-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K3eeyWHGOOZv9G2Rgi/PcPnnSueF5uyjqGOpnEiAW2rBD2IlcM+W9nDexeQtRMLs NDT+bXGvWAjXTx1sjiWKUQ== 0000950137-02-002495.txt : 20020426 0000950137-02-002495.hdr.sgml : 20020426 ACCESSION NUMBER: 0000950137-02-002495 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20020202 FILED AS OF DATE: 20020426 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: 0201 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12951 FILM NUMBER: 02622975 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-K 1 c69084e10-k.txt ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended FEBRUARY 2, 2002 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from ____________ to ____________ Commission File Number: 000-20132 THE BUCKLE, INC. (Exact name of Registrant as specified in its charter) NEBRASKA 47-0366193 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2407 WEST 24TH STREET, KEARNEY, NEBRASKA 68845-4915 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (308) 236-8491 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: TITLE OF CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED -------------- ----------------------------------------- Common Stock, $.01 par value New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ]. The aggregate market value (based on the closing price of the New York Stock Exchange) of the Common Stock of the Registrant held by non-affiliates of the Registrant was $177,206,578.68 on March 26, 2002. For purposes of this response, executive officers and directors are deemed to be the affiliates of the Registrant and the holdings by non-affiliates was computed as 7,420,711 shares. The number of shares outstanding of the Registrant's Common Stock, as of March 26, 2002, was 21,518,647. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive Proxy Statement dated April 26, 2002 for Registrant's 2002 Annual Meeting of Shareholders to be held May 30, 2002 are incorporated by reference in Part III. THE BUCKLE, INC. FORM 10-K FEBRUARY 2, 2002 TABLE OF CONTENTS PAGE ---- PART I Item 1. Business 3 Item 2. Properties 10 Item 3. Legal Proceedings 11 Item 4. Submission of Matters to a Vote of Security Holders 11 PART II Item 5. Market for Registrant's Common Equity and Related 11 Shareholder Matters Item 6. Selected Financial Data 11 Item 7. Management's Discussion and Analysis of Financial 11 Condition and Results of Operations Item 7A. Quantitative and Qualitative Disclosures About Market Risk 11 Item 8. Financial Statements and Supplementary Data 11 Item 9. Changes In and Disagreements With Accountants on 11 Accounting and Financial Disclosure PART III Item 10. Directors and Executive Officers of the Registrant 12 Item 11. Executive Compensation 12 Item 12. Security Ownership of Certain Beneficial Owners and 12 Management Item 13. Certain Relationships and Related Transactions 12 PART IV Item 14. Exhibits, Financial Statements, Schedules and Reports 12 on Form 8-K 2 PART I ITEM 1 - BUSINESS The Buckle, Inc. (the "Company") is a retailer of medium to better-priced casual apparel, footwear and accessories for fashion conscious young men and women. As of February 2, 2002, the Company operated 295 retail stores in 37 states throughout the central United States, as well as in the northwest, southeast and southwestern states under the names "Buckle" and "The Buckle." The Company markets a wide selection of mostly brand name casual apparel including denims, other casual bottoms, tops, sportswear, outerwear, accessories and footwear. The Company emphasizes personalized attention to its customers and provides individual customer services such as free alterations, free gift-wrapping, easy layaways and a frequent shopper program. Most stores are located in regional, high-traffic shopping malls, and this is the Company's strategy for future expansion. All of the Company's central office functions, including purchasing, pricing, advertising and distribution, are controlled from its headquarters and distribution center in Kearney, Nebraska. Incorporated in Nebraska in 1948, the Company commenced business under the name Mills Clothing, Inc., a conventional men's clothing store with only one location. In 1967, a second store, under the trade name Brass Buckle, was purchased. In the early 1970s, the store image changed to that of a jeans store with a wide selection of denims and shirts. The first branch store was opened in Columbus, Nebraska, in 1976. In 1977, the Company began selling young women's apparel as well, and opened its first mall store. The Company has experienced significant growth over the past ten years, growing from 86 stores at the start of 1992 to 295 stores by the close of fiscal 2001. The Company changed its corporate name to The Buckle, Inc. on April 23, 1991. All references herein to fiscal 2001 refer to the 52-week period ended February 2, 2002. Fiscal 2000 refers to the 53-week period ending February 3, 2001 and fiscal 1999 refers to the 52-week period ended January 29, 2000. The Company's principal executive offices and distribution center are located at 2407 West 24th Street, Kearney, Nebraska 68845. The Company's telephone number is (308) 236-8491. The Company publishes its corporate web site at www.buckle.com. MARKETING AND MERCHANDISING The Company's marketing and merchandising strategy is to offer customers a wide selection of key brand name merchandise while also providing a broad range of services designed to create customer loyalty. The Company provides a unique specialty apparel store with merchandise designed to appeal to the fashion conscious 12-to 24-year old. The merchandise mix includes denims, slacks/casual bottoms, tops, sweaters, sportswear, outerwear, accessories and footwear. Denim is a significant contributor to total sales (28.8% of fiscal 2001 net sales) and is a key to the Company's merchandising concept. The Company believes it attracts customers with a selection of key brands and a wide variety of fits, finishes and styles in denim. Shirts and tops are also significant contributors to the total sales (33.5% of fiscal 2001 net sales). The Company strives to provide a continually changing selection of the latest casual fashions. The percentage of net sales over the past three fiscal years of the Company's major product lines are set forth in the following table. Percentage of Net Sales --------------------------------- Merchandise Group Fiscal Fiscal Fiscal ----------------- 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 ----- ----- ----- Total 100.0% 100.0% 100.0% ===== ===== ===== 3 Brand name merchandise constitutes nearly 90% of the Company's sales volume. The remaining balance is comprised of private label merchandise that is manufactured to the Company's specifications. The Company's merchandisers continually work with manufacturers and vendors to produce brand name merchandise that is unique in color and style compared to the merchandise sold in other stores. While the brands offered by the Company change to meet current customer preferences, the Company currently offers brands such as Lucky Brand Dungarees, Dr. Martens, Silver, Fossil and Polo Jeans Company. The Company believes brand name merchandise will continue to constitute a substantial majority of sales. Management believes the Company provides a unique store setting by maintaining a high level of customer service and by offering a wide selection of fashionable, quality merchandise at good values. The Company believes that it is essential to create an enjoyable shopping atmosphere and to provide highly motivated employees who give personal attention to customers. Each salesperson is educated to help create a complete look for the customer by showing merchandise as coordinating outfits. The Company also offers specialized services such as free alterations, free gift wrapping, layaways, a special order system which allows stores to obtain specifically requested merchandise from other Company stores, a frequent shopper card and The Buckle private label credit card. Customers are encouraged to use the Company's layaway plan, which allows customers to make a partial payment on merchandise that is then held by the store until the balance is paid. For the past three fiscal years, an average of approximately five to six percent of net sales have been made on a layaway basis. Merchandising and pricing decisions are made centrally; however, the Company's distribution system allows for variation in the mix of merchandise distributed to each store so that individual store inventories can be tailored to reflect differences in customer buying patterns at various locations. In addition, to assure a continually fresh, new look in its stores, the Company ships new merchandise daily to most stores, including varying styles and colors that differ from prior merchandise. The Company also has a transfer program that shifts specific merchandise to locations where it is selling best. This distribution and transfer system helps to maintain customer satisfaction by providing in-stock popular items and reducing the need to mark down slow-moving merchandise at a particular location. The Company believes the reduced markdowns justify the incremental costs of distribution associated with the transfer system. The Company does not hold storewide off-price sales at anytime. During fiscal 2001, the Company worked with a nationally recognized design firm to review architectural finishes, lighting, column treatments, cashwrap design and other stores features. A total of 10 new and remodeled locations in fiscal 2001, plus 4 new and remodeled stores in fiscal 2002, have introduced these new finishes and they were very highly received by guests and management. Based on the success of these elements, the Company contracted with the design firm for a full new store design including all wall systems, finishes and fixtures. The last update to the store look was in fiscal 1997. New materials include: wood flooring, enhanced graphic elements, corrugated metals and Icon brand elements. Attention will also be directed to the development of accessory and shoe fixtures for potential roll out to all stores in fiscal 2002. The Company expects to open the first new prototype stores in the summer of 2002 with all subsequent remodels and new stores featuring the new design. The basic overall store architectural design presents a unique atmosphere in which the store's architectural elements, including feature display walls, provide a backdrop and create a strong visual presentation for the customer. Special care is taken to provide a comfortable environment to which customers can relate. ADVERTISING AND PROMOTION In fiscal 2001, the Company spent $3.7 million (net co-op reimbursements) or 1.0% of net sales on advertising, promotions and in-store point of sale materials. In-store seasonal sign kits, promotional signage and image brochures are used to enhance merchandising presentations, the stores' image and special events at point of sale. Magazine advertising in leading teen publications is used during key seasons to introduce new merchandise, build awareness and brand the Buckle's image. The Buckle partners with key vendors on magazine opportunities to extend the reach in these publications. Radio advertising continues as a media source used to support special events and promotions such as sweepstakes, grand openings and end-of-season sales in approximately 75% of the Company's markets. The Company has developed programs to help strengthen relationships with loyal guests. Seasonal fliers and birthday cards are mailed to guests who have signed up on the Buckle's in-house mailing list. In addition, the Company offers a frequent shopper program (the Buckle Primo Card), a rewards program designed to build customer loyalty. Private label credit card marketing is another avenue for marketing to loyal guests. The Company offers exclusive benefits to active Buckle Cardholders such as a seasonal newsletter, coupons and other special targeted mailings. 4 The Company publishes a corporate web site at www.buckle.com. The Company's web site serves as a marketing tool reaching a growing online audience. Buckle.com is an interactive, entertaining, informative and brand building environment where visitors can get the latest Buckle fashion information with special features including an online denim guide, shoe guides and style boutiques. The Company has an opt-in online database and sends weekly e-mail blasts to fill members in on the latest store promotions and product offerings. Online guests can shop, enter monthly contests, fill out a wish list, find out about career opportunities, and read the latest Buckle financial news. The Buckle Online Store was launched April 26, 1999 as a marketing tool, to extend the Company's brand beyond the physical locations. Offering a small sampling of the merchandise inventory online, the Company presents the online store as a "taste test" in new markets as well as a customer service tool in existing markets. STORE OPERATIONS The Company has an Executive Vice President of Sales, a Vice President of Sales, one regional manager, 14 district managers and 49 area managers. Seven of the district managers and all of the area managers also serve as manager of their home base store. Each store has one manager, one or two assistant managers, one to three additional full-time salespeople and up to 20 part-time salespeople. Most stores have peak levels of staff during the back-to-school and Christmas seasons. Almost every location also employs a seamstress. The Company places great importance on educating quality personnel. The Company recruits interns and management trainees and focuses on building its management organization from within. Store managers receive compensation in the form of a base salary and incentive bonuses. District and area managers also receive added incentives based upon the sales performance of stores in their district/area. Store managers perform sales training of new employees at the store level. Salespeople displaying particular talent are generally assigned to stores operated by district managers for training as a store manager. A majority of the Company's store managers and most of its middle and upper level management are former salespeople, including the President of the Company, Dennis Nelson, and its Chairman, Dan Hirschfeld. The Company has established a comprehensive program stressing the prevention and control of shrinkage losses. Steps taken to reduce shrinkage include monitoring cash refunds, voids, inappropriate discounts, employee sales and returns-to-vendor. The Company also has electronic article surveillance systems in approximately 98% of the Company's stores as well as surveillance camera systems in approximately 64% of the stores. As a result, the Company achieved a merchandise shrinkage rate of 0.7% of net sales for fiscal 2001, 0.6% of net sales for fiscal 2000 and 0.7% for fiscal year 1999. The average store is approximately 4,800 square feet (of which the Company estimates an average of approximately 80% is selling space), and stores range in size from 2,450 square feet to 8,475 square feet. PURCHASING AND DISTRIBUTION The Company has a very experienced