0000885245-20-000034.txt : 20200910 0000885245-20-000034.hdr.sgml : 20200910 20200910150544 ACCESSION NUMBER: 0000885245-20-000034 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 55 CONFORMED PERIOD OF REPORT: 20200801 FILED AS OF DATE: 20200910 DATE AS OF CHANGE: 20200910 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BUCKLE INC CENTRAL INDEX KEY: 0000885245 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FAMILY CLOTHING STORES [5651] IRS NUMBER: 470366193 STATE OF INCORPORATION: NE FISCAL YEAR END: 0130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12951 FILM NUMBER: 201168646 BUSINESS ADDRESS: STREET 1: 2407 W 24TH ST CITY: KEARNEY STATE: NE ZIP: 68847 BUSINESS PHONE: 3082368491 MAIL ADDRESS: STREET 1: P O BOX 1480 CITY: KEARNEY STATE: NE ZIP: 68848-1480 10-Q 1 bke-20200801.htm THE BUCKLE, INC. 10-Q bke-20200801
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended August 1, 2020
o 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: 001-12951
THE BUCKLE, INC.
(Exact name of Registrant as specified in its charter)
Nebraska47-0366193
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
 2407 West 24th Street, Kearney, Nebraska  68845-4915
(Address of principal executive offices)     (Zip Code)
Registrant's telephone number, including area code: (308) 236-8491
____________________________________________________________________
(Former name, former address, and former fiscal year if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $0.01 par valueBKENew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for a shorter period that the registrant was required to submit such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o; Accelerated filer þ;
Non-accelerated filer o; Smaller reporting company o;
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ
The number of shares outstanding of the Registrant's Common Stock, $0.01 par value, as of September 4, 2020, was 49,407,731.



THE BUCKLE, INC.

FORM 10-Q
INDEX

2


THE BUCKLE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands Except Share and Per Share Amounts)
(Unaudited)
ASSETSAugust 1,
2020
February 1,
2020
CURRENT ASSETS:  
Cash and cash equivalents$265,714 $220,969 
Short-term investments12,637 12,532 
Receivables2,394 3,136 
Inventory116,479 121,258 
Prepaid expenses and other assets20,388 20,935 
Total current assets417,612 378,830 
PROPERTY AND EQUIPMENT451,899 452,205 
Less accumulated depreciation and amortization(345,820)(338,357)
106,079 113,848 
 
OPERATING LEASE RIGHT-OF-USE ASSETS305,814 350,088 
LONG-TERM INVESTMENTS16,536 15,863 
OTHER ASSETS9,782 9,261 
Total assets$855,823 $867,890 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
CURRENT LIABILITIES:  
Accounts payable$48,142 $26,491 
Accrued employee compensation9,391 22,929 
Accrued store operating expenses21,579 17,837 
Gift certificates redeemable12,611 15,319 
Current portion of operating lease liabilities81,427 87,314 
Income taxes payable 2,751 
Total current liabilities173,150 172,641 
DEFERRED COMPENSATION16,536 15,863 
NON-CURRENT OPERATING LEASE LIABILITIES251,830 290,238 
Total liabilities441,516 478,742 
COMMITMENTS
STOCKHOLDERS’ EQUITY:  
Common stock, authorized 100,000,000 shares of $0.01 par value; 49,407,731 and 49,205,681 shares issued and outstanding at August 1, 2020 and February 1, 2020 respectively
494 492 
Additional paid-in capital154,517 152,258 
Retained earnings259,296 236,398 
Total stockholders’ equity414,307 389,148 
Total liabilities and stockholders’ equity$855,823 $867,890 

