. >FISCAL 2000 COMPARED TO FISCAL 1999 >> Based upon the retail calendar, fiscal 2000 was a 53-week year compared to 52 weeks in the prior year, giving retailers an extra week of sales. During fiscal 2000, net sales increased to $393.2 million from $375.5 million in fiscal 1999, a 4.7% increase. Comparable store sales decreased by $21.3 million, or 6.0% for the 52 weeks ended January 27, 2001 compared to the same 52-week period in the prior year. The Company had 2.8% sales growth in fiscal 2000 that was attributable to the inclusion of a full year of operating results in fiscal 2000 for stores opened in fiscal 1999 and 6.7% from the opening of 28 new stores in fiscal 2000. The change in the method of revenue recognition for layaway sales in accordance with the guidance and interpretations provided by the SEC's SAB No. 101-Revenue Recognition resulted in a decrease in comparable stores sales for fiscal 2000 of 0.2% compared to fiscal 1999. The remaining 1.4% of the sales increase came from $5.0 million in sales during the extra week of the fiscal year. The Company's average retail price of merchandise decreased $1.60 per piece in fiscal 2000 compared to fiscal 1999, primarily due to lower price points in knit tops, outerwear and footwear, as well as, from the decline in footwear sales as a percentage of net sales. Footwear accounted for 14.4% of fiscal 2000 sales versus 16.6% of fiscal 1999 sales. Average sales per square foot decreased 7.5% from $334 to $309. Gross profit after buying, distribution and occupancy costs decreased $0.9 million in fiscal 2000 to $131.1 million, a 0.7% decrease. As a percentage of net sales, gross profit decreased from 35.2% in fiscal 1999 to 33.3% in fiscal 2000. The decrease was primarily attributable to an increase in occupancy costs. A portion of the occupancy cost increase in fiscal 2000 resulted from higher depreciation costs due to the fiscal 1999 rollout of new point of sale systems to every store. Lower actual merchandise margins for fiscal 2000 compared to fiscal 1999 also contributed to the decline. Merchandise shrinkage decreased to ..6% in fiscal 2000 compared to .7% in fiscal 1999. Selling expenses increased from $64.9 million for fiscal 1999 to $69.6 million for fiscal 2000, a 7.4% increase. Selling expenses as a percent of net sales increased to 17.7% for fiscal 2000 from 17.3% for fiscal 1999. The increase was primarily attributable to higher sales salaries and higher selling supplies as a percentage of net sales due to a decline in leverage provided by comparable store sales. Sales salaries were also up in fiscal 2000 due to an increased pay structure for the majority of the sales staff compared to fiscal 1999. [BAR CODE] no.13 General and administrative expenses decreased from $11.0 million in fiscal 1999 to $10.4 million in fiscal 2000, a 5.8% decrease. As a percentage of net sales, general and administrative expense decreased to 2.6% for fiscal 2000 from 2.9% for fiscal 1999. Decreases in general and administrative expenses, as a percentage of net sales, resulted primarily from leverage provided by the restructuring of the Company's executive compensation plan. As a result of the above changes, the Company's income from operations decreased $5.0 million to $51.1 million for fiscal 2000 compared to $56.1 million for fiscal 1999, a 9.0% decrease. Income from operations was 13.0% as a percentage of net sales in fiscal 2000 compared to 15.0% in fiscal 1999. Other income for fiscal 2000 increased 14.7% from fiscal 1999 to $3.9 million. Other income in fiscal 2000 increased due to additional interest income and greater state tax incentives received compared to fiscal 1999. Income tax expense as a percentage of pre-tax income was 36.7% in fiscal 2000 compared to 37.2% in fiscal 1999. The decrease in the income tax percentage rate was primarily due to state tax incentives. > CRITICAL ACCOUNTING POLICIES AND ESTIMATES >> Management's Discussion and Analysis of Financial Condition and Results of Operations are based upon The Buckle, Inc.'s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires that management make estimates and judgments that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the financial statement date, and the reported amounts of revenue and expenses during the reporting period. The Company regularly evaluates its estimates, including those related to merchandise returns, inventory, bad debts, health care costs and income taxes. Management bases its estimates on past experience and on various other factors that are thought to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company's significant accounting policies are described in Note A to the audited financial statements, with certain critical policies listed below. 1. MERCHANDISE RETURNS. The Company reserves a liability for estimated merchandise returns at the end of the period. Customer returns could potentially exceed those reserved for, reducing future net sales results. 2. INVENTORY. Inventory is valued at the lower of cost or market. Cost is determined using the average cost method and management makes estimates to reserve for obsolescence and markdowns that could effect market value, based on assumptions regarding future demand and market conditions. Such judgments may have a material impact on current and future operating results and financial position. 