buying team. The buying team includes the President, two head women's merchandisers, six women's buyers, and three men's merchandisers and one men's buyer. Five members of this buying team have between 16 and 30 years of experience with the Company. The experience and leadership within the buying team contributes significantly to the company's success by enabling the buying team to react quickly to changes in fashion and by providing extensive knowledge of sources for branded and private label goods. The Company purchases products from manufacturers within the United States and from some foreign manufacturers. The Company's merchandising team monitors U.S. fashion centers (in New York and on the West Coast) and shops high fashion stores to adapt new ideas to The Buckle. The Company continually monitors fabric selection, quality and delivery schedules. The Company has not experienced any material difficulties with merchandise manufactured in foreign countries. The Company does not have long-term or exclusive contracts with any brand name manufacturer or supplier. The Company does have a long term relationship with an agent in Hong Kong for the manufacture of The Buckle, Inc.'s private label merchandise. An agreement with this company was entered into on November 28, 1994, for orders placed subsequent to that date. In fiscal 2001, Lucky Brand Dungarees (including their children's division) made up 23.7% of the Company's net sales. No other vendor accounted for more than 10% of the Company's sales. Current significant vendors include Lucky Brand Dungarees, Dr. Martens, Fossil, Silver, Ecko Apparel and Polo Jeans Company. The Company continually strives to offer brands that are currently popular with its customers and, therefore, the Company's suppliers and purchases from specific vendors may vary significantly from year to year. 5 The Buckle stores generally carry the same merchandise, with quantity and seasonal variations based upon historical sales data, climate and perceived local customer interest. The Company uses a centralized receiving and distribution center located within the corporate headquarters building in Kearney, Nebraska. Merchandise is received daily in Kearney where it is sorted, tagged with bar-coded tickets (unless the vendor UPC code can be used or the merchandise is pre-ticketed), and packaged for distribution to individual stores primarily via United Parcel Service. The Company's goal is to ship the majority of its merchandise out to the stores within one to two business days of receipt. This system allows stores to receive new merchandise almost every day, providing customers with a good reason to shop often and helping create excitement within each store. During fiscal 1998, the Company began using "pre-packs" to expedite the movement of merchandise through the distribution center. The Company's current building space and distribution system will allow for handling of up to 450 stores. The Company has developed an effective computerized system for tracking merchandise from the time it is checked in at the Company's distribution center until it arrives at the stores and is sold to a customer. The system's function is to insure that store shipments are delivered accurately and promptly, to account for inventory and to assist in allocating merchandise among stores. Management can track, on a daily basis, which merchandise is selling at specific locations and directs transfers of merchandise from one store to another as necessary. This allows stores to carry a reduced inventory while at the same time satisfying customer demands. To reduce inter-store shipping costs and provide a more timely restocking of in-season merchandise, the Company has increased its focus on warehousing a portion of initial shipments. Sales reports are then used to replenish, on a basis of one to three times each week, those stores that are experiencing the greatest success selling specific styles, colors and sizes of merchandise. This system is also designed to prevent an over-crowded look in the stores at the beginning of a season. STORE LOCATIONS AND EXPANSION STRATEGIES As of April 1, 2002, the Company operated 298 stores in 37 states, including 3 stores opened in fiscal 2002. The existing stores are in 4 downtown locations, 10 strip centers, 2 lifestyle centers and 282 shopping malls. The Company anticipates opening approximately 9 to 13 additional new stores in fiscal 2002. All new stores for fiscal 2002 will be located in higher traffic shopping malls. The following table lists the location of existing stores as of April 1, 2002. Location of Stores State Number of Stores State Number of Stores - ----- ---------------- ----- ---------------- Alabama 2 Montana 5 Arizona 6 Nebraska 15 Arkansas 5 New Mexico 4 California 6 North Carolina 7 Colorado 10 North Dakota 3 Florida 3 Ohio 13 Georgia 3 Oklahoma 13 Idaho 5 Oregon 2 Illinois 16 Pennsylvania 4 Indiana 12 South Carolina 1 Iowa 20 South Dakota 3 Kansas 15 Tennessee 8 Kentucky 5 Texas 32 Louisiana 7 Utah 8 Michigan 18 Virginia 1 Minnesota 10 Washington 5 Mississippi 4 West Virginia 2 Missouri 12 Wisconsin 12 Wyoming 1 --- Total 298 === 6 The Buckle has grown significantly over the past ten years, with the number of stores increasing from 86 at the beginning of 1992 to 295 at the end of fiscal 2001. The Company's plan is to continue expansion by developing the geographic region it currently serves and by expanding into contiguous markets. The Company intends to open new stores only when management believes there is a reasonable expectation of satisfactory results. The following table sets forth information regarding store openings and closings since the beginning of fiscal 1992 to the end of fiscal 2001: Total Number of Stores Per Year Fiscal Open at start Opened in Closed in Year of year Current Year Current Year Total ------ ------------- ------------ ------------ ----- 1992 86 18 - 104 1993 104 27 - 131 1994 131 16 - 147 1995 147 17 - 164 1996 164 17 - 181 1997 181 19 1 199 1998 199 24 1 222 1999 222 27 1 248 2000 248 28 2 274 2001 274 24 3 295 The Company's criteria used when considering a particular location for expansion include: 1. Market area, including proximity to existing markets to capitalize on name recognition; 2. Trade area population (number, average age, and college population); 3. Economic vitality of market area; 4. Mall location, anchor tenants, tenant mix, average sales per square foot; 5. Available location within a mall, square footage, storefront width, and facility of using the current store design; 6. Availability of suitable management personnel for the market; 7. Cost of rent, including minimum rent, common area and extra charges; 8. Estimated construction costs, including landlord charge backs and tenant allowances. The Company generally seeks sites of 4,000 to 5,000 square feet for its stores. The projected cost of opening a store with the new design is approximately $690,000, including construction costs of approximately $530,000 (which is prior to any construction allowance received) and inventory costs of approximately $160,000. The Company anticipates opening approximately 12 new stores during fiscal 2002 and completing the remodeling of approximately 10 existing stores. Remodels range from partial to full, with construction costs for a full remodel being nearly the same as for a new store. Of the stores scheduled for remodeling during fiscal 2002, it is estimated that each will receive full remodeling. The Company has budgeted a total of $19.0 million (before estimated construction allowances from landlords of $2.9 million) for new store construction, remodeling, technology upgrades and improvements at the corporate headquarters during fiscal 2002. The Company plans to expand in 2002 by opening stores in existing markets. New store openings are generally scheduled to coincide with the increased customer traffic of the Easter, back-to-school or Christmas holiday shopping seasons. The Company believes that, given the time required for training personnel, staffing a store and developing adequate district and regional managers, its current management infrastructure is sufficient to support its currently planned rate of growth. The Company's ability to expand in the future will depend, in part, on general business conditions, the ability to find suitable malls with acceptable sites on satisfactory terms, the availability of financing and the readiness of trained store managers. There can be no assurance that the Company's expansion plans will be fulfilled in whole or in part, or that leases under negotiation for planned new sites will be obtained on terms favorable to the Company. 7 MANAGEMENT INFORMATION SYSTEMS The Company's management information systems (MIS) and electronic data processing systems (EDP) consist of a full range of retail, financial and merchandising systems, including purchasing, inventory distribution and control, sales reporting, accounts payable and merchandise management. The system includes PC based point-of-sale (POS) registers equipped with bar code readers in each store. These registers are polled nightly by the central computer (IBM AS/400) using a virtual private network for collection of comprehensive data, including complete item-level sales information, employee time clocking, merchandise transfers and receipts, special orders, supply orders and returns-to-vendor. In conjunction with the nightly polling, the central computer sends the PC server messages from various departments at the Company headquarters and price changes for the price lookup (PLU) file maintained within the POS registers. Each weekday morning, the Company initiates an electronic "sweep" of the individual store bank accounts to the Company's primary concentration account. This allows the Company to meet its obligations with a minimum of borrowing and to invest excess cash on a timely basis. Management monitors the performance of each of its stores on a continual basis. Daily information is used to evaluate inventory, determine markdowns, analyze profitability and assist management in the scheduling and compensation of employees. Additionally, reports are generated verifying daily bank deposit information against recorded sales, identifying transactions rung at prices that differ from the PLU file, and listing selected "exception" transactions (e.g. refunds, cash paid-outs, discounts). These reports are used to help assure consistency among the stores and to help prevent losses due to error or dishonesty. The PLU system allows management to control merchandise pricing centrally, permitting faster and more accurate processing of sales at the store and the monitoring of specific inventory items to confirm that centralized pricing decisions are carried out in each of the stores. Management is able to direct all price changes, including promotional, clearance and markdowns on a central basis and estimate the financial impact of such changes. The Company is committed to ongoing review of the MIS and EDP systems to provide productive, timely information and effective controls. This review includes testing of new products and systems to assure that the Company is aware of technological developments. Most important, continual feedback is sought from every level of the Company to assure that information provided is pertinent to all aspects of the Company's operations. EMPLOYEES As of February 2, 2002, the Company had approximately 5,500 employees - approximately 1,023 of whom were full-time. The Company has an experienced management team and substantially all of the management team, from store managers through senior management, commenced work for the Company on the sales floor. The Company experiences high turnover of store and distribution center employees, primarily due to having a significant number of part-time employees. However, the Company has not experienced significant difficulty in hiring qualified personnel. Of the total employees, approximately 300 are employed at the corporate headquarters and in the distribution center. None of the Company's employees are represented by a union. Management believes that employee relations are good. The Company provides medical, dental, life insurance and long-term disability plans, as well as a 401(k) and a section 125 cafeteria plan for eligible employees. To be eligible for the plans, other than the 401(k) Plan, an employee must have worked for the Company for 90 days or more, and his or her normal workweek must be 35 hours or more. As of February 2, 2002, 825 employees participated in the medical plan, 825 in the dental plan, 796 in the life insurance plan, 735 in the long-term disability plan and 289 in the cafeteria plan. With respect to the medical, dental and life insurance plans, the Company pays 80% to 100% of the employee's expected premium cost plus 20% to 100% of the expected cost of dependent coverage under the health plan. The exact percentage is based upon the employee's term of employment and job classification within the Company. In addition, all employees receive discounts on company merchandise. COMPETITION The men's and women's apparel industries are highly competitive with fashion, selection, quality, price, location, store environment and service being the principal competitive factors. While the Company believes that it is able to compete 8 favorably with other merchandisers, including department stores and specialty retailers, with respect to each of these factors, the Company believes it competes mainly on the basis of customer service and merchandise selection. In the men's merchandise areas, the Company competes with specialty retailers such as Abercrombie & Fitch, American Eagle Outfitters, Gadzooks, Gap and Pacific Sunwear. The men's market also competes with certain department stores, such as Dillards, Federated stores, May Company stores, Saks and other local or regional department stores and specialty retailers, as well as with mail order and internet merchandisers. In the women's merchandise area, the Company competes with specialty retailers such as Abercrombie & Fitch, American Eagle Outfitters, Express, Gadzooks, Gap, Maurices, Pacific Sunwear and Vanity. The women's sales also compete with department stores, such as Dillards, Federated stores, May Company stores, Saks and certain local or regional department stores and specialty retailers, as well as with mail order and internet merchandisers. Many of the Company's competitors are considerably larger and have substantially greater financial, marketing and other resources than the Company, and there is no assurance that the Company will be able to compete successfully with them in the future. Furthermore, while the Company believes it competes effectively for favorable site locations and lease terms, competition for prime locations within a mall is intense. TRADEMARKS "BUCKLE", "BKLE", "RECLAIM", "BKE" and "THE BUCKLE" are federally registered trademarks of the Company. The Company believes the strength of its trademarks is of considerable value to its business, and its trademarks are important to its marketing efforts. The Company intends to protect and promote its trademarks as management deems appropriate. EXECUTIVE