See notes to unaudited condensed consolidated financial statements.
3


THE BUCKLE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands Except Per Share Amounts)
(Unaudited)
 Thirteen Weeks EndedTwenty-Six Weeks Ended
 August 1,
2020
August 3,
2019
August 1,
2020
August 3,
2019
SALES, Net of returns and allowances$216,025 $203,817 $331,438 $405,130 
COST OF SALES (Including buying, distribution, and occupancy costs)
122,643 125,120 211,231 249,780 
Gross profit93,382 78,697 120,207 155,350 
OPERATING EXPENSES: 
Selling38,257 48,535 71,761 95,144 
General and administrative9,593 10,560 19,096 21,870 
 47,850 59,095 90,857 117,014 
INCOME FROM OPERATIONS45,532 19,602 29,350 38,336 
OTHER INCOME, Net404 2,086 978 3,341 
INCOME BEFORE INCOME TAXES45,936 21,688 30,328 41,677 
INCOME TAX EXPENSE11,254 5,314 7,430 10,211 
NET INCOME$34,682 $16,374 $22,898 $31,466 
EARNINGS PER SHARE:  
Basic$0.71 $0.34 $0.47 $0.65 
Diluted$0.71 $0.34 $0.47 $0.65 
Basic weighted average shares48,714 48,550 48,719 48,551 
Diluted weighted average shares48,913 48,760 48,918 48,747 

See notes to unaudited condensed consolidated financial statements.
4


THE BUCKLE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in Thousands Except Share and Per Share Amounts)
(Unaudited)
 Number
of Shares
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Total
FISCAL 2020     
BALANCE, May 3, 202049,408,181 $494 $152,841 $224,614 $377,949 
Net income   34,682 34,682 
Issuance of non-vested stock, net of forfeitures
(450)    
Amortization of non-vested stock grants, net of forfeitures
  1,676  1,676 
BALANCE, August 1, 202049,407,731 $494 $154,517 $259,296 $414,307 
BALANCE, February 2, 202049,205,681 $492 $152,258 $236,398 $389,148 
Net income   22,898 22,898 
Issuance of non-vested stock, net of forfeitures
227,050 2 (2)  
Amortization of non-vested stock grants, net of forfeitures
  2,633  2,633 
Common stock purchased and retired
(25,000) (372) (372)
BALANCE, August 1, 202049,407,731 $494 $154,517 $259,296 $414,307 
FISCAL 2019     
BALANCE, May 5, 201949,231,625 $492 $149,860 $247,606 $397,958 
Net income   16,374 16,374 
 Dividends paid on common stock, ($0.25 per share)
   (12,306)(12,306)
Issuance of non-vested stock, net of forfeitures
(3,262)    
Amortization of non-vested stock grants, net of forfeitures
  1,235  1,235 
Common stock purchased and retired
(4,552) (68) (68)
BALANCE, August 3, 201949,223,811 $492 $151,027 $251,674 $403,193 
BALANCE, February 3, 201949,017,395 $490 $148,564 $244,823 $393,877 
Net income   31,466 31,466 
 Dividends paid on common stock, ($0.50 per share)
   (24,615)(24,615)
Issuance of non-vested stock, net of forfeitures
210,968 2 (2)  
Amortization of non-vested stock grants, net of forfeitures
  2,533  2,533 
Common stock purchased and retired
(4,552) (68) (68)
BALANCE, August 3, 201949,223,811 $492 $151,027 $251,674 $403,193 

See notes to unaudited condensed consolidated financial statements.
5


THE BUCKLE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
 Twenty-Six Weeks Ended
 August 1,
2020
August 3,
2019
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income$22,898 $31,466 
Adjustments to reconcile net income to net cash flows from operating activities:
  