3. BAD DEBTS. The Company books an allowance for doubtful accounts based upon historical data and current trends. Management believes the reserve is adequate; however, customers' ability to pay could deteriorate causing actual losses to exceed those anticipated in the allowance. 4. HEALTH CARE COSTS. The Company is self-funded for health and dental claims up to $60,000 per individual, per plan year. This plan covers eligible employees and management makes estimates at period end to record a reserve for future claims. The number and amount of claims submitted could vary from the amounts reserved, effecting current and future net earnings results. 5. INCOME TAXES. The Company records a deferred tax asset for future tax benefits for difference between book and tax revenue and expense recognition. If the Company is unable to realize all or part of its deferred tax asset in the future, an adjustment would be charged to income in the period such determination was made. [BAR CODE] no. 14 > 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 2001, 2000, and 1999 the Company's cash flow from operations was $43.4 million, $47.2 million, and $40.9 million, respectively. During fiscal 2001, 2000 and 1999, the Company also used cash for repurchasing shares of the Company's common stock. In fiscal 2001, the Company purchased 79,200 shares at a cost of $1.3 million. In fiscal 2000, the Company purchased 559,200 shares at a cost of $7.3 million and 1,520,220 shares in fiscal 1999 at a cost of $24.2 million. The Company has available an unsecured line of credit of $7.5 million and a $10.0 million letter of credit for foreign and domestic letters of credit, with Wells Fargo Bank Nebraska, N.A. 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 February 2, 2002, the Company's working capital was $176.9 million, including $101.9 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 immaterial borrowings during fiscal 2001, 2000 and fiscal 1999. The Company had no bank borrowings as of February 2, 2002. During fiscal 2001, 2000, and 1999, the Company invested $10.3 million, $13.4 million, and $18.6 million, respectively, in new store construction, store renovation and upgrading store technology, net of any construction allowances received from landlords. The Company also spent $0.4 million, $1.3 million, and $2.8 million, in fiscal 2001, 2000, and 1999, respectively, in capital expenditures for the corporate headquarters and distribution facility. During the second quarter of fiscal 1999, the Company also purchased a second corporate aircraft at a cost of $3.6 million. During fiscal 2002, the Company anticipates completing approximately 22 store construction projects, including approximately 12 new stores and approximately 10 stores to be remodeled and/or relocated. As of March 2002, leases for seven new stores have been signed, and leases for four 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 2001 was approximately $585,000, including construction costs of approximately $425,000 and inventory costs of approximately $160,000, net of payables. Management estimates that total capital expenditures during fiscal 2002 will be approximately $19.0 million, before landlord allowances, estimated to be $2.9 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. However, future conditions may reduce the availability of funds based upon factors such as a decrease in demand for the Company's product, change in product mix, competitive factors and general economic conditions as well as other risks and uncertainties. > CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS >> As described in the notes to the Company's financial statements, Note G, as referenced in the tables which follow, the Company has contractual obligations and commercial commitments that may affect the financial condition of the Company. Based on management's review of the terms and conditions of its contractual obligations and commercial commitments, there is no known trend, demand, commitment, event or uncertainty that is reasonably likely to occur which would have a material effect on the Company's financial condition or results of operations. In addition, the commercial obligations and commitments made by the Company are customary transactions which are similar to those of other comparable retail companies. [BAR CODE] no. 15 The following tables identify the material obligations and commitments as of February 2, 2002:
PAYMENTS DUE BY PERIOD --------------------------------------------------------------------------------------------------- Contractual Obligations Less than (dollar amounts in thousands) Total 1 year 1-3 years 4-5 years After 5 years Long term debt $ -- $ -- $ -- $ -- $ -- Operating Leases $177,189 $ 26,566 $ 48,058 $ 40,596 $ 61,969 -------------------------------------------------------------- Total contractual obligations $177,189 $ 26,566 $ 48,058 $ 40,596 $ 61,969 ============================================================== ---------------------------------------------------------------------------------------------------