OFFICERS OF THE COMPANY The Executive Officers of the Company are listed below, together with brief accounts of their experience and certain other information. DANIEL J. HIRSCHFELD, AGE 60. Mr. Hirschfeld is Chairman of the Board of the Company. He has served as Chairman of the Board since April 19, 1991. Prior to that time, Mr. Hirschfeld served as President and Chief Executive Officer. Mr. Hirschfeld has been involved in all aspects of the Company's business, including the development of the Company's management information systems. DENNIS H. NELSON, AGE 52. Mr. Nelson is President and Chief Executive Officer and a Director of the Company. He has held the titles of President and Director since April 19, 1991. Mr. Nelson was elected Chief Executive Officer on March 17, 1997. Mr. Nelson began his career with the Company in 1970 as a part-time salesman while he was attending Kearney State College (now the University of Nebraska - Kearney). While attending college, he became involved in merchandising and sales supervision for the Company. Upon graduation from college in 1973, Mr. Nelson became a full-time employee of the Company and he has worked in all phases of the Company's operations since that date. Prior to his election as President and Chief Operating Officer on April 19, 1991, Mr. Nelson performed all of the functions normally associated with those positions. KAREN B. RHOADS, AGE 43. Ms. Rhoads is the Vice-President - Finance, Treasurer, Chief Financial Officer and a Director of the Company. Ms. Rhoads was elected a Director on April 19, 1991. She worked in the corporate offices during college and later worked part-time on the sales floor. Ms. Rhoads practiced as a CPA for 6 1/2 years, during which time she began working on tax and accounting matters for the Company as a client. She has been employed with the Company since November 1987. JAMES E. SHADA, AGE 46. Mr. Shada is Executive Vice President - Sales. He began employment with the Company in November of 1978 as a salesperson. Between 1979 and 1985, he managed and opened new stores for the Company, and in 1985 Mr. Shada became the Company's sales manager. He is also involved in other aspects of the business including site selection and development and education of personnel as store managers and as regional and district managers. BRETT P. MILKIE, AGE 42. Mr. Milkie is Vice President-Leasing. He was elected Vice President-Leasing on May 30, 1996. Mr. Milkie was a leasing agent for a national retail mall developer for 6 years prior to joining the company in January 1992 as director of leasing. 9 KARI SMITH, AGE 38. Ms. Smith is Vice President - Sales. She has held this position since May 31, 2001. Ms. Smith joined the Company May 16, 1978 as a part-time salesperson. Later she became store manager in Great Bend, KS and then began working with other stores as an area manager. As regional manager, Ms. Smith has continued to develop her involvement with the sales management executive team, helping with manager meetings and new store manager development, as well as providing support for store managers, area managers and district managers. PATRICIA WHISLER, AGE 45. Ms. Whisler is Vice President of Women's Merchandising. She has held this position since May 31, 2001. Ms. Whisler joined the Company in February 1976 as a part-time salesperson and later became manager of a Buckle store before returning to the corporate office in 1983 to work as part of the growing merchandising team. ITEM 2 - PROPERTIES All of the store locations operated by the Company are leased facilities. Most of the Company's stores have lease terms of approximately ten years and generally do not contain renewal options. In the past, the Company has not experienced problems renewing its leases, although no assurance can be given that the Company can renew existing leases on favorable terms. The Company seeks to negotiate extensions on leases for stores undergoing remodeling to provide terms of approximately ten years after completion of remodeling. Consent of the landlord generally is required to remodel or change the name under which the Company does business. The Company has not experienced problems in obtaining such consent in the past. Most leases provide for a fixed minimum rental plus an additional rental cost based upon a set percentage of sales beyond a specified breakpoint, plus common area and other charges. The current terms of the Company's leases, including automatic renewal options, expire as follows: During Fiscal Number of expiring Year leases ------------ ------------------- 2002 30 2003 34 2004 29 2005 27 2006 19 2007 22 2008 21 2009 and later 116 --- Total 298 === The corporate headquarters and distribution center for the Company operate within a facility purchased by the Company in 1988, and located in Kearney, NE. The building provides approximately 179,000 square feet of space with over 70% of the area being allocated for the distribution and returns-to-vendor departments. During fiscal 2000, the Company purchased a 40,000 square foot building with warehouse and office space near the corporate headquarters, which will give the Company flexibility in its growth. The Company also acquired a 50-year lease, with favorable lease terms, on the land the building is built upon. 10 ITEM 3 - LEGAL PROCEEDINGS From time to time, the Company is involved in litigation relating to claims arising out of its operations in the normal course of business. As of the date of this form, the Company was not engaged in any legal proceedings that are expected, individually or in the aggregate, to have a material adverse effect on the Company. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of fiscal 2001. PART II ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The Company's common stock trades on the New York Stock Exchange under the symbol BKE. Prior to the Company's initial public offering on May 6, 1992, there was no public market for the Company's common stock. The Company has not paid any cash dividends in fiscal 2001, 2000 or 1999, and has no current plans for dividend payment. 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 4,200 beneficial owners. The closing price of the Company's common stock on March 26, 2002 was $23.88. Additional information required by this item is incorporated by reference to the information on page 32 of the Company's 2001 Annual Report to Shareholders under the caption "Stock Prices by Quarter" which is attached to this Form 10-K. The remainder of the information required by this item appears under the caption "Equity Compensation Plan Information" in the Company's Proxy Statement for its 2002 Annual Shareholders' Meeting and is incorporated by reference. ITEM 6 - SELECTED FINANCIAL DATA The information required by this item is incorporated by reference to the information on page 11 in the Company's 2001 Annual Report to Shareholders under the caption "Selected Financial Data" which is attached to this Form 10-K. ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item is incorporated by reference to the information appearing on pages 12 through 16 in the Company's 2001 Annual Report to Shareholders which is attached to this Form 10-K. ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has evaluated the disclosure requirements of Item 305 of S-K "Quantitative and Qualitative Disclosures about Market Risk," and has concluded that the Company has no market risk sensitive instruments for which these additional disclosures are required. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements together with the independent auditors' report thereon of Deloitte & Touche LLP dated March 4, 2002, appearing on pages 17 through 32 of the Company's 2001 Annual Report to Shareholders (which is attached to this Form 10-K) are incorporated by reference in this Form 10-K. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 11 PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item appears under the captions "Executive Officers of the Company" appearing on pages 9 and 10 of this report, and "Election of Directors" in the Company's Proxy Statement for its 2002 Annual Shareholders' Meeting and is incorporated by reference. ITEM 11- EXECUTIVE COMPENSATION The information required by this item appears under the caption "Executive Compensation and Other Information" in the Company's Proxy Statement for its 2002 Annual Shareholders' Meeting and is incorporated by reference. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item appears under the caption "Election of Directors" in the Company's Proxy Statement for its 2002 Annual Shareholders' Meeting and is incorporated by reference. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item appears under the caption "Compensation Committee Interlocks and Insider Participation" in the Company's Proxy Statement for its 2002 Annual Shareholders' Meeting and is incorporated by reference. PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (a) (1) FINANCIAL STATEMENTS The Company's 2001 Annual Report to Shareholders, a copy of which appears as Exhibit 13 to this Form 10-K Report, contains the following on pages 17 through 32 and are hereby incorporated by reference to this report: Balance Sheets as of February 2, 2002, and February 3, 2001 Statements of Income for each of the three years in the period ended February 2, 2002 Statements of Stockholders' Equity for each of the three years in the period ended February 2, 2002 Statements of Cash Flows for each of the three years in the period ended February 2, 2002 Notes to Financial Statements for each of the three years in the period ended February 2, 2002 Independent Auditors' Report (a) (2) FINANCIAL STATEMENT SCHEDULE Independent Auditors' Report II. Valuation and Qualifying Accounts and Reserves All other schedules are omitted because they are not applicable or the required information is presented in the financial statements or notes thereto. This schedule is on page 14. (b) REPORTS ON FORM 8-K The Company did not file a report on Form 8-K during the quarter ended February 2, 2002. (c) EXHIBITS See index to exhibits on pages 15 and 16. 12 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE BUCKLE, INC. Date: April 22, 2002 By: /s/ DENNIS H. NELSON ------------------------------- Dennis H. Nelson, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on the 22nd day of April, 2002. /s/ DANIEL J. HIRSCHFELD - ----------------------------------------- ---------------------------------- Daniel J. Hirschfeld Bill L. Fairfield Chairman of the Board and Director Director /s/ DENNIS H. NELSON - ----------------------------------------- ---------------------------------- Dennis H. Nelson Ralph M. Tysdal President and Chief Executive Officer Director and Director /s/ KAREN B. RHOADS - ----------------------------------------- ---------------------------------- Karen B. Rhoads Bruce L. Hoberman Vice President of Finance and Director Chief Financial Officer and Director /s/ JAMES E. SHADA - ----------------------------------------- ---------------------------------- James E. Shada David A. Roehr Executive Vice President of Sales Director /s/ ROBERT E. CAMPBELL /s/ WILLIAM D. ORR - ----------------------------------------- ---------------------------------- Robert E. Campbell William D. Orr Director Director 13 INDEPENDENT AUDITORS' REPORT BOARD OF DIRECTORS THE BUCKLE, INC. We have audited the financial statements of The Buckle, Inc., ("the Company") as of February 2, 2002 and February 3, 2001, and for each of the three years in the period ended February 2, 2002, and have issued our report thereon dated March 4, 2002; such financial statements and report are included in your 2001 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the financial statement schedule of The Buckle, Inc., listed in Item 14(a)(2). This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Omaha, Nebraska March 4, 2002 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES Allowance for Doubtful Accounts ----------------- Balance, January 30, 1999 $ 300,000 Amounts charged to costs and expenses 1,095,115 Write-off of uncollectible accounts (1,170,115) ----------- Balance, January 29, 2000 225,000 Amounts charged to costs and expenses 857,968 Write-off of uncollectible accounts (832,968) ----------- Balance, February 3, 2001 250,000 Amounts charged to costs and expenses 816,276 Write-off of uncollectible accounts (816,276) ----------- Balance, February 2, 2002 $ 250,000 =========== 14 INDEX TO EXHIBITS
EXHIBITS PAGE NUMBER OR INCORPORATION BY REFERENCE TO (3) Articles of Incorporation and By-Laws. (3.1) Articles of Incorporation Exhibit 3.1 to Form S-1 of The Buckle, Inc. as amended No. 33-46294 (3.1.1) Amendment to the Articles of Incorporation of The Buckle, Inc. (3.2) By-Laws of The Buckle, Inc. Exhibit 3.2 to Form S-1 No. 33-46294 (4) Instruments defining the rights of security holders, including indentures (4.1) See Exhibits 3.1 and 3.2 for provisions of the Articles of Incorporation and By-laws of the Registrant defining rights of holders of Common Stock of the registrant (4.2) Form of stock certificate for Common Stock Exhibit 4.1 to Form S-1 No. 33-46294 (9) Not applicable (10) Material Contracts (10.1) 1991 Stock Incentive Plan Exhibit 10.1 to Form S-1 No. 33-46294 (10.2) 1991 Non-Qualified Stock Option Plan Exhibit 10.2 to Form S-1 No. 33-46294 (10.3) Non-Qualified Stock Option Plan and Exhibit 10.3 to Form S-1 Agreement With Dennis Nelson No. 33-46294 (10.4) Acknowledgment for Dennis H. Nelson dated April 18, 2002 (10.6) Acknowledgment for James E. Shada dated April 18, 2002 (10.7) Acknowledgment for Kari G. Smith dated April 18, 2002 (10.8) Acknowledgment for Brett P. Milkie dated April 18, 2002 (10.9) Acknowledgment for Patricia K. Whisler dated April 18, 2002 (10.10) Cash or Deferred Profit Sharing Plan Exhibit 10.10 to Form S-1 No. 33-46294 (10.10.1) Non-Qualified Deferred Compensation Plan (10.11) Commercial Note dated May 31, 2001 between The Buckle, Inc. and Wells Fargo Bank Nebraska, N.A. for a $10.0 million line of credit for issuance of letters of credit.
15 (10.12) Commercial Note and Credit agreement dated May 31, 2001 between The Buckle, Inc. and Wells Fargo Bank Nebraska, N.A, regarding $7.5 million operating line of credit (10.17) 1993 Director Stock Option Plan Exhibit A to Proxy Statement for Annual Meeting to be held May 26, 1993 (10.18) 1993 Executive Stock Option Plan Exhibit B to Proxy Statement for Annual Meeting to be held May 26, 1993 (10.19) 1995 Management Incentive Plan Exhibit A to Proxy Statement for Annual Meeting to be held June 2, 1995 (10.20) 1995 Executive Stock Option Plan Exhibit B to Proxy Statement for Annual Meeting to be held June 2, 1995 (10.21) 1997 Management Incentive Plan Exhibit A to Proxy Statement for Annual Meeting to be held June 2, 1997 (10.22) 1998 Management Incentive Plan Exhibit A to Proxy Statement for Annual Meeting to be held May 28, 1998 (10.23) 1997 Executive Stock Option Plan Exhibit B to Proxy Statement for Annual Meeting to be held May 28, 1998 (10.24) 1998 Restricted Stock Plan Exhibit C to Proxy Statement for Annual Meeting to be held May 28, 1998 (10.25) 1999 Management Incentive Plan Exhibit A to Proxy Statement for Annual Meeting to be held June 4, 1999 (10.26) 2002 Management Incentive Plan Exhibit A to Proxy Statement for Annual Meeting to be held May 30, 2002 (12) Not applicable (13) 2001 Annual Report to Stockholders (18) Not applicable (19) Not applicable (22) Not applicable (23) Consent of Deloitte & Touche LLP (25) Not applicable (28) Not applicable