Depreciation and amortization11,010 12,427 
Amortization of non-vested stock grants, net of forfeitures2,633 2,533 
Deferred income taxes(632)(608)
Other58 279 
Changes in operating assets and liabilities:  
Receivables1,278 534 
Inventory4,779 (3,878)
Prepaid expenses and other assets547 (2,923)
Accounts payable21,734 13,520 
Accrued employee compensation(13,538)(9,940)
Accrued store operating expenses3,279 4,131 
Gift certificates redeemable(2,708)(3,329)
Income taxes payable(3,287)(9,793)
Other assets and liabilities1,115 1,124 
Net cash flows from operating activities49,166 35,543 
CASH FLOWS FROM INVESTING ACTIVITIES:  
Purchases of property and equipment(3,382)(4,152)
Change in other assets111 99 
Purchases of investments(15,953)(25,167)
Proceeds from sales/maturities of investments15,175 27,930 
Net cash flows from investing activities(4,049)(1,290)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Purchases of common stock(372)(68)
Payment of dividends (24,615)
Net cash flows from financing activities(372)(24,683)
NET INCREASE IN CASH AND CASH EQUIVALENTS44,745 9,570 
CASH AND CASH EQUIVALENTS, Beginning of period220,969 168,471 
CASH AND CASH EQUIVALENTS, End of period$265,714 $178,041 

See notes to unaudited condensed consolidated financial statements.
6


THE BUCKLE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 1, 2020 AND AUGUST 3, 2019
(Dollar Amounts in Thousands Except Share and Per Share Amounts)
(Unaudited)

1.Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments necessary for the fair presentation of the results of operations for the interim periods have been included. All such adjustments are of a normal recurring nature. Because of the seasonal nature of the business, results for interim periods are not necessarily indicative of a full year's operations. The accounting policies followed by the Company and additional footnotes are reflected in the consolidated financial statements for the fiscal year ended February 1, 2020, included in The Buckle, Inc.'s 2019 Form 10-K. The condensed consolidated balance sheet as of February 1, 2020 is derived from audited financial statements.

For purposes of this report, unless the context otherwise requires, all references herein to the “Company”, “Buckle”, “we”, “us”, or similar terms refer to The Buckle, Inc. and its subsidiary.

The Company follows generally accepted accounting principles (“GAAP”) established by the Financial Accounting Standards Board (“FASB”). References to GAAP in these notes are to the FASB Accounting Standards Codification (“ASC”).

2.Revenues

The Company is a retailer of medium to better priced casual apparel, footwear, and accessories for fashion conscious young men and women. The Company operates its business as one reportable segment. The Company sells its merchandise through its retail stores and e-Commerce platform. The Company had 446 stores located in 42 states throughout the United States as of August 1, 2020 and 449 stores in 42 states as of August 3, 2019. During the twenty-six week period ended August 1, 2020, the Company opened 3 new stores, substantially remodeled 1 store, and closed 5 stores, which includes 3 new stores, no substantially remodeled stores, and 3 closed stores for the second quarter. During the twenty-six week period ended August 3, 2019, the Company opened 1 new store, substantially remodeled 3 stores, and closed 2 stores; which includes 1 new store, 2 substantially remodeled stores, and 1 closed store during the second quarter.

The Company temporarily closed all of its brick and mortar stores beginning March 18, 2020 to protect the health and welfare of its guests, teammates, and communities as a result of the COVID-19 pandemic. The Company began the process of reopening certain stores the week of April 26, 2020, following all appropriate federal, state, and local reopening guidelines. As of August 1, 2020, 431 of the Company's 446 stores were open. Of the 15 stores which were closed, 2 had not yet reopened due to damage sustained during the closure period. The remaining 13 stores are located in California and had previously reopened but were subsequently closed again during July in accordance with state guidelines. The store closings had a significant impact on the Company's revenue for the twenty-six week period ended August 1, 2020, which was down $73,692 or 18.2% from the same twenty-six week period in the prior year. The Company's online store remained open without interruption and experienced significant growth during the twenty-six week period ended August 1, 2020, growing $30,555 or 64.3% compared to the same twenty-six week period in the prior year.

For the thirteen week periods ended August 1, 2020 and August 3, 2019, online revenues accounted for 21.3% and 11.3%, respectively, of the Company's net sales. For the twenty-six week periods ended August 1, 2020 and August 3, 2019, online revenues accounted for 23.6% and 11.7%, respectively, of the Company's net sales. No sales to an individual customer or country, other than the United States, accounted for more than 10% of net sales.