AMOUNT OF COMMITMENT EXPIRATION PER PERIOD ------------------------------------------------------------------------------------------------------------- Other Commercial Commitments Total Amounts Less than (dollar amounts in thousands) Committed 1 year 1-3 years 4-5 years After 5 years Lines of Credit $ 7,500 $ 7,500 $ -- $ -- $ -- Letters of Credit $10,000 $10,000 $ -- $ -- $ -- -------------------------------------------------------------------- Total Commercial Commitments $17,500 $17,500 $ -- $ -- $ -- ==================================================================== -------------------------------------------------------------------------------------------------------------
> SEASONALITY AND INFLATION >> The Company's business is seasonal, with the holiday 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 2001, 2000, and 1999, 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. > 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, and 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. [BAR CODE] no. 16 -------------------------------------------------------------------------------- >> BALANCE SHEETS (dollar amounts in thousands, except share and per share amounts) --------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------ ASSETS FEBRUARY 2, FEBRUARY 3, 2002 2001 -------------------------- CURRENT ASSETS: Cash and cash equivalents $ 101,915 $ 69,155 Investments (Note B): Held-to-maturity 40,368 34,847 Available-for-sale 951 4,398 Accounts receivable, net of allowance of $250 and $250, respectively 2,021 2,068 Inventory 54,297 54,392 Prepaid expenses and other assets (Note E) 7,357 6,593 ------------------------ Total current assets 206,909 171,453 ------------------------ PROPERTY AND EQUIPMENT (Note C): 111,443 103,686 Less accumulated depreciation and amortization (57,151) (47,605) ------------------------ 54,292 56,081 ------------------------ OTHER ASSETS (Notes B, E and F) 3,456 2,999 ------------------------ $ 264,657 $ 230,533 ======================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts Payable $ 11,133 $ 13,703 Accrued employee compensation 10,755 11,753 Accrued store operating expenses 4,231 4,072 Gift certificates redeemable 2,482 2,199 Income taxes payable 1,397 3,890 ------------------------ Total current liabilities 29,998 35,617 ------------------------ DEFERRED COMPENSATION (Note H) 957 850 ------------------------ Total liabilities 30,955 36,467 ------------------------ COMMITMENTS (Notes D and G) STOCKHOLDERS' EQUITY (Note I): Common stock, authorized 100,000,000 shares of $.01 par value; issued and outstanding; 21,115,538 and 20,378,657 shares, respectively 211 204 Additional paid-in capital 19,320 13,006 Retained earnings 214,309 181,447 Unearned compensation - restricted stock (126) (620) Accumulated other comprehensive (loss) income (12) 29 ------------------------ Total stockholders' equity 233,702 194,066 ------------------------ $ 264,657 $ 230,533 ======================== ------------------------------------------------------------------------------------------------------
See notes to financial statements. [BAR CODE] no. 17
----------------------------------------------------------------------------------------------- >> STATEMENTS OF INCOME (dollar amounts in thousands, except per share amounts) ----------------------------------------------------------------------------------------------- FISCAL YEARS ENDED ----------------------------------------------------------------------------------------------- FEBRUARY 2, FEBRUARY 3, JANUARY 29, 2002 2001 2000 ----------------------------------------------- SALES, Net of returns and allowances of $28,278, $28,203 and $26,420, respectively $ 387,638 $ 393,247 $ 375,526 COST OF SALES (Including buying, distribution and occupancy costs) 259,645 262,146 243,517 ----------------------------------------------- Gross profit 127,993 131,101 132,009 ----------------------------------------------- OPERATING EXPENSES: Selling 69,786 69,635 64,876 General and administrative 10,939 10,365 11,004 ----------------------------------------------- 80,725 80,000 75,880 ----------------------------------------------- INCOME FROM OPERATIONS 47,268 51,101 56,129 OTHER INCOME, Net 4,820 3,860 3,367 ----------------------------------------------- INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING 52,088 54,961 59,496 PROVISION FOR INCOME TAXES (Note E) 19,226 20,164 22,110 ----------------------------------------------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING 32,862 34,797 37,386 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING, net of taxes (Note A) - (270) - ----------------------------------------------- NET INCOME $ 32,862 $ 34,527 $ 37,386 ----------------------------------------------- BASIC INCOME PER SHARE (Note J): Income before cumulative effect of change in accounting $ 1.59 $ 1.69 $ 1.72 Cumulative effect of change in accounting, net of taxes - (0.01) - ----------------------------------------------- Net income $ 1.59 $ 1.68 $ 1.72 ----------------------------------------------- DILUTED INCOME PER SHARE (Note J): Income before cumulative effect of change in accounting $ 1.52 $ 1.63 $ 1.64 Cumulative effect of change in accounting, net of taxes - (0.02) - ----------------------------------------------- Net income $ 1.52 $ 1.61 $ 1.64 -----------------------------------------------