16 EX-10.4 3 c69084ex10-4.txt ACKNOWLEDGMENT FOR DENNIS H. NELSON EXHIBIT 10.4 ACKNOWLEDGMENT 1. Dennis H. Nelson, currently employed by The Buckle, Inc. ("Company") of Kearney, Nebraska, will be paid an annual salary of $725,000 for so long as the employee is employed by the Company during the fiscal year ending February 1, 2003. 2. In addition to the salary outlined in paragraph 1, above, a "Cash Award" for the above fiscal year will be paid to you provided you are employed by the Company on the last day of such fiscal year. The "Cash Award" will be paid as part of the Incentive Plan which includes a Bonus Pool as Cash Incentive for executives. This Bonus Pool will be calculated for the fiscal year based upon dollars of growth in key performance categories compared to the Base Year amounts, multiplied by the applicable percentage amounts as outlined in the Plan (see Exhibit A to the Company's Proxy Statement). The applicable percentage amounts for the fiscal 2002 Executive Incentive Plan include 8.5% of the increase in Same Store Sales, 5.0% of the increase in Gross Profit and 15.0% of the increase in Pre-bonus Net Income. The Base Year amounts are determined using the immediately preceding fiscal year for Same Store Sales and the prior three-year rolling average for the Gross Profit and Pre-Bonus Net Income. Your percentage of the bonus pool has been pre-set for fiscal 2002 by the compensation committee of the Board of Directors. Each Participant in the Plan shall receive a Cash Award calculated as follows for fiscal 2002, which is considered to be the "transition year " for the Incentive Plan. For the Transition Year (fiscal 2002) the Cash Award shall be equal to the sum of 50% the Participant's share of the Bonus Pool for the Transition Year; plus a multiple of the Participant's Base Salary, which multiple will be based upon the Company's growth in Pre-Bonus Net Income for the Transition Year over the previous year. The multiple will also be different for Level I and Level II Executives. You are designated as a Level I employee. The multiples will be calculated as follows, with the multiples being pro-rated for each one percent (1%) increase in Pre-Bonus Net Income between the levels set forth below: ------------------------------------------------------------------- EXECUTIVE LEVEL LEVEL I LEVEL II ------------------------------------------------------------------- Change in Pre-Bonus Net Income ------------------------------------------------------------------- Any decrease 0.00 0.00 ------------------------------------------------------------------- No Change 0.45 0.25 ------------------------------------------------------------------- 5% increase 0.525 0.30 ------------------------------------------------------------------- 10% increase 0.60 0.35 ------------------------------------------------------------------- 20% increase 0.80 0.45 ------------------------------------------------------------------- 25% increase 0.90 0.50 ------------------------------------------------------------------- 30% increase 1.00 0.55 ------------------------------------------------------------------- 40% increase 1.20 0.65 ------------------------------------------------------------------- No payment of a Cash Award for the year may be made until the Company's Pre-Bonus Net Income for the year is certified by the Compensation Committee. You shall not be entitled to receive payment of a Cash Award unless you are still in the employ of (and shall not have delivered notice of resignation to) the Company on the last day of the fiscal year for which the Cash Award is earned. The Cash Award will be paid on or before April 15 following the close of the fiscal year. For calculating this Cash Award, "Pre-Bonus Net Income" shall be defined as the Company's net income from operations after the deduction of all expenses, excluding administrative and store manager percentage bonuses and excluding income taxes, but including draws against such bonuses. Net income from operations does not include earnings on cash investments. For this purpose, net income shall be computed by the Company in accordance with the Company's normal accounting practices, and the Company's calculations will be final and conclusive. 17 3. Options to purchase 113,400 shares ("Options") of The Buckle, Inc. common stock at $20.50 per share were granted to you pursuant to the 1997 Executive Stock Option Plan as of the last day of the fiscal year preceding this Plan (2-02-02). Options granted under the Plan will vest according to the same terms as the 1997 Management Incentive Plan. Those terms include a performance feature whereby one-half of the Options granted will vest over three years if a 10% increase in Pre-Bonus Net Income is achieved, and the second one-half of the Options granted vest over three years if a 30% increase in Pre-Bonus Net Income is achieved. If the performance goals are not met the Options will ultimately vest after nine years and eleven months. This Plan added an "accelerator" feature for the Options so that vesting may occur sooner than the three years or nine years and eleven months, when and if the market price of the Company's stock doubles from the fair market value of the stock at the date of the grant. All Options will also include a "reload" feature under this Plan. 4. You will be given a vehicle allowance of $17,000 to be paid quarterly throughout the fiscal year. You are also allowed personal use of a corporate owned aircraft for up to 30 hours this fiscal year. 5. A credit limit of $3,500 has been established on your The Buckle charge account, subject to annual change as determined by management. Please make sure your charge account balance does not exceed this limit. You may have payments made to your charge account via payroll withholding during the year. Management is committed to reviewing its policies continually. Accordingly, the statements outlined above are subject to review and change at any time, with or without notice. I understand I have the right to terminate my employment with the Company at any time, with or without notice, and the Company retains the same right, with or without cause or notice. I recognize, therefore, that I am an "at will" employee. This acknowledgment supersedes any prior acknowledgment or agreement with the Company. This acknowledgment does not constitute an agreement of employment with the Company. April 18, 2002 The Buckle, Inc. Acknowledged by: ------------------------------ Dennis H. Nelson 18 EX-10.6 4 c69084ex10-6.txt ACKNOWLEDGMENT FOR JAMES E. SHADA EXHIBIT 10.6 ACKNOWLEDGMENT 1. James E. Shada, currently employed by The Buckle, Inc. ("Company") of Kearney, Nebraska, will be paid an annual salary of $400,000 for so long as the employee is employed by the Company during the fiscal year ending February 1, 2003. 2. In addition to the salary outlined in paragraph 1, above, a "Cash Award" for the above fiscal year will be paid to you provided you are employed by the Company on the last day of such fiscal year. The "Cash Award" will be paid as part of the Incentive Plan which includes a Bonus Pool as Cash Incentive for executives. This Bonus Pool will be calculated for the fiscal year based upon dollars of growth in key performance categories compared to the Base Year amounts, multiplied by the applicable percentage amounts as outlined in the Plan (see Exhibit A to the Company's Proxy Statement). The applicable percentage amounts for the fiscal 2002 Executive Incentive Plan include 8.5% of the increase in Same Store Sales, 5.0% of the increase in Gross Profit and 15.0% of the increase in Pre-bonus Net Income. The Base Year amounts are determined using the immediately preceding fiscal year for Same Store Sales and the prior three-year rolling average for the Gross Profit and Pre-Bonus Net Income. Your percentage of the bonus pool has been pre-set for fiscal 2002 by the compensation committee of the Board of Directors. Each Participant in the Plan shall receive a Cash Award calculated as follows for fiscal 2002, which is considered to be the "transition year " for the Incentive Plan. For the Transition Year (fiscal 2002) the Cash Award shall be equal to the sum of 50% the Participant's share of the Bonus Pool for the Transition Year; plus a multiple of the Participant's Base Salary, which multiple will be based upon the Company's growth in Pre-Bonus Net Income for the Transition Year over the previous year. The multiple will also be different for Level I and Level II Executives. You are designated as a Level I employee. The multiples will be calculated as follows, with the multiples being pro-rated for each one percent (1%) increase in Pre-Bonus Net Income between the levels set forth below: --------------------------------------------------------------------- EXECUTIVE LEVEL LEVEL I LEVEL II --------------------------------------------------------------------- Change in Pre-Bonus Net Income --------------------------------------------------------------------- Any decrease 0.00 0.00 --------------------------------------------------------------------- No Change 0.45 0.25 --------------------------------------------------------------------- 5% increase 0.525 0.30 --------------------------------------------------------------------- 10% increase 0.60 0.35 --------------------------------------------------------------------- 20% increase 0.80 0.45 --------------------------------------------------------------------- 25% increase 0.90 0.50 --------------------------------------------------------------------- 30% increase 1.00 0.55 --------------------------------------------------------------------- 40% increase 1.20 0.65 --------------------------------------------------------------------- No payment of a Cash Award for the year may be made until the Company's Pre-Bonus Net Income for the year is certified by the Compensation Committee. You shall not be entitled to receive payment of a Cash Award unless you are still in the employ of (and shall not have delivered notice of resignation to) the Company on the last day of the fiscal year for which the Cash Award is earned. The Cash Award will be paid on or before April 15 following the close of the fiscal year. For calculating this Cash Award, "Pre-Bonus Net Income" shall be defined as the Company's net income from operations after the deduction of all expenses, excluding administrative and store manager percentage bonuses and excluding income taxes, but including draws against such bonuses. Net income from operations does not include earnings on cash investments. For this purpose, net income shall be computed by the Company in accordance with the Company's normal accounting practices, and the Company's calculations will be final and conclusive. 19 3. Options to purchase 56,700 shares ("Options") of The Buckle, Inc. common stock at $20.50 per share were granted to you pursuant to the 1997 Executive Stock Option Plan as of the last day of the fiscal year preceding this Plan (2-02-02). Options granted under the Plan will vest according to the same terms as the 1997 Management Incentive Plan. Those terms include a performance feature whereby one-half of the Options granted will vest over three years if a 10% increase in Pre-Bonus Net Income is achieved, and the second one-half of the Options granted vest over three years if a 30% increase in Pre-Bonus Net Income is achieved. If the performance goals are not met the Options will ultimately vest after nine years and eleven months. This Plan added an "accelerator" feature for the Options so that vesting may occur sooner than the three years or nine years and eleven months, when and if the market price of the Company's stock doubles from the fair market value of the stock at the date of the grant. All Options will also include a "reload" feature under this Plan. 4. You will be given a vehicle allowance of $13,000 to be paid quarterly throughout the fiscal year. You are also allowed personal use of a corporate owned aircraft for up to 12 hours this fiscal year. 5. A credit limit of $3,500 has been established on your The Buckle charge account, subject to annual change as determined by management. Please make sure your charge account balance does not exceed this limit. You may have payments made to your charge account via payroll withholding during the year. Management is committed to reviewing its policies continually. Accordingly, the statements outlined above are subject to review and change at any time, with or without notice. I understand I have the right to terminate my employment with the Company at any time, with or without notice, and the Company retains the same right, with or without cause or notice. I recognize, therefore, that I am an "at will" employee. This acknowledgment supersedes any prior acknowledgment or agreement with the Company. This acknowledgment does not constitute an agreement of employment with the Company. April 18, 2002 The Buckle, Inc. Acknowledged by: ------------------------------ James E. Shada 20 EX-10.7 5 c69084ex10-7.txt ACKNOWLEDGMENT FOR KARI G. SMITH EXHIBIT 10.7 ACKNOWLEDGMENT 1. Kari G. Smith, currently employed by The Buckle, Inc. ("Company") of Kearney, Nebraska, will be paid an annual salary of $225,000 for so long as the employee is employed by the Company during the fiscal year ending February 1, 2003. 