7


The following is information regarding the Company’s major product lines, stated as a percentage of the Company’s net sales:
 
 Thirteen Weeks EndedTwenty-Six Weeks Ended
Merchandise GroupAugust 1,
2020
August 3,
2019
August 1,
2020
August 3,
2019
Denims32.1 %33.0 %36.9 %37.7 %
Tops (including sweaters)30.3 33.8 29.4 31.8 
Sportswear/Fashions15.6 12.8 12.4 10.8 
Accessories9.8 9.7 9.2 9.1 
Footwear9.6 7.6 9.2 7.5 
Casual bottoms0.7 1.0 0.8 1.1 
Outerwear0.3 0.6 0.6 0.7 
Other1.6 1.5 1.5 1.3 
100.0 %100.0 %100.0 %100.0 %

3.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.

Thirteen Weeks EndedThirteen Weeks Ended
August 1, 2020August 3, 2019
Net IncomeWeighted
Average
Shares (a)
Per Share
Amount
Net IncomeWeighted
Average
Shares (a)
Per Share
Amount
Basic EPS$34,682 48,714 $0.71 $16,374 48,550 $0.34 
Effect of Dilutive Securities:      
Non-vested shares 199   210  
Diluted EPS$34,682 48,913 $0.71 $16,374 48,760 $0.34 
Twenty-Six Weeks EndedTwenty-Six Weeks Ended
August 1, 2020August 3, 2019
Net IncomeWeighted
Average
Shares (a)
Per Share
Amount
Net IncomeWeighted
Average
Shares (a)
Per Share
Amount
Basic EPS$22,898 48,719 $0.47 $31,466 48,551 $0.65 
Effect of Dilutive Securities:      
Non-vested shares 199   196  
Diluted EPS$22,898 48,918 $0.47 $31,466 48,747 $0.65 

(a) Shares in thousands.

8


4.Investments

The following is a summary of investments as of August 1, 2020:
 
Amortized
Cost or
Par Value
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Other-than-
Temporary
Impairment
Estimated
Fair
Value
Held-to-Maturity Securities:     
State and municipal bonds$12,637 $57 $ $ $12,694 
Trading Securities:     
Mutual funds$15,080 $1,456 $ $ $16,536 
 
The following is a summary of investments as of February 1, 2020:
 
Amortized
Cost or
Par Value
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Other-than-
Temporary
Impairment
Estimated
Fair
Value
Held-to-Maturity Securities:     
State and municipal bonds$12,532 $13 $(1)$ $12,544 
Trading Securities:     
Mutual funds$14,563 $1,300 $ $ $15,863 

The amortized cost and fair value of debt securities by contractual maturity as of August 1, 2020 is as follows:
 
Amortized
Cost
Fair
Value
Held-to-Maturity Securities  
Less than 1 year$12,637 $12,694 
1 - 5 years  
 $12,637 $12,694 
 
As of August 1, 2020 and February 1, 2020, all of the Company's investments in held-to-maturity securities are classified in short-term investments. Trading securities are held in a Rabbi Trust, intended to fund the Company’s deferred compensation plan, and are classified in long-term investments.

5.Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories:

Level 1 – Quoted market prices in active markets for identical assets or liabilities. Short-term and long-term investments with active markets or known redemption values are reported at fair value utilizing Level 1 inputs.
Level 2 – Observable market-based inputs (either directly or indirectly) such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or inputs that are corroborated by market data.
Level 3 – Unobservable inputs that are not corroborated by market data and are projections, estimates, or interpretations that are supported by little or no market activity and are significant to the fair value of the assets.

9


As of August 1, 2020 and February 1, 2020, the Company held certain assets that are required to be measured at fair value on a recurring basis including its investments in trading securities.