See notes to financial statements. [BAR CODE] no. 18 -------------------------------------------------------------------------------- >> STATEMENTS OF STOCKHOLDERS' EQUITY (dollar amounts in thousands) --------------------------------------------------------------------------------
ACCUMULATED OTHER ADDITIONAL COMPREHENSIVE COMMON PAID-IN RETAINED UNEARNED INCOME COMPREHENSIVE STOCK CAPITAL EARNINGS COMPENSATION (LOSS) TOTAL INCOME ------------------------------------------------------------------------------------------------------------------------------------ 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 Comprehensive income: Net income -- -- 34,527 -- -- 34,527 $ 34,527 Unrealized gain on available-for-sale securities, net of taxes of $142 -- -- -- -- 236 236 236 --------- Total comprehensive income $ 34,763 ========= Common stock (197,036 shares) issued on exercise of stock options 2 1,485 -- -- -- 1,487 Restricted stock issuance (14,792 shares) 1 255 -- -- -- 256 Amortization of restricted stock issuance -- -- -- 171 -- 171 Common stock (559,200 shares) purchased and retired (6) (7,299) -- -- -- (7,305) Tax benefit related to exercise of employee stock options -- 1,434 -- -- -- 1,434 -------------------------------------------------------------------------------------- BALANCE, February 3, 2001 204 13,006 181,447 (620) 29 194,066 Comprehensive income: Net income -- -- 32,862 -- -- 32,862 $ 32,862 Unrealized loss on available-for-sale securities, net of taxes of $24 -- -- -- -- (41) (41) (41) --------- Total comprehensive income $ 32,821 ========= Common stock (869,272 shares) issued on exercise of stock options 9 3,900 -- -- -- 3,909 Amortization of restricted stock issuance -- -- -- 126 -- 126 Forfeited restricted stock (53,191 shares) (1) (1,113) -- 368 -- (746) Common stock (79,200 shares) purchased and retired (1) (1,280) -- -- -- (1,281) Tax benefit related to exercise of employee stock options -- 4,807 -- -- -- 4,807 ------------------------------------------------------------------------------------ BALANCE, February 2, 2002 $ 211 $ 19,320 $214,309 $ (126) $ (12) $233,702 ==================================================================================== See notes to financial statements.
[BAR CODE] no. 19 -------------------------------------------------------------------------------- >> STATEMENTS OF CASH FLOWS (dollar amounts in thousands) --------------------------------------------------------------------------------
FISCAL YEARS ENDED --------------------------------------------------------------------------------------------------------- FEBRUARY 2, FEBRUARY 3, JANUARY 29, 2002 2001 2000 ---------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 32,862 $ 34,527 $ 37,386 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation 12,007 11,696 9,624 Amortization of unearned compensation - restricted stock 126 171 264 Forfeiture of restricted stock (746) -- -- Deferred taxes (307) (296) (545) Loss on disposal of assets 512 455 902 Cumulative effect of change in accounting, net of taxes -- 270 -- Changes in operating assets and liabilities: Accounts receivable 47 (238) 550 Inventory 95 1,693 (5,634) Prepaid expenses (459) (3,029) 1,331 Accounts payable (2,570) (2,470) (1,044) Accrued employee compensation (998) 337 (2,576) Accrued store operating expenses 159 581 174 Gift certificates redeemable 283 274 332 Deferred compensation 107 408 442 Income taxes payable 2,314 2,822 (269) ---------------------------------------- Net cash flows from operating activities 43,432 47,201 40,937 ---------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (10,734) (14,690) (24,963) Proceeds from sale of property and equipment 4 25 113 (Increase) decrease in other assets (431) (261) 580 Purchase of investments (21,973) (19,551) (33,150) Proceeds from maturities of investments 19,834 25,044 15,150 ---------------------------------------- Net cash flows from investing activities (13,300) (9,433) (42,270) ---------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the exercise of stock options 3,909 1,487 1,076 Purchases of common stock (1,281) (7,305) (24,243) ---------------------------------------- Net cash flows from financing activities 2,628 (5,818) (23,167) ---------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 32,760 31,950 (24,500) CASH AND CASH EQUIVALENTS, Beginning of year 69,155 37,205 61,705 ---------------------------------------- CASH AND CASH EQUIVALENTS, End of year $ 101,915 $ 69,155 $ 37,205 =======================================