2. In addition to the salary outlined in paragraph 1, above, a "Cash Award" for the above fiscal year will be paid to you provided you are employed by the Company on the last day of such fiscal year. The "Cash Award" will be paid as part of the Incentive Plan which includes a Bonus Pool as Cash Incentive for executives. This Bonus Pool will be calculated for the fiscal year based upon dollars of growth in key performance categories compared to the Base Year amounts, multiplied by the applicable percentage amounts as outlined in the Plan (see Exhibit A to the Company's Proxy Statement). The applicable percentage amounts for the fiscal 2002 Executive Incentive Plan include 8.5% of the increase in Same Store Sales, 5.0% of the increase in Gross Profit and 15.0% of the increase in Pre-bonus Net Income. The Base Year amounts are determined using the immediately preceding fiscal year for Same Store Sales and the prior three-year rolling average for the Gross Profit and Pre-Bonus Net Income. Your percentage of the bonus pool has been pre-set for fiscal 2002 by the compensation committee of the Board of Directors. Each Participant in the Plan shall receive a Cash Award calculated as follows for fiscal 2002, which is considered to be the "transition year " for the Incentive Plan. For the Transition Year (fiscal 2002) the Cash Award shall be equal to the sum of 50% the Participant's share of the Bonus Pool for the Transition Year; plus a multiple of the Participant's Base Salary, which multiple will be based upon the Company's growth in Pre-Bonus Net Income for the Transition Year over the previous year. The multiple will also be different for Level I and Level II Executives. You are designated as a Level II employee. The multiples will be calculated as follows, with the multiples being pro-rated for each one percent (1%) increase in Pre-Bonus Net Income between the levels set forth below: --------------------------------------------------------------------- EXECUTIVE LEVEL LEVEL I LEVEL II --------------------------------------------------------------------- Change in Pre-Bonus Net Income --------------------------------------------------------------------- Any decrease 0.00 0.00 --------------------------------------------------------------------- No Change 0.45 0.25 --------------------------------------------------------------------- 5% increase 0.525 0.30 --------------------------------------------------------------------- 10% increase 0.60 0.35 --------------------------------------------------------------------- 20% increase 0.80 0.45 --------------------------------------------------------------------- 25% increase 0.90 0.50 --------------------------------------------------------------------- 30% increase 1.00 0.55 --------------------------------------------------------------------- 40% increase 1.20 0.65 --------------------------------------------------------------------- No payment of a Cash Award for the year may be made until the Company's Pre-Bonus Net Income for the year is certified by the Compensation Committee. You shall not be entitled to receive payment of a Cash Award unless you are still in the employ of (and shall not have delivered notice of resignation to) the Company on the last day of the fiscal year for which the Cash Award is earned. The Cash Award will be paid on or before April 15 following the close of the fiscal year. For calculating this Cash Award, "Pre-Bonus Net Income" shall be defined as the Company's net income from operations after the deduction of all expenses, excluding administrative and store manager percentage bonuses and excluding income taxes, but including draws against such bonuses. Net income from operations does not include earnings on cash investments. For this purpose, net income shall be computed by the Company in accordance with the Company's normal accounting practices, and the Company's calculations will be final and conclusive. 21 3. Options to purchase 27,900 shares ("Options") of The Buckle, Inc. common stock at $20.50 per share were granted to you pursuant to the 1997 Executive Stock Option Plan as of the last day of the fiscal year preceding this Plan (2-02-02). Options granted under the Plan will vest according to the same terms as the 1997 Management Incentive Plan. Those terms include a performance feature whereby one-half of the Options granted will vest over three years if a 10% increase in Pre-Bonus Net Income is achieved, and the second one-half of the Options granted vest over three years if a 30% increase in Pre-Bonus Net Income is achieved. If the performance goals are not met the Options will ultimately vest after nine years and eleven months. This Plan added an "accelerator" feature for the Options so that vesting may occur sooner than the three years or nine years and eleven months, when and if the market price of the Company's stock doubles from the fair market value of the stock at the date of the grant. All Options will also include a "reload" feature under this Plan. 4. A credit limit of $3,500 has been established on your The Buckle charge account, subject to annual change as determined by management. Please make sure your charge account balance does not exceed this limit. You may have payments made to your charge account via payroll withholding during the year. Management is committed to reviewing its policies continually. Accordingly, the statements outlined above are subject to review and change at any time, with or without notice. I understand I have the right to terminate my employment with the Company at any time, with or without notice, and the Company retains the same right, with or without cause or notice. I recognize, therefore, that I am an "at will" employee. This acknowledgment supersedes any prior acknowledgment or agreement with the Company. This acknowledgment does not constitute an agreement of employment with the Company. April 18, 2002 The Buckle, Inc. Acknowledged by: ------------------------------ Kari G. Smith 22 EX-10.8 6 c69084ex10-8.txt ACKNOWLEDGMENT FOR BRETT P. MILKIE EXHIBIT 10.8 ACKNOWLEDGMENT 1. Brett P. Milkie, currently employed by The Buckle, Inc. ("Company") of Kearney, Nebraska, will be paid an annual salary of $210,000 for so long as the employee is employed by the Company during the fiscal year ending February 1, 2003. 2. In addition to the salary outlined in paragraph 1, above, a "Cash Award" for the above fiscal year will be paid to you provided you are employed by the Company on the last day of such fiscal year. The "Cash Award" will be paid as part of the Incentive Plan which includes a Bonus Pool as Cash Incentive for executives. This Bonus Pool will be calculated for the fiscal year based upon dollars of growth in key performance categories compared to the Base Year amounts, multiplied by the applicable percentage amounts as outlined in the Plan (see Exhibit A to the Company's Proxy Statement). The applicable percentage amounts for the fiscal 2002 Executive Incentive Plan include 8.5% of the increase in Same Store Sales, 5.0% of the increase in Gross Profit and 15.0% of the increase in Pre-bonus Net Income. The Base Year amounts are determined using the immediately preceding fiscal year for Same Store Sales and the prior three-year rolling average for the Gross Profit and Pre-Bonus Net Income. Your percentage of the bonus pool has been pre-set for fiscal 2002 by the compensation committee of the Board of Directors. Each Participant in the Plan shall receive a Cash Award calculated as follows for fiscal 2002, which is considered to be the "transition year " for the Incentive Plan. For the Transition Year (fiscal 2002) the Cash Award shall be equal to the sum of 50% the Participant's share of the Bonus Pool for the Transition Year; plus a multiple of the Participant's Base Salary, which multiple will be based upon the Company's growth in Pre-Bonus Net Income for the Transition Year over the previous year. The multiple will also be different for Level I and Level II Executives. You are designated as a Level II employee. The multiples will be calculated as follows, with the multiples being pro-rated for each one percent (1%) increase in Pre-Bonus Net Income between the levels set forth below: --------------------------------------------------------------------- EXECUTIVE LEVEL LEVEL I LEVEL II --------------------------------------------------------------------- Change in Pre-Bonus Net Income --------------------------------------------------------------------- Any decrease 0.00 0.00 --------------------------------------------------------------------- No Change 0.45 0.25 --------------------------------------------------------------------- 5% increase 0.525 0.30 --------------------------------------------------------------------- 10% increase 0.60 0.35 --------------------------------------------------------------------- 20% increase 0.80 0.45 --------------------------------------------------------------------- 25% increase 0.90 0.50 --------------------------------------------------------------------- 30% increase 1.00 0.55 --------------------------------------------------------------------- 40% increase 1.20 0.65 --------------------------------------------------------------------- No payment of a Cash Award for the year may be made until the Company's Pre-Bonus Net Income for the year is certified by the Compensation Committee. You shall not be entitled to receive payment of a Cash Award unless you are still in the employ of (and shall not have delivered notice of resignation to) the Company on the last day of the fiscal year for which the Cash Award is earned. The Cash Award will be paid on or before April 15 following the close of the fiscal year. For calculating this Cash Award, "Pre-Bonus Net Income" shall be defined as the Company's net income from operations after the deduction of all expenses, excluding administrative and store manager percentage bonuses and excluding income taxes, but including draws against such bonuses. Net income from operations does not include earnings on cash investments. For this purpose, net income shall be computed by the Company in accordance with the Company's normal accounting practices, and the Company's calculations will be final and conclusive. 23 3. Options to purchase 27,900 shares ("Options") of The Buckle, Inc. common stock at $20.50 per share were granted to you pursuant to the 1997 Executive Stock Option Plan as of the last day of the fiscal year preceding this Plan (2-02-02). Options granted under the Plan will vest according to the same terms as the 1997 Management Incentive Plan. Those terms include a performance feature whereby one-half of the Options granted will vest over three years if a 10% increase in Pre-Bonus Net Income is achieved, and the second one-half of the Options granted vest over three years if a 30% increase in Pre-Bonus Net Income is achieved. If the performance goals are not met the Options will ultimately vest after nine years and eleven months. This Plan added an "accelerator" feature for the Options so that vesting may occur sooner than the three years or nine years and eleven months, when and if the market price of the Company's stock doubles from the fair market value of the stock at the date of the grant. All Options will also include a "reload" feature under this Plan. 4. A credit limit of $3,500 has been established on your The Buckle charge account, subject to annual change as determined by management. Please make sure your charge account balance does not exceed this limit. You may have payments made to your charge account via payroll withholding during the year. Management is committed to reviewing its policies continually. Accordingly, the statements outlined above are subject to review and change at any time, with or without notice. I understand I have the right to terminate my employment with the Company at any time, with or without notice, and the Company retains the same right, with or without cause or notice. I recognize, therefore, that I am an "at will" employee. This acknowledgment supersedes any prior acknowledgment or agreement with the Company. This acknowledgment does not constitute an agreement of employment with the Company. April 18, 2002 The Buckle, Inc. Acknowledged by: ------------------------------ Brett P. Milkie 24 EX-10.9 7 c69084ex10-9.txt ACKNOWLEDGMENT FOR PATRICIA K. WHISLER EXHIBIT 10.9 ACKNOWLEDGMENT 1. Patricia K. Whisler, currently employed by The Buckle, Inc. ("Company") of Kearney, Nebraska, will be paid an annual salary of $210,000 for so long as the employee is employed by the Company during the fiscal year ending February 1, 2003. 2. In addition to the salary outlined in paragraph 1, above, a "Cash Award" for the above fiscal year will be paid to you provided you are employed by the Company on the last day of such fiscal year. The "Cash Award" will be paid as part of the Incentive Plan which includes a Bonus Pool as Cash Incentive for executives. This Bonus Pool will be calculated for the fiscal year based upon dollars of growth in key performance categories compared to the Base Year amounts, multiplied by the applicable percentage amounts as outlined in the Plan (see Exhibit A to the Company's Proxy Statement). The applicable percentage amounts for the fiscal 2002 Executive Incentive Plan include 8.5% of the increase in Same Store Sales, 5.0% of the increase in Gross Profit and 15.0% of the increase in Pre-bonus Net Income. The Base Year amounts are determined using the immediately preceding fiscal year for Same Store Sales and the prior three-year rolling average for the Gross Profit and Pre-Bonus Net Income. Your percentage of the bonus pool has been pre-set for fiscal 2002 by the compensation committee of the Board of Directors. Each Participant in the Plan shall receive a Cash Award calculated as follows for fiscal 2002, which is considered to be the "transition year " for the Incentive Plan. For the Transition Year (fiscal 2002) the Cash Award shall be equal to the sum of 50% the Participant's share of the Bonus Pool for the Transition Year; plus a multiple of the Participant's Base Salary, which multiple will be based upon the Company's growth in Pre-Bonus Net Income for the Transition Year over the previous year. The multiple will also be different for Level I and Level II Executives. You are designated as a Level II employee. The multiples will be calculated as follows, with the multiples being pro-rated for each one percent (1%) increase in Pre-Bonus Net Income between the levels set forth below: --------------------------------------------------------------------- EXECUTIVE LEVEL LEVEL I LEVEL II --------------------------------------------------------------------- Change in Pre-Bonus Net Income --------------------------------------------------------------------- Any decrease 0.00 0.00 --------------------------------------------------------------------- No Change 0.45 0.25 --------------------------------------------------------------------- 5% increase 0.525 0.30 --------------------------------------------------------------------- 10% increase 0.60 0.35 --------------------------------------------------------------------- 20% increase 0.80 0.45 --------------------------------------------------------------------- 25% increase 0.90 0.50 --------------------------------------------------------------------- 30% increase 1.00 0.55 --------------------------------------------------------------------- 40% increase 1.20 0.65 --------------------------------------------------------------------- No payment of a Cash Award for the year may be made until the Company's Pre-Bonus Net Income for the year is certified by the Compensation Committee. You shall not be entitled to receive payment of a Cash Award unless you are still in the employ of (and shall not have delivered notice of resignation to) the Company on the last day of the fiscal year for which the Cash Award is earned. The Cash Award will be paid on or before April 15 following the close of the fiscal year. For calculating this Cash Award, "Pre-Bonus Net Income" shall be defined as the Company's net income from operations after the deduction of all expenses, excluding administrative and store manager percentage bonuses and excluding income taxes, but including draws against such bonuses. Net income from operations does not include earnings on cash investments. For this purpose, net income shall be computed by the Company in accordance with the Company's normal accounting practices, and the Company's calculations will be final and conclusive. 