The Company’s financial assets measured at fair value on a recurring basis are as follows:
 
 Fair Value Measurements at Reporting Date Using
Quoted Prices in
Active Markets
for Identical
Assets
Significant
Observable
Inputs
Significant
Unobservable
Inputs
August 1, 2020(Level 1)(Level 2)(Level 3)Total
Trading securities (including mutual funds)$16,536 $ $ $16,536 
 
 Fair Value Measurements at Reporting Date Using
Quoted Prices in
Active Markets
for Identical
Assets
Significant
Observable
Inputs
Significant
Unobservable
Inputs
February 1, 2020(Level 1)(Level 2)(Level 3)Total
Trading securities (including mutual funds)$15,863 $ $ $15,863 
 
Securities included in Level 1 represent securities which have publicly traded quoted prices.

The carrying value of cash equivalents approximates fair value due to the low level of risk these assets present and their relatively liquid nature, particularly given their short maturities. The Company also holds certain financial instruments that are not carried at fair value on the condensed consolidated balance sheets, including held-to-maturity securities. Held-to-maturity securities consist primarily of state and municipal bonds. The fair values of these debt securities are based on quoted market prices and yields for the same or similar securities, which the Company determined to be Level 2 inputs. As of August 1, 2020, the fair value of held-to-maturity securities was $12,694 compared to the carrying amount of $12,637. As of February 1, 2020, the fair value of held-to-maturity securities was $12,544 compared to the carrying amount of $12,532.

The carrying values of receivables, accounts payable, accrued expenses, and other current liabilities approximates fair value because of their short-term nature. From time to time, the Company measures certain assets at fair value on a non-recurring basis, specifically long-lived assets evaluated for impairment. These are typically store specific assets, which are reviewed for impairment when circumstances indicate impairment may exist due to the questionable recoverability of the carrying values of long-lived assets. If expected future cash flows related to a store’s assets are less than their carrying value, an impairment loss would be recognized for the difference between the carrying value and the estimated fair value of the store's assets. The fair value of the store's assets is estimated utilizing an income-based approach based on the expected cash flows over the remaining life of the store's lease.

Given the substantial reduction in the Company's sales (and the related impact on cash flow projections) as a result of store closures due to the COVID-19 pandemic, an impairment assessment was triggered for certain stores as of May 2, 2020. This analysis resulted in $1,000 of store-related asset impairment charges in the fiscal quarter ended May 2, 2020. There was no impairment related to long-lived assets for all other periods presented.

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6.Leases

The Company's lease portfolio is primarily comprised of leases for retail store locations. The Company also leases certain equipment and corporate office space. Store leases for new stores typically have an initial term of 10 years, with options to renew for an additional 1 to 5 years. The exercise of lease renewal options is at the Company's sole discretion and is included in the lease term for calculations of its right-of-use assets and liabilities when it is reasonably certain that the Company plans to renew these leases. Certain store lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation. Lease agreements do not contain any residual value guarantees, material restrictive covenants, or options to purchase the leased property.

The Company has elected to apply the practical expedient to account for lease components (e.g. fixed payments for rent, insurance, and real estate taxes) and non-lease components (e.g. fixed payments for common area maintenance) together as a single component for all underlying asset classes. Additionally, the Company elected as an accounting policy to exclude short-term leases from the recognition requirements.

Given the store closures resulting from the COVID-19 pandemic, the Company paid essentially full rent for the month of April but was then able to negotiate substantial rent deferrals for May and June. Consistent with guidance in the FASB Staff Q&A regarding lease concessions related to the effects of the COVID-19 pandemic, the Company has made the election to treat all lease concessions as though the enforceable rights and obligations existed in each contract and, therefore, will not apply the lease modification guidance in ASC 842. As such, these deferrals had no impact to rent expense during the quarter. Amounts deferred and payable in future periods have been included in "accounts payable" on the Company's condensed consolidated balance sheets

Lease expense is included in cost of sales in the condensed consolidated statements of income. The components of total lease cost are as follows:

 Thirteen Weeks EndedTwenty-Six Weeks Ended
 August 1,
2020
August 3,
2019
August 1,
2020
August 3,
2019
Operating lease cost$24,431 $21,680 $49,021 $43,226 
Variable lease cost (a)
1,667 8,592 6,156 17,836 
Total lease cost$26,098 $30,272 $55,177 $61,062 
(a) Includes variable payments related to both lease and non-lease components, such as contingent rent payments based on performance and payments related to taxes, insurance, and maintenance costs. Also includes payments related to short-term leases with periods of less than twelve months.