See notes to financial statements. [BAR CODE] no. 20 -------------------------------------------------------------------------------- >> NOTES TO FINANCIAL STATEMENTS (dollar amounts 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 2000 represents the 53-week period ended February 3, 2001 and fiscal 2001 and 1999 represent the 52-week periods ended February 2, 2002 and January 29, 2000, respectively. > NATURE OF OPERATIONS >> The Company is a retailer of medium to better priced casual apparel, footwear and accessories for fashion conscious young men and women operating 295 stores located in 37 states throughout the central, northwestern and southern regions of the United States, as of February 2, 2002. During fiscal 2001, the Company opened twenty-four new stores, substantially renovated eight stores and closed three stores. During fiscal 2000, the Company opened twenty-eight new stores, substantially renovated eleven stores, and closed two stores. During fiscal 1999, the Company opened twenty-seven new stores, substantially renovated ten 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 buildings, which have estimated useful lives of 31.5 to 39 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 $3,706, $3,985 and $4,150 for fiscal years 2001, 2000 and 1999, respectively. > 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 [BAR CODE] no. 21 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; which include 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. > 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 >> Comprehensive income consists of net income and unrealized gains and losses on available-for-sale securities. 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 stock holders' equity, net of related income taxes. > ACCOUNTING PRONOUNCEMENTS >> Effective at the beginning of fiscal 2001, the Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Under SFAS No. 133, certain contracts that were not formerly considered derivatives may now meet the definition of a derivative. The adoption of SFAS No. 133 did not have a significant impact on the financial position, results of operations, or cash flows of the Company. In June 2001, the Financial Accounting Standards Board ("FASB") approved the issuance of SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. These standards establish accounting and reporting for business combinations. SFAS No. 141 requires all business combinations entered into subsequent to June 30, 2001 to be accounted for using the purchase method of accounting. SFAS No. 142 provides that goodwill and other intangible assets with indefinite lives will not be amortized, but will be tested for impairment on an annual basis. SFAS No. 142 is effective for the Company beginning February 3, 2002. The Company does not believe the adoption of SFAS No.'s 141 and 142 will have a significant impact on the financial position, results of operations, or cash flows for the Company. In June 2001, the FASB approved the issuance of SFAS No. 143, Accounting for Asset Retirement Obligations. This Statement addresses financial accounting and reporting obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 is effective for the Company beginning February 2, 2003. The Company does not believe the adoption of SFAS No. 143 will have a significant impact on the financial position, results of operations, or cash flows of the Company. In August 2001, the FASB approved the issuance of SFAS No. 144, Accounting for the Impairment and Disposal of Long-Lived Assets. This Statement replaces SFAS No. 121, Accounting for Impairment or Disposal of Long-Lived Assets, and replaces the provisions of APB Opinion No. 30, Reporting the Results of [BAR CODE] no. 22 -------------------------------------------------------------------------------- >> NOTES TO FINANCIAL STATEMENTS (dollar amounts in thousands, except share and per share amounts) -------------------------------------------------------------------------------- Operations-Reporting the Effects of Disposal of a Segment of a Business for the disposal of segments of a business. The Statement develops one accounting model for long-lived assets to be disposed of by sale and broadens the reporting of discontinued operations. SFAS No. 144 is effective for the Company beginning February 3, 2002. The Company does not believe the adoption of SFAS No. 144 will have a significant impact on the financial position, results of operations, or cash flows of the Company. > CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING >> On January 30, 2000, the Company changed its revenue recognition policy related to layaway sales in accordance with the guidance and interpretations provided by the SEC's Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition. This SAB affected the Company's recognition of layaway sales, which requires recognition of revenue from sales made under its layaway program upon delivery of the merchandise to the customer. In the first quarter of fiscal 2000, the Company recorded a $270 cumulative effect adjustment for the change in this accounting principle in accordance with APB Opinion No. 20, Accounting Changes. If SAB No. 101 had been adopted prior to fiscal 2000, the net income for fiscal 1999 would have been $37,408, versus the $37,386 as reported. > RECLASSIFICATION >> Certain reclassifications have been made to 2000 balances to conform to the 2001 presentation. > B. INVESTMENTS The following is a summary of investments as of February 3, 2002: GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE -------------------------------------------------------------------------------- Available-for-Sale Securities: U.S. corporate securities $ 970 $ 11 $ (30) $ 951 =============================================== Held-to-Maturity Securities: State and municipal bonds $ 37,823 $ 572 $ (125) $ 38,270 U.S. corporate bonds 248 -- (3) 245 U.S. treasuries 2,297 2 (25) 2,274 ----------------------------------------------- $ 40,368 $ 574 $ (153) $ 40,789 =============================================== Trading Securities: Mutual funds $ 1,190 $ -- $ (233) $ 957 =============================================== [BAR CODE] no. 23 The following is a summary of investments as of February 3, 2001:
GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ----------------------------------------------------------------------------------------------------------- Available-for-Sale Securities: U.S. corporate securities $ 4,352 $ 46 $ -- $ 4,398 ============================================================= Held-to-Maturity Securities: State and municipal bonds $ 33,685 $ 290 $ (210) $ 33,765 U.S. corporate bonds 1,017 2 (11) 1,008 U.S. treasuries 145 -- -- 145 ------------------------------------------------------------- $ 34,847 $ 292 $ (221) $ 34,918 ============================================================= Trading Securities: Mutual funds $ 926 $ -- $ (76) $ 850 =============================================================
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). > C. PROPERTY AND EQUIPMENT A summary of the cost of property and equipment follows: ----------------------------------------------------------------- FEBRUARY 2, FEBRUARY 3, 2002 2001 ------------------------------ Land $ 917 $ 917 Buildings and improvements 8,436 8,343 Office equipment 2,969 2,791 Transportation equipment 7,758 7,758 Leasehold improvements 39,060 35,452 Furniture and fixtures 47,269 43,022 Shipping/receiving equipment 4,191 4,152 Screenprinting equipment 102 102 Construction-in-progress 741 1,149 ----------------------------- $ 111,443 $ 103,686 ============================= ----------------------------------------------------------------- [BAR CODE] no. 24 -------------------------------------------------------------------------------- >> NOTES TO FINANCIAL STATEMENTS (dollar amounts in thousands, except share and per share amounts) -------------------------------------------------------------------------------- > D. FINANCING ARRANGEMENTS The Company has available an unsecured line of credit of $7.5 million and a $10 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 February 2, 2002 and February 3, 2001. There were immaterial bank borrowings during fiscal 2001, 2000 and 1999. The Company had outstanding letters of credit totaling $621 and $857 at February 2, 2002 and February 3, 2001, respectively. > E. INCOME TAXES The provision for income taxes consists of: FISCAL YEAR -------------------------------------------------------------------------------- 2001 2000 1999 ----------------------------------- Current: Federal $ 16,214 $ 17,454 $ 19,247 State 3,319 3,006 3,408 Deferred (307) (296) (545) ----------------------------------- Total $ 19,226 $ 20,164 $ 22,110 =================================== 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 -------------------------------------------------------------------------------- 2001 2000 1999 ----------------------------------- Statutory rate 35.0% 35.0% 35.0% State income tax effect 4.3 3.9 4.3 Tax exempt interest income (2.5) (1.8) (1.8) Expenses not deductible 0.1 0.1 0.1 Benefits of state tax credits -- (0.5) (0.4) ----------------------------------- Effective tax rate 36.9% 36.7% 37.2% =================================== [BAR CODE] no. 25 Deferred tax assets and liabilities are comprised of the following: -------------------------------------------------------------------------------- FEBRUARY 2, FEBRUARY 3, 2002 2001 ----------------------------- Deferred tax assets (liabilities): Stock-based compensation $ 974 $ 1,406 Inventory 927 850 Accrued employee compensation 468 420 Property and equipment 357 74 Accrued store operating costs 320 45 Gift certificates redeemable 133 121 Allowance for doubtful accounts 94 94 Unrealized loss on trading securities 88 44 Unrealized loss (gain) on available-for-sale securities 7 (17) ----------------------------- $ 3,368 $ 3,037 ============================= At February 2, 2002 and February 3, 2001, respectively, the net current deferred tax assets of $2,144 and $1,839 are classified in prepaid expenses and other assets and the net noncurrent deferred tax assets of $1,224 and $1,198 are classified in other assets. Cash paid for income taxes was $17,449, $17,187 and $19,814 in fiscal years 2001, 2000 and 1999, respectively. > F. RELATED PARTY TRANSACTIONS Included in other assets is a note receivable of $795 and $765 at February 2, 2002 and February 3, 2001, 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 2014. 