25 3. Options to purchase 27,900 shares ("Options") of The Buckle, Inc. common stock at $20.50 per share were granted to you pursuant to the 1997 Executive Stock Option Plan as of the last day of the fiscal year preceding this Plan (2-02-02). Options granted under the Plan will vest according to the same terms as the 1997 Management Incentive Plan. Those terms include a performance feature whereby one-half of the Options granted will vest over three years if a 10% increase in Pre-Bonus Net Income is achieved, and the second one-half of the Options granted vest over three years if a 30% increase in Pre-Bonus Net Income is achieved. If the performance goals are not met the Options will ultimately vest after nine years and eleven months. This Plan added an "accelerator" feature for the Options so that vesting may occur sooner than the three years or nine years and eleven months, when and if the market price of the Company's stock doubles from the fair market value of the stock at the date of the grant. All Options will also include a "reload" feature under this Plan. 4. A credit limit of $3,500 has been established on your The Buckle charge account, subject to annual change as determined by management. Please make sure your charge account balance does not exceed this limit. You may have payments made to your charge account via payroll withholding during the year. Management is committed to reviewing its policies continually. Accordingly, the statements outlined above are subject to review and change at any time, with or without notice. I understand I have the right to terminate my employment with the Company at any time, with or without notice, and the Company retains the same right, with or without cause or notice. I recognize, therefore, that I am an "at will" employee. This acknowledgment supersedes any prior acknowledgment or agreement with the Company. This acknowledgment does not constitute an agreement of employment with the Company. April 18, 2002 The Buckle, Inc. Acknowledged by: --------------------------------- Patricia K. Whisler 26 EX-10.11 8 c69084ex10-11.txt COMMERCIAL NOTE Exhibit 10.11 COMMERCIAL NOTE ________________________________________________________________________________ Borrower's name Date The Buckle, Inc. 05/31/2001 ________________________________________________________________________________ Promise to Pay: For value received, the undersigned Borrower (if more than on, jointly and severally) promise(s) to pay to the order of Wells Fargo Bank Nebraska, N.A. (the "Bank"), at 21 West 21st Street, ______________________________ ________________________ Kearney, NE 68847 or at any other place designated at any time by the holder __________________ of this promissory note (the "Note") in lawful money of the United States of America, the principal sum of Ten Million and 0/100 ________________________________________________________________________________ ________________________________________________________________________________ Dollars ($10,000,000.00), together with interest on the unpaid principal amount in accordance with the repayment terms set forth below. INTEREST: Interest on this Note, calculated on the basis of actual days elapsed in a 360 day year, will accrue as follows (choose one of the following): [ ] on the unpaid principal amount of this Note at the Note Rate. [ ] on the unpaid principle amount of this Note at the __________ of the Note Rates selected at any time. [ ] on the unpaid principal amount of this Note: up to and including $____________________ at the Note Rate. from $ ___________________ to and including $ ____________________ at the Note Rate _______ __________%. from $ ___________________ to and including $ ____________________ at the Note Rate _______ __________%. in excess of $___________________ at the Note Rate _______ __________%. [ ] if the unpaid principal amount of this Note: is not in excess of $ ___________________ at the Note Rate, is equal to or greater than $ ___________________ but not in excess of $ ___________________ at the Note Rate __________ __________%, is equal to or greater than $ ___________________ but not in excess of $ ___________________ at the Note Rate __________ __________%, is equal to or greater than $ ___________________ at the Note Rate _______ __________%. NOTE RATE: The Note Rate under this Note shall be (choose the applicable Note Rate(s)): [ ] an annual rate of _________ % (the "Note Rate"), [ ] an annual rate [ ] equal to the Index Rate, or [ ] _______ % _____ the Index Rate, or [ ] ______ % of the Index Rate [ ] from time to time in effect, each change in the interest rate to become effective on the day the corresponding change in the Index Rate becomes effective, or _________________________________________________________________________ ____________________________________________________________________________ with an initial interest rate equal to 7.0000 % (the "Note Rate"), [ ] an annual rate as set forth in the Interest Rate Addendum attached to this Note (the "Note Rate"), provided that if this Note has a variable rate of interest, the Note Rate shall at no time be less than an annual rate of ________ %, and [ ] shall at no time exceed an annual rate of ________ %. In no event shall the rate of interest applicable to this Note under any term or condition exceed the maximum rate permitted by law. [ ] "Index Rate" means the "Base Rate" which is the rate of interest established by ______________________________________ from time to time as its "base" or "prime" rate, or [ ] the "Wall Street Rate" which is the highest "prime" rate of interest reported in the Wall Street Journal "Money Rates" Table, or [ ] the ________________________________________________________________________ ________________________________________________________________________ REPAYMENT TERMS: Unless payable sooner as a result of its acceleration, the Borrower promises to pay this Note as follows (choose the applicable Repayment Term). PRINCIPAL. Principal shall be payable: [ ] on the earlier of demand or 05/31/2002 (the "Due Date"). [ ] on _______________________ (the "Due Date"). INTEREST. Interest shall be payable: [ ] on the Due Date. [ ] monthly, commencing 06/30/2001 and on the last day of each succeeding month and on the Due Date. Unless applicable law requires the Bank to apply amounts in come other matter, all payments shall be applied first in payment of billed interest, then to the payment of any outstanding late fees, and the balance thereof shall be applied in reduction of the principal amount outstanding, provided however, that if an event of default has occurred then all payments will be applied as directed by the Bank, in its sole discretion. "DUE DATE" means the maturity date of this Note whether it is the dated maturity date or an earlier date by reason of acceleration or demand. [ ] REVOLVING LINE. The Borrower may borrow, prepay, and reborrow under this Note until the Due Date within the limits of this Note, and subject to the terms and conditions in any other agreements between the Borrower and the Bank. [ ] LATE FEE: Each time that a scheduled payment is not paid when due or within ________ days afterwards, the Borrower agrees to pay a late fee equal to [ ] $ _________________ , or [ ] ________ % of the full amount of the late payment, or [ ] the _________ of $ or _________ % of the full amount of the late payment. Acceptance by the Bank of any late fee shall not constitute a waiver of any default hereunder. [ ] OTHER FEES: [ ] The Borrower shall pay to the Bank [ ] a nonrefundable, one-time Origination Fee equal to $ ______________________ and/or [ ] a non-refundable, one-time ___________________________________ equal to $ ____________________ at any time this Note is signed. [ ] The Borrower shall by to the Bank a(n) Letter of Credit Fee equal to [ ] $ ______________________ , or [ ] _____________ % per annum (calculated on the basis of actual days elapsed in a _____ day year) of the average daily unused portion, maximum principal amount of the line evidenced by this Note, payable ____________________ , in arrears, commencing 06/30/2001 and on the last day of each succeeding ______________ and on the Due Date. [ ] ADDITIONAL INTEREST BEFORE AND AFTER THE DUE DATE: Each time that a scheduled payment is not paid when due or within ______ days afterward, additional interest will begin accruing on the next calendar day on the entire unpaid principal amount of this Note at an annual rate of _________ % in excess of the Note Rate ("Additional Interest Rate"). Acceptance by the Bank of Additional Interest shall not constitute a waiver of any default hereunder. The unpaid principal and interest due on this Note after the Due Date shall bear interest until paid at the Additional Interest Rate (except in North Dakota). PREPAYMENT: The Borrower may at any time prepay this Note, in whole or in part and any prepayments shall be applied against outstanding principal only after all billed interest and any outstanding late fees have been paid in full. SECURITY: In addition to any other collateral interest given to the Bank previously, now, or in the future, by separate agreements not referenced herein, which states it is given to secure this Note or all indebtedness of the Borrower to the Bank, this Note is secured with a(n) __________________________ dated _______________________ DEFAULT AND ACCELERATION: Borrower will be in default under this Note if: (i) the Borrower fails to pay when due any principal, interest or other amounts due under this Note, or (ii)the Borrower fails to perform or observe any term or covenant of this Note or any related documents or perform under any other agreement with the Bank, or (iii) the Borrower or any subsidiary fails to perform or observe any agreement with any other creditor that relates to indebtedness or contingent liabilities which would allow the maturity of such indebtedness or obligation to be accelerated. or (iv) the Borrower changes its legal form of organization, or (v) any representation or warranty made by the Borrower in applying for the loan evidenced by this Note is untrue in any material respect, or (vi) a garnishment, levy or writ of attachment, or any local, state, or federal notice of tax lien or levy is served upon the Bank for the attachment of property of the Borrower or any subsidiary that is in the Bank's possession or for indebtedness owed to the Borrower or any subsidiary by the Bank, or (vii) any Guaranty given in connection herewith may have become, in the Bank's judgment, unenforceable, or (viii) the Bank at any time, in good faith, believes that the Borrower will not be able to pay this Note when it is due; then or at any time thereafter unless such default is cured the Bank may, at is opinion, declare all unpaid principal, accrued interest, fees and all other amounts payable under this Note to be immediately due and payable, without notice or demand to the Borrower, and if this Note evidences a line of credit, terminate the line of credit without notice to the Borrower. If, however, this Note is payable on demand, nothing herein contained shall preclude or limit the Bank from demanding payment of this Note at any time and for any reason, without notice. AUTOMATIC ACCELERATION: If, with or without the Borrower's consent, a custodian, trustee or receiver is appointed for any of the Borrower's or any subsidiary's properties, or if a petition is filed by or against the Borrower or any subsidiary under the United States Bankruptcy Code, or if the Borrower is dissolved or liquidated (if an entity), or dies (if an individual), the unpaid principal, accrued interest and all other amounts payable under this Note will automatically become due and payable without notice or demand and, if this Note evidences a line of credit, the line of credit will automatically terminate. REMEDIES ON DEFAULT: If the indebtedness evidenced hereby is not paid at maturity, whether by acceleration or otherwise, the Bank shall have all of the rights and remedies provided by any law and/or by agreement of the Borrower, including but not limited to all of the rights and remedies of a secured party under the Uniform Commercial Code. Any requirement of reasonable notice mandated by the Uniform Commercial Code shall be met if the Bank sends such notice to the Borrower at least ten (10) days prior to the date of sale, disposition or other event giving rise to the required notice. The Borrower shall be liable for any deficiency remaining after disposition of any property in which the Bank has a security interest to secure payment of the indebtedness evidenced hereby, and the computation of such deficiency or of the amount required to redeem such property shall include, unless otherwise prohibited by law, reasonable attorney's fees and legal expenses. WAIVER: Each endorser hereof or any other party liable for the indebtedness evidenced hereby severally waives demand, presentment, notice of dishonor and protest of this Note, and consents to any extension or postponement of time of its payment without limit as to the number or period thereof, to any substitution, exchange or release of all or any part of any collateral securing this Note, to the addition of any party hereto, and to the release or discharge of, or suspension of any rights and remedies against, any person who may be liable hereon for the payment of the indebtedness evidenced hereby. AMENDMENT OR MODIFICATION OF TERMS: Any amendment or modification of this Note must be in writing and singed by the party against whom enforcement of such amendment or modification is sought. The Bank may change any of the repayment terms of this Note, including extensions of time and renewals, and release or add any party liable on this Note, or agree to the substitution or release of any security collateralizing this Note without notifying or releasing from liability any accommodation party, endorser, or guarantor. The Bank may suspend or waive any rights or remedies that it may have against any person who may be liable for its repayment. MISCELLANEOUS: No delay on the part of the Bank in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Bank of any right or remedy shall preclude any other future exercise thereof or the exercise of any other right or remedy. No waiver or indulgence by the Bank of any default shall be effective unless in writing and singed by the Bank, nor shall a waiver by the Bank on one occasion be constructed as a bar to, or waiver of, any such right on any future occasion. Any reference to the Bank herein shall be deemed to include any subsequent holder of this Note. This Note is accepted in the stave where the Bank is located, and shall be governed by the laws of the state where the Bank is located. The Borrower agrees to pay all costs in connection with the borrowing represented by this Note or security given, including any taxes, stamp, insurance or otherwise, payable by reason of the execution and delivery of this Note and any relation documents. In the event the Bank is required to collect this Note following its Due Date or the bankruptcy of any maker hereof, the Borrower will pay the Bank such further amounts as shall be sufficient to cover the costs and expenses incurred in collecting this Note and liquidating any security or guaranties given in support hereof, including reasonable attorneys' fees and expenses required to take such actions in any court, including any bankruptcy court. FINANCIAL REPORTING: While any amounts are due under this Note, or the Borrower has the right to request an advance under this Note, the Bank reserves the right to require that the Borrower deliver to the Bank annual financial statements and such other financial information as the Bank may request. ARBITRATION: The Bank and Borrower agree, at the request of either party, to submit to binding arbitration all claims, disputes and controversies whether in tort, contract, or otherwise, except "core proceedings" under the U.S. Bankruptcy Code arising between themselves and their respective employees, officers, directors, attorneys and other agents, which relate in any way without limitation to this Note, including by way of example but not by way of limitation the negotiation, collateralization, administration, repayment, modification, default, termination and enforcement of the loans or credit evidenced by this Note. Arbitration under this Agreement will be governed by the Federal Arbitration Act (Title 9 of the United States Code), except in Colorado where it will be governed by Colorado law, and proceed in the city where the Bank's principal office is located, or such other location as the Bank and Borrower my agree and shall be conducted by the American Arbitration Association ("AAA") in accordance with the AAA's commercial arbitration rules ("AAA Rules"). Arbitration will be conducted before a single neutral arbitrator selected in accordance with AAA Rules and who shall be an attorney who has practiced commercial law for at least ten years. The arbitrator will determine whether an issue is arbitratable and will give effect to applicable statues of limitation. Judgement upon the arbitrator's award may be entered in any court having jurisdiction. The arbitrator has the discretion to decide, upon documents only or with a hearing, any motion to dismiss for failure to state a claim or any motion for summary judgment. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. The arbitrator will award costs and expenses in accordance with the provisions of this Note. Discovery will be governed by the rules of civil procedure in effect in the state where the Bank's principal office is located. Discovery must be completed at least 20 days before the hearing date and within 180 days of the commencement of arbitration. Each request for an extension and all other discovery disputes will be determined by the arbitrator upon a showing that the request is essential for the party's presentation and that no alternative means for obtaining information are available during the initial discovery period. This Agreement does not limit the right of either party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies such as setoff or repossession; or (iii) obtain provisional remedies such as replevin, injunctive relief, attachment or the appointment of a receiver during the pendency or before or after any arbitration proceeding. These exceptions do not constitute a waiver of the right or obligation of either party to submit any dispute to arbitration, including those arising from the exercise of these remedies. STATE LAW REQUIREMENTS: If the Bank is located in IOWA: IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS NOTE AND AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED. YOU MAY CHANGE THE TERMS OF THIS NOTE AND AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT. THIS NOTICE ALSO APPLIES TO ANY OTHER CREDIT AGREEMENTS (EXCEPT CONSUMER LOANS OR OTHER EXEMPT TRANSACTIONS) NOW IN EFFECT BETWEEN YOU AND THIS LENDER. BY SIGNING THIS NOTE AND AGREEMENT, THE BORROWER ACKNOWLEDGES RECEIPT OF A COPY OF THIS NOTE AND AGREEMENT. If the Bank is located in MINNESOTA: This extension of credit is made under (i) Minn. Stat 47 204 if this Note is from an individual and is secured by a first lien on residential real estate; (ii) Minn. Stat 334 01, subd. 2, if the initial advance under this Note is $100,000.00 or more and it is not secured by a first lien on residential real estate. If the Bank is located in NEBRASKA: A credit agreement must be in writing to be enforceable under law. To protect you and us from any misunderstandings or disappointments, any contract, promise, undertaking or offer to forebear repayment of money or to make any other financial accommodation in connection with is loan of money or grant or extension of credit, or any amendment of, cancellation of, waiver of, or substitution for any or all of the terms or provisions of any instrument or document executed in connection with this loan of money or grant or extension of credit, must be in writing to be effective. If the Bank is located in TEXAS: THIS WRITTEN LOAN AGREEMENTS REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRIDICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. CHAPTER 346 OF THE TEXAS FINANCE COSD OR ANY SUCCESSOR STATUTE WHICH REGULATE CERTAIN REVOLVING LOAN ACCOUNTS SHALL NOT APPLY TO THIS AGREEMENT. If the Bank is located in NORTH DAKOTA: In all events the Note Rate shall be the same rate after the Due Date as was in effect on the Due Date. If this Note is secured by a mortgage on real property located in North Dakota except a first mortgage, THIS OBLIGATION MAY BE THE BASIS FOR A PERSONAL ACTION AGAINST THE PROMISOR OR PROMISORS IN ADDITION TO THE OTHER REMEDIES ALLOWED BY LAW. (The term "Promisor" or "Promisors" means the Borrower herein). If the Note is secured by a mortgage on commercial real property located in North Dakota, the Bank has the right, following an event of default, to proceed to obtain and collect a deficiency judgment, together with foreclosure of the real property mortgaged under applicable laws. - -------------------------------------------------------------------------------- SIGNATURES - -------------------------------------------------------------------------------- Borrower's Name The Buckle, Inc. - -------------------------------------------------------------------------------- Signature Signature x_______________________________________________________________________________ Name and Title (if applicable) Name and Title (if applicable) Dennis Nelson, President & CEO - -------------------------------------------------------------------------------- Signature Signature x_______________________________________________________________________________ Name and Title (if applicable) Name and Title (if applicable) - -------------------------------------------------------------------------------- Street address City, State, Zip Code 2407 West 24th Street Kearney, NE 68847 Loan Purpose: [ ] Business, and/or [ ] this Note is given as replacement for, and not in satisfaction of the promissory note given by the Borrower to the Bank dated 05/31/2000______________ . EX-10.12 9 c69084ex10-12.txt COMMERCIAL NOTE AND CREDIT AGREEMENT Exhibit 10.12 COMMERCIAL NOTE AND CREDIT AGREEMENT - -------------------------------------------------------------------------------- Borrower's name Date The Buckle, Inc. 05/31/2001 - -------------------------------------------------------------------------------- Promise to Pay: For value received, the undersigned Borrower (if more than on, jointly and severally) promise(s) to pay to the order of Wells Fargo Bank Nebraska, N.A. (the "Bank"), at 21 West 21st Street Kearney, NE 68847 or at any other place designated at any time by the holder of this promissory note (the "Note") in lawful money of the United States of America, the principal sum of Seven Million Five Hundred Thousand and 0/100___________________________________ ________________________________________________________________________________ Dollars ($7,500,000.00), together with interest on the unpaid principal amount in accordance with the repayment terms set forth below. INTEREST: Interest on this Note, calculated on the basis of actual days elapsed in a 360 day year, will accrue as follows (choose one of the following): [ ] on the unpaid principal amount of this Note at the Note Rate. [ ] on the unpaid principle amount of this Note at the __________ of the Note Rates selected at any time. [ ] on the unpaid principal amount of this Note: up to and including $____________________ at the Note Rate. from $ ___________________ to and including $ ____________________ at the Note Rate _______ __________%. from $ ___________________ to and including $ ____________________ at the Note Rate _______ __________%. in excess of $ ___________________ at the Note Rate _______ __________%. [ ] if the unpaid principal amount of this Note: is not in excess of $ ___________________ at the Note Rate, is equal to or greater than $ ___________________ but not in excess of $ ___________________ at the Note Rate ___________ _____________%, is equal to or greater than $ ___________________ but not in excess of $ ___________________ at the Note Rate _________ _________%, is equal to or greater than $ ___________________ at the Note Rate _______ __________%. NOTE RATE: The Note Rate under this Note shall be (choose the applicable Note Rate(s)): [ ] an annual rate of _________ % (the "Note Rate"), [ ] an annual rate equal to the Index Rate, or _______ % _____ the Index Rate, or ______ % of the Index Rate from time to time in effect, each change in the interest rate to become effective on the day the corresponding change in the Index Rate becomes effective, or ________________________________________________________________________ with an initial interest rate equal to 7.0000 % (the "Note Rate"), [ ] an annual rate as set forth in the Interest Rate Addendum attached to this Note (the "Note Rate"), provided that if this Note has a variable rate of interest, [ ] the Note Rate shall at no time be less than an annual rate of ________ %, and [ ] shall at no time exceed an annual rate of ________ %. In no event shall the rate of interest applicable to this Note under any term or condition exceed the maximum rate permitted by law. [ ] "Index Rate" means the "Base Rate" which is the rate of interest established by ____________________________________________________________ from time to time as its "base" or "prime" rate, or the "Wall Street Rate" which is the highest "prime" rate of interest reported in the Wall Street Journal "Money Rates" Table, or [ ] the _______________________________________________________________________ ________________________________________________________________________________ REPAYMENT TERMS: Unless payable sooner as a result of its acceleration, the Borrower promises to pay this Note as follows (choose the applicable Repayment Term). PRINCIPAL. Principal shall be payable: [ ] on the earlier of demand or _____________________ (the "Due Date"). [ ] on 05/31/2002 (the "Due Date"). INTEREST. Interest shall be payable: [ ] on the Due Date. [ ] monthly, commencing 06/30/2001 and on the last day of each succeeding month and on the Due Date. Unless applicable law requires the Bank to apply amounts in come other matter, all payments shall be applied first in payment of billed interest, then to the payment of any outstanding late fees, and the balance thereof shall be applied in reduction of the principal amount outstanding, provided however, that if an event of default has occurred then all payments will be applied as directed by the Bank, in its sole discretion. "DUE DATE" means the maturity date of this Note whether it is the sated maturity date or an earlier date by reason of acceleration or demand. [ ] REVOLVING LINE. The Borrower may borrow, prepay, and reborrow under this Note until the Due Date within the limits of this Note, and subject to the terms and conditions in any other agreements between the Borrower and the Bank. LATE FEE: Each time that a scheduled payment is not paid when due or within ________ days afterwards, the Borrower agrees to pay a late fee equal to [ ] $ _________________ , or [ ] ________ % of the full amount of the late payment, or [ ] the _________ of $ or _________ % of the full amount of the late payment. Acceptance by the Bank of any late fee shall not constitute a waiver of any default hereunder. [ ] OTHER FEES: [ ] The Borrower shall pay to the Bank [ ] a nonrefundable, one-time Origination Fee equal to $ ______________________ and/or [ ] a non-refundable, one-time ___________________________________ equal to $ ____________________ at any time this Note is signed. [ ] The Borrower shall by to the Bank a(n) Letter of Credit Fee equal to $ ______________________ , or _____________ % per annum (calculated on the basis of actual days elapsed in a _____ day year) of the average daily unused portion, maximum principal amount of the line evidenced by this Note, payable ____________________ , in arrears, commencing 06/30/2001 and on the lastday of each succeeding ______________ and on the Due Date. [ ] ADDITIONAL INTEREST BEFORE AND AFTER THE DUE DATE: Each time that a scheduled payment is not paid when due or within ______ days afterward, additional interest will begin accruing on the next calendar day on the entire unpaid principal amount of this Note at an annual rate of _________ % in excess of the Note Rate ("Additional Interest Rate"). Acceptance by the Bank of Additional Interest shall not constitute a waiver of any default hereunder. The unpaid principal and interest due on this Note after the Due Date shall bear interest until paid at the Additional Interest Rate (except in North Dakota). PREPAYMENT: The Borrower may at any time prepay this Note, in whole or in part and any prepayments shall be applied against outstanding principal only after all billed interest and any outstanding late fees have been paid in full. SECURITY: In addition to any other collateral interest given to the Bank previously, now, or in the future, by separate agreements not referenced herein, which states it is given to secure this Note or all indebtedness of the Borrower to the Bank, this Note is secured with a(n) __________________________ dated _______________________ GUARANTY: Payment of this Note is guaranteed by ________________________________________________________________________________ by execution of a guaranty agreement(s) in a form acceptable to the Bank. REPRESENTATIONS: The Borrower is a Corporation , and is duly authorized to make and perform this Note, which constitutes a valid and enforceable obligation of the Borrower. All balance sheet, profit and loss statements, footnotes and other information furnished to the Bank in connection with this Note, are true, correct and complete and fairly and accurately reflect the financial condition and progress of the Borrower and its subsidiaries, if any, at the date thereof, including contingent liabilities of every type, and the Borrower warrants that said financial condition has not changed materially since such dates. ENVIRONMENTAL MATTERS: To the best of the Borrower's knowledge following diligent inquiry: 1) the Borrower and its subsidiaries, if any, are in compliance and fully intend and expect to remain in compliance in all material respects with all applicable environmental, health, and safety statues and regulations, 2) the properties and business of the Borrower and its subsidiaries, if any, are not and in the future will not be