Supplemental cash flow information related to leases is as follows:

 Thirteen Weeks EndedTwenty-Six Weeks Ended
 August 1,
2020
August 3,
2019
August 1,
2020
August 3,
2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$15,175 $21,746 $40,210 $43,265 
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases$2,590 $5,678 $5,970 $6,096 

The Company uses its incremental borrowing rate as the discount rate to determine the present value of lease payments. As of August 1, 2020, the weighted-average remaining lease term was 4.9 years and the weighted-average discount rate was 3.8%.
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The table below reconciles undiscounted future lease payments (e.g. fixed payments for rent, insurance, real estate taxes, and common area maintenance) for each of the next five fiscal years and the total of the remaining years to the operating lease liabilities recorded on the condensed consolidated balance sheet as of August 1, 2020:

Fiscal Year
Operating Leases (a)
2020 (remaining)$49,812 
202185,018 
202272,577 
202359,489 
202444,381 
Thereafter54,770 
Total lease payments366,047 
Less: Imputed interest32,790 
Total operating lease liability$333,257 
(a) Operating lease payments exclude $925 of legally binding minimum lease payments for leases signed, but not yet commenced.

7.Supplemental Cash Flow Information

The Company had non-cash investing activities during the twenty-six week periods ended August 1, 2020 and August 3, 2019 of $83 and ($3), respectively. The non-cash investing activity relates to the change in the balance of unpaid purchases of property, plant, and equipment included in accounts payable as of the end of the period. The liability for unpaid purchases of property, plant, and equipment included in accounts payable was $476 and $559 as of August 1, 2020 and February 1, 2020, respectively. Amounts reported as unpaid purchases are recorded as cash outflows from investing activities for purchases of property, plant, and equipment in the condensed consolidated statement of cash flows in the period they are paid.

Additional cash flow information for the Company includes cash paid for income taxes during the twenty-six week periods ended August 1, 2020 and August 3, 2019 of $11,349 and $20,611, respectively.

8.Stock-Based Compensation

The Company has several stock option plans which allow for granting of stock options to employees, executives, and directors. The Company has not granted any stock options since fiscal 2008 and there are currently no stock options outstanding. The Company also has a restricted stock plan that allows for the granting of non-vested shares of common stock to employees and executives and a restricted stock plan that allows for the granting of non-vested shares of common stock to non-employee directors. As of August 1, 2020, 731,803 shares were available for grant under the Company’s various restricted stock plans, of which 632,242 shares were available for grant to executive officers.

Compensation expense was recognized during fiscal 2020 and fiscal 2019 for equity-based grants, based on the grant date fair value of the awards. The fair value of grants of non-vested common stock awards is the stock price on the date of grant.

Information regarding the impact of compensation expense related to grants of non-vested shares of common stock is as follows:

 Thirteen Weeks EndedTwenty-Six Weeks Ended
 August 1,
2020
August 3,
2019
August 1,
2020
August 3,
2019
Stock-based compensation expense, before tax$1,676 $1,235 $2,633 $2,533 
Stock-based compensation expense, after tax$1,265 $932 $1,988 $1,912 

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Non-vested shares of common stock granted during the twenty-six week periods ended August 1, 2020 and August 3, 2019 were granted pursuant to the Company’s 2005 Restricted Stock Plan and the Company’s 2008 Director Restricted Stock Plan. Shares granted under the 2005 Plan are typically "performance based" and vest over a period of four years, only upon certification by the Compensation Committee of the Board of Directors that the Company has achieved its pre-established performance targets for the fiscal year. Certain shares granted under the 2005 Plan, however, are "non-performance based" and vest over a period of four years without being subject to the achievement of performance targets. Shares granted under the 2008 Director Plan vest 25% on the date of grant and then in equal portions on each of the first three anniversaries of the date of grant.