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 2001, 2000 and 1999 was $25,650, $22,326 and $18,710, 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 2001, 2000 and 1999 were $821, $1,268 and $2,318, respectively. Total future minimum rental commitments under these operating leases are as follows: FISCAL YEAR --------------------------------------------------------- 2002 $ 26,566 2003 25,219 2004 22,839 2005 21,278 2006 19,318 Thereafter 61,969 ---------- Total minimum payments required $ 177,189 ========== --------------------------------------------------------- [BAR CODE] no. 26 -------------------------------------------------------------------------------- >> NOTES TO FINANCIAL STATEMENTS (dollar amounts in thousands, except share and per share amounts) -------------------------------------------------------------------------------- > 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 $561, $550 and $601 for fiscal years 2001, 2000 and 1999, 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 were $65, $110 and $182 for fiscal years 2001, 2000 and 1999, respectively. > 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 February 2, 2002, 259,218 shares of common stock were available for grant under the various option plans of which no shares were 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. Due to officers terminating their employment with the Company in 2001 prior to the vesting of the restricted common stock awarded pursuant to this plan, unearned compensation was reduced $368 and compensation expense was reduced $325 in fiscal 2001 for previously amortized compensation expense. Pursuant to the 1998 Management Incentive Plan, compensation expense of $256 associated with the fiscal 1999 bonus was recorded as accrued employee compensation at January 29, 2000. During fiscal year 2000, the Company granted 14,792 shares of restricted common stock related to this amount upon approval of the Board of Directors. There was no stock compensation expense for the years ended February 2, 2002 or February 3, 2001. Due to officers terminating their employment with the Company in 2001 prior to the full vesting of the restricted common stock awarded pursuant to this plan, compensation expense was reduced $421 in fiscal 2001 for previously recognized compensation expense. 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 $126, $171 and $519 for the fiscal years ended 2001, 2000 and 1999, 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 as follows: [BAR CODE] no. 27 -------------------------------------------------------------------------------- 2001 2000 1999 ---------------------------------------------------- Net income As reported $32,862 $34,527 $37,386 Pro forma $29,236 $30,641 $31,854 Basic income per share As reported $ 1.59 $ 1.68 $ 1.72 Pro forma $ 1.41 $ 1.49 $ 1.46 Diluted income per share As reported $ 1.52 $ 1.61 $ 1.64 Pro forma $ 1.35 $ 1.43 $ 1.40 -------------------------------------------------------------------------------- The weighted average fair value of options granted during the year under the SFAS No. 123 methodology was $13.76, $12.39 and $17.87 per option for fiscal 2001, 2000 and 1999, 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: ---------------------------------------------------------------------------- 2001 2000 1999 ------------------------------------------- Risk-free interest rate 5.00% 6.00% 6.00% Dividend yield 0.00% 0.00% 0.00% Expected volatility 54.0% 60.0% 60.0% Expected life (years) 7.0 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:
----------------------------------------------------------------------------------------------------------- 2001 2000 1999 ----------------------------------------------------------------------------------------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE NUMBER PRICE NUMBER PRICE NUMBER PRICE Outstanding - beginning of year 4,421,641 $13.54 4,163,380 $13.01 3,905,746 $11.09 Granted 447,040 19.73 500,375 16.00 483,540 26.05 Expired/terminated (592,274) 21.36 (45,078) 23.94 (26,094) 26.37 Exercised (869,272) 4.50 (197,036) 7.55 (199,812) 5.38 --------------------------------------------------------------------------- Outstanding - end of year 3,407,135 $15.29 4,421,641 $13.54 4,163,380 $13.01 =========================================================================== -----------------------------------------------------------------------------------------------------------
[BAR CODE] no. 28 -------------------------------------------------------------------------------- >> NOTES TO FINANCIAL STATEMENTS (dollar amounts in thousands, except share and per share amounts) -------------------------------------------------------------------------------- There were 2,011,127; 2,765,205; and 2,743,868 options exercisable at February 2, 2002, February 3, 2001 and January 29, 2000, respectively. The following table summarizes information about stock options outstanding as of February 2, 2002:
------------------------------------------------------------------------------------------------------------ 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 $ 4.167 $ 4.750 236,375 3.00 years $ 4.59 236,375 $ 4.59 4.958 5.583 217,575 2.00 5.42 217,575 5.42 6.000 6.667 298,303 3.81 6.32 298,303 6.32 8.500 9.292 747,114 3.08 9.13 747,114 9.13 11.500 17.010 406,593 8.20 16.44 30,296 16.54 17.188 23.250 1,102,595 6.92 20.95 382,584 21.84 26.750 34.083 398,580 6.80 28.48 98,880 33.72 --------------------------------------------------------------------------- 3,407,135 5.36 $ 15.29 2,011,127 $ 11.59 =========================================================================== ------------------------------------------------------------------------------------------------------------
> J. EARNINGS PER SHARE The following table provides a reconciliation between basic and diluted earnings per share (amounts in thousands except per share amounts):
--------------------------------------------------------------------------------------------------------------------------- 2001 2000 1999 --------------------------------------------------------------------------------------------------------------------------- WEIGHTED PER WEIGHTED PER WEIGHTED PER AVERAGE SHARE AVERAGE SHARE AVERAGE SHARE INCOME SHARES AMOUNT INCOME SHARES AMOUNT INCOME SHARES AMOUNT BASIC EPS Net income $32,862 20,733 $1.59 $34,527 20,540 $1.68 $37,386 21,777 $1.72 EFFECT OF DILUTIVE SECURITIES Stock Options -- 853 (0.07) -- 851 (0.07) -- 1,076 (0.08) --------------------------------------------------------------------------------------------------- DILUTED EPS $32,862 21,586 $1.52 $34,527 21,391 $1.61 $37,386 22,853 $1.64 ===================================================================================================
[BAR CODE] no. 29 Options to purchase 1,403,250, 1,982,233 and 977,288 shares of common stock in fiscal 2001, 2000 and 1999, respectively, are not included in the computation of diluted earnings per share because the options would be considered anti-dilutive. > K. SEGMENT INFORMATION The Company is a retailer of medium to better priced casual apparel, footwear and accessories. The Company operates 295 stores located in 37 states throughout the central, northwestern and southern regions of the United States at February 2, 2002. 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 2001 2000 1999 Denims 28.8% 26.6% 25.0% Slacks/Casual Bottoms 5.0 5.4 4.3 Tops (including sweaters) 33.5 32.2 34.0 Sportswear/Fashion Clothes 5.7 6.5 7.8 Outerwear 2.9 3.3 2.7 Accessories 11.0 9.1 7.1 Footwear 11.8 14.4 16.6 Little Guys/Gals 1.0 2.2 2.4 Other 0.3 0.3 0.1 ------------------------------------ 100.0% 100.0% 100.0% ==================================== ------------------------------------------------------------------------- [BAR CODE] no. 30 -------------------------------------------------------------------------------- >> NOTES TO FINANCIAL STATEMENTS (dollar amounts in thousands, except share and per share amounts) -------------------------------------------------------------------------------- > L. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial information for fiscal 2001 and 2000 are as follows:
QUARTER ------------------------------------------------------------------------------------------ FISCAL 2001 FIRST SECOND THIRD FOURTH Net sales $ 76,439 $ 78,596 $111,142 $121,461 Gross profit $ 22,853 $ 22,185 $ 38,730 $ 44,225 Net income $ 4,239 $ 3,909 $ 11,021 $ 13,693 Basic income per share $ 0.21 $ 0.19 $ 0.53 $ 0.65 Diluted income per share $ 0.20 $ 0.18 $ 0.51 $ 0.63 ------------------------------------------------------------------------------------------
QUARTER --------------------------------------------------------------------------------------------------- FISCAL 2000 FIRST SECOND THIRD FOURTH Net sales $ 78,501 $ 77,111 $ 114,161 $ 123,474 Gross profit $ 23,931 $ 22,117 $ 39,818 $ 45,235 Income before cumulative effect of change in accounting $ 4,866 $ 3,770 $ 11,605 $ 14,556 Net income $ 4,596 $ 3,770 $ 11,605 $ 14,556 Basic income per share: Income before cumulative effect of change in accounting $ 0.24 $ 0.18 $ 0.56 $ 0.71 Net income $ 0.22 $ 0.18 $ 0.56 $ 0.71 Diluted income per share: Income before cumulative effect of change in accounting $ 0.23 $ 0.18 $ 0.54 $ 0.68 Net income $ 0.21 $ 0.18 $ 0.54 $ 0.68 ---------------------------------------------------------------------------------------------------
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. [BAR CODE] no. 31 -------------------------------------------------------------------------------- >> INDEPENDENT AUDITOR'S REPORT -------------------------------------------------------------------------------- To the Board of Directors and Stockholders of The Buckle, Inc. Kearney, Nebraska We have audited the accompanying balance sheets of The Buckle, Inc. (the Company), as of February 2, 2002 and February 3, 2001, and the related statements of income, stockholders' equity and cash flows for each of the three fiscal years in the period ended February 2, 2002. 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 February 2, 2002 and February 3, 2001, and the results of its operations and its cash flows for each of the three fiscal years in the period ended February 2, 2002, in conformity with accounting principles generally accepted in the United States of America. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Omaha, Nebraska March 4, 2002 [BAR CODE] no. 32