A summary of the Company’s stock-based compensation activity related to grants of non-vested shares of common stock for the twenty-six week period ended August 1, 2020 is as follows:
 
SharesWeighted Average
Grant Date
Fair Value
Non-Vested - beginning of year507,863 $18.23 
Granted370,600 24.41 
Forfeited(143,550)17.39 
Vested(41,161)18.37 
Non-Vested - end of quarter693,752 $21.70 
 
As of August 1, 2020, there was $7,058 of unrecognized compensation expense related to grants of non-vested shares. It is expected that this expense will be recognized over a weighted average period of approximately 2.1 years. The total fair value of shares vested during the twenty-six week periods ended August 1, 2020 and August 3, 2019 was $744 and $694, respectively. During the twenty-six week period ended August 1, 2020, 143,100 shares (representing one-half of the "performance based" shares granted during fiscal 2019 under the 2005 Restricted Stock Plan) were forfeited because the Company did not achieve all of the performance targets established for the fiscal 2019 grants.

9.Recently Issued Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for fair value investments. The amendments are effective for all entities for annual and interim periods in fiscal years beginning after December 15, 2019. This ASU did not have a material impact on the Company's condensed consolidated financial statements for the thirteen and twenty-six week periods ended August 1, 2020.

13


THE BUCKLE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto of the Company included in this Form 10-Q. All references herein to the “Company”, “Buckle”, “we”, “us”, or similar terms refer to The Buckle, Inc. and its subsidiary. The following is management’s discussion and analysis of certain significant factors which have affected the Company’s financial condition and results of operations during the periods included in the accompanying condensed consolidated financial statements.

EXECUTIVE OVERVIEW

Company management considers the following items to be key performance indicators in evaluating Company performance.

Comparable Store Sales – Stores are deemed to be comparable stores if they were open in the prior year on the first day of the fiscal period being presented. Stores which have been remodeled, expanded, and/or relocated, but would otherwise be included as comparable stores, are not excluded from the comparable store sales calculation. Online sales are included in comparable store sales. Management considers comparable store sales to be an important indicator of current Company performance, helping leverage certain fixed costs when results are positive. Negative comparable store sales results could reduce net sales and have a negative impact on operating leverage, thus reducing net earnings.

Net Merchandise Margins – Management evaluates the components of merchandise margin including initial markup and the amount of markdowns during a period. Any inability to obtain acceptable levels of initial markups or any significant increase in the Company’s use of markdowns could have an adverse effect on the Company’s gross margin and results of operations.

Operating Margin – Operating margin is a good indicator for management of the Company’s success. Operating margin can be positively or negatively affected by comparable store sales, merchandise margins, occupancy costs, and the Company’s ability to control operating costs.

Cash Flow and Liquidity (working capital) – Management reviews current cash and short-term investments along with cash flow from operating, investing, and financing activities to determine the Company’s short-term cash needs for operations and expansion. The Company believes that existing cash, short-term investments, 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.

14


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 SalesPercentage of Net Sales
For Thirteen Weeks EndedPercentageFor Twenty-Six Weeks EndedPercentage
 August 1,
2020
August 3,
2019
Increase/(Decrease)August 1,
2020
August 3,
2019
Increase/(Decrease)
Net sales100.0 %100.0 %6.0 %100.0 %100.0 %(18.2)%
Cost of sales (including buying, distribution, and occupancy costs)
56.8 %61.4 %(2.0)%63.7 %61.6 %(15.4)%
Gross profit43.2 %38.6 %18.7 %36.3