subject to any present or contingent environmental liability which could have a material adverse effect on the Borrower's business, and 3) the Borrower and its subsidiaries, if any, have not incurred, directly or indirectly, any material contingent liability in connection with the release of any toxic or hazardous waste or substance into the environment. So long as any indebtedness remains outstanding under this Note, the Borrower will and will cause its subsidiaries, if any, to inform the Bank promptly and in writing whenever Borrower obtains knowledge of a problem or information about releases, emissions or discharges which could form the basis of an environmental claim against the Borrower or its subsidiaries, if any. AFFIRMATIVE COVENANTS: So long as any indebtedness remains outstanding under this Note, the Borrower will and will cause its subsidiaries, if any, to (choose the applicable paragraph(s) from the following): [ ] 1. Maintain insurance with financially sound and reputable insurers covering its properties and business against such casualties and contingencies and in such types and such amounts as shall be in accordance with sound business and industry practices, with the Bank named as mortgagee, lender loss payee, or loss payee, as applicable, in such policies of insurance. [ ] 2. Maintain its existence and its business operations as in effect on the date of this Note and in accordance with all applicable laws and regulations and comply with all such laws and regulations, pay its indebtedness and obligations when due under normal terms, and pay on or before the respective due date all taxes, assessments, fees and other governmental monetary obligations, except as the same may be contested in good faith as an hereafter provided. [ ] 3. Maintain proper books of record and account. [ ] 4. Furnish to the Bank such information or books and records as the Bank may reasonably request, including, but not limited to, the following. (Fill in applicable requirements) [ ] a. Within 60 days after each fiscal quarterly period, a balance sheet as of the end of such period, and a statement of profit and loss and Statement of Changes in Owners Equity, from the beginning of the then fiscal year to the end of said period, certified as correct by one of its authorized agents. [ ] b. Within ______ days after, and as of the end of each of its fiscal years, a detailed financial statement, including a balance sheet and a statement of profit and loss and Statement of Changes in Owners Equity, compiled reviewed audited by an independent certified public accountant of recognized standing. [ ] c. For purposes of subparagraphs a and b of this section, if the Borrower has subsidiaries, the financial statements required will be provided on a consolidated and consolidating basis. [ ] d. A periodic listing in form and frequency satisfactory to the Bank of any property of the Borrower which is security for repayment of indebtedness evidenced hereby. [ ] e. Within ______ days after each _______________________________________ a borrowing base certificate in form satisfactory to the Bank, current through the end of that period certified as correct by an authorized representative of the Borrower. [ ] f. Within 30 days after and as of the end of each fiscal ______________ an aged listing of the Borrower's accounts receivable and accounts payable, in form and substance acceptable to the Bank. [ ] g. Annual personal financial statements and federal income tax returns of the Borrower and the guarantor(s), if any, including supporting documents for any tax returns (such as W-2 forms, 1099 forms, and Schedule K-1 forms). [ ] 5. Cause to be subordinated to the indebtedness of Borrower to the Bank, in a form acceptable to the Bank, indebtedness of the Borrower or its subsidiaries, if any to: [ ] 6. This loan will be at zero for a period of at least 60 consecutive days. NEGATIVE COVENANTS: The definitions contained in the Definitions section below shall apply to the negative covenants contained in paragraphs 1 to 20 below. Without the written consent of the Bank, so long as any indebtedness remains outstanding thereunder, the Borrower will not and will not permit its subsidiaries, if any to (choose the applicable paragraph(s) and provisions within a paragraph(s) form the following): 1. Permit the outstanding principal amount of this Note at any time to exceed the aggregate of the following: [ ] __________% of its Acceptable Accounts Receivable, [ ] __________% of its Inventory, [ ] __________% of its Equipment, [ ] less _____________________________________________________ [ ] 2. Permit its Net Working Capital to be less than $ ______________ as of the end of each fiscal: [ ] 3. Permit its ratio of Current Assets to Current Liabilities to be less than ___________ to 1.0 as of the end of each fiscal: ____________________. [ ] 4. Permit its ratio of Debt to Tangible Net Worth to be more than ____________ to 1.0 as of the end of each fiscal: [ ] If this box is checked, Subordinated Debt shall be subtracted from Debt and added to Tangible Net Worth for purposes of calculating compliance under this covenant. [ ] 5. Permit its ratio of Tangible Net Worth to be less than $ _____________ as of the end of each fiscal: _______________________. [ ] If this box is checked, Subordinated Debt shall be subtracted from Debt and shall be added to Tangible Net Worth for purposes of calculating compliance under this covenant. [ ] 6. Permit its ratio of Traditional Cash Flow to Current Maturities of Long-Term Debt to be less than _______________ to 1.0 as of the end of each fiscal: _______________________. [ ] If this box is checked, Interest Expense shall be added to Traditional Cash Flow and Current Maturities of Long-Term Debt for purposed of calculating compliance under this covenant. [ ] 7. Permit its ratio of Net Cash After Operations to the sum of Financing Costs and Current Maturities of Long-Term Debt to be less than ______________ to 1.0 for any fiscal year. [ ] 8. Permit its Traditional Cash Flow to be less than $ ________________ for any fiscal year. [ ] 9. Permit its After Tax Net Income, as determined in accordance with Generally Accepted Accounting Principles, to be less than $_________________ for any fiscal year. [ ] 10. Permit its [ ] Net Cash After Operations [ ] Net Cash Income [ ] Cash After Debt Amortization, to be less than $ for any fiscal year. [ ] 11. Acquire or retire any of its shares of capital stock, or declare or pay dividends or make any other distributions upon any of its shares of capital stock, except dividends payable in its capital stock. [ ] 12. Allow any partner or owner withdrawals or cash dividends in any fiscal year in the aggregate exceeding $ [ ] 13. Incur or permit to remain outstanding indebtedness for borrowed money or installment obligations, except indebtedness to the Bank, existing indebtedness disclosed to the Bank in writing, and indebtedness to _________________________. For purposes of this paragraph, the sale of any accounts receivable shall be deemed the incurring of indebtedness for borrowed money. [ ] 14. Create, or permit to exist, any lien on any of Borrower's property, real or personal, except liens to secure indebtedness permitted in writing by the Bank, liens to the Bank, liens incurred in the ordinary course of business securing current nondeliquent liabilities for taxes, worker's compensation, unemployment insurance, social security and pension liabilities, and liens for taxes being contested in good faith if liabilities relating thereto have been properly reflected on Borrower's books or, at request of the Bank, adequate funds or collateral has been pledged to insure payment. [ ] 15. Consolidate or combine with, or merge into, any other corporation or business entity, or permit any other compensation or business entity to merge into Borrower, nor shall it convey, lease or sell, all or a material portion of Borrower's assets or business, except the sale of inventory to customers in the ordinary course of business; nor shall Borrower lease, purchase or otherwise acquire, all or a material portion of the assets or business of any other corporation or business entity. [ ] 16. Guarantee, or otherwise become or remain, secondary liable on the undertaking of another, except for endorsement of checks for deposit and collection in the ordinary course of business. [ ] 17. Purchase or acquire any securities of, or make any loans or advances to, or investments in, any person, firm or corporation, except obligations of the United States Government, open market commercial paper rated prime or certificates of deposit in commercial banks. [ ] 18. Expend for, or contract for lease or rental of, or otherwise acquire fixed assets, if the aggregate costs of such expenditures, leases or rentals, or acquisitions to the Borrower and all subsidiaries, if any, shall exceed $_______________________ in any one fiscal year. Fixed assets shall be determined by Generally Accepted Accounting Principles, and shall include, but are not limited to, land, buildings, leaseholds, machinery, equipment, patents, patent rights, copyrights, trademarks and goodwill. [ ] 19. Pay, or award compensation of any type which exceeds $______________________ in any one fiscal year to [ ] 20. _______________________________________________________________________. Definitions. The definitions set forth below shall apply to this Note including the negative covenants contained in paragraphs 1 to 20 under Negative Covenants above: 1. "Acceptable Accounts Receivable" shall mean the Borrower's accounts receivable, determined in accordance with generally accepted accounting principles consistently applied, that are: (i) aged 90 days or less; (ii) not due from any party 10% or more of whose accounts are more than 90 days in age; (iii) not subject to offset or dispute, (iv) not due from the U.S. Government, foreign entities, of affiliates or subsidiaries of the Borrower, (v) not representing booked but unfilled orders, and (vi) _____________________________________________. 2. "Cash After Debt Amortization" shall mean, for the fiscal year of the Borrower, Net Cash After Operations less the sum of: (i) Financing Costs, and (ii) Current Maturities of Long-Term Debt. 3. "Current Assets" shall mean the aggregate amount of the Borrower's assets properly shown as current assets on its balance sheet, determined in accordance with generally accepted accounting principles consistently applied, minus the following: receivables and other amounts due from any shareholder, director, officer, or employee of the Borrower, and receivables and other amounts due from any other related or affiliated person, corporation, partnership, trust, or other entity of the Borrower. 4. "Current Liabilities" shall mean the aggregate amount of the Borrower's liabilities properly shown as current liabilities on its balance sheet, determined in accordance with generally accepted accounting principles consistently applied, minus any portion of such current liabilities which the Bank determines, in its sole discretion, to be subordinated in a satisfactory manner to the Borrower's indebtedness to the Bank. 5. "Current Maturities of Long-Term Debt" shall mean, that portion of the Borrower's "Long-Term Debt," that matures or that is scheduled to be paid during the fiscal year of the Borrower. For the purposes of this definition, "Long-Term Debt" shall mean the following: (i) the aggregate amount of the Borrower's properly shown as non-current liabilities on its balance sheet, determined in accordance with generally accepted accounting principles consistently applied, as of the last day of its preceding fiscal year; and (ii) any new liabilities of the Borrower incurred during its fiscal year that, in accordance with generally accepted accounting principles consistently applied, should be shown as non-current liabilities on its balance sheet at fiscal year-end. 6. "Debt" shall mean the aggregate amount of the Borrower's items properly shown as liabilities on its balance sheet, determined in accordance with generally accepted accounting principles consistently applied. 7. "Equipment" and "Inventory" shall have the same meaning as is given to those terms under the Uniform Commercial Code in the State in which the Bank is located. 8. "Financing Costs" shall mean the sum of the following for the fiscal year of the Borrower: (i) if the Borrower is a corporation, any dividends paid on any class of its stock (except for stock dividends); if the Borrower is a partnership, any distributions and withdrawals paid to its partners; and (ii) Interest Expense less any net increase or plus any net decrease in interest payable during the fiscal year of the Borrower. 9. "Interest Expense" shall mean, for the fiscal year of the Borrower, the amount of interest expense properly shown on its year-end income statement, determined in accordance with generally accepted accounting principles consistently applied. 10. "Net Cash After Operations" shall mean, for the fiscal year of the Borrower, the amount of net cash provided by operating activities, determined in accordance with generally accepted accounting principles consistently applied under the direct method, as described in Statement of the Financial Accounting Standards Board No. 95 - Statement of Cash Flows ("FASB 95"), but adjusted by adding back any interest paid (net of amount capitalized) under FASB 95. 11. "Net Cash Income" shall mean, for the fiscal year of the Borrower, Net Cash After Operations less Financing Costs. 12. "Net Working Capital" shall mean Current Assets minus Current Liabilities. 13. "Net Worth" shall mean the aggregate amount of the Borrower's items properly shown as assets on its balance sheet minus the aggregate amount of the Borrower's items properly shown as liabilities on its balance sheet, determined in accordance with generally accepted accounting principles consistently applied. 14. "Subordinated Debt" shall mean the amount of the Borrower's Debt that has been subordinated to the Borrower's indebtedness to the Bank, in a form and manner satisfactory to the Bank. 15. "Subsidiaries" are defined as any corporation or other entity of which more than 50% of the voting stock or controlling interest is owned or controlled, directly or indirectly, by the Borrower or one or more subsidiaries of the Borrower. 16. "Tangible Net Worth" shall mean Net Worth minus the aggregate amount of the Borrower's items properly shown as the following types of assets on its balance sheet, determined in accordance with generally accepted accounting principles consistently applied: (i) goodwill, patents, copyrights, mailing lists, trade names, trademarks, servicing rights, organizational and franchise costs, bond underwriting costs, and other like assets properly classified as intangible; (ii) leasehold improvements, (iii) receivables, loans and other amounts due from any shareholder, director, officer, or employee of the Borrower for partner, if the Borrower is a partnership, and receivables, loans and other amounts due from any other related or affiliated person, corporation, partnership, trust, or other entity of the Borrower; and (iv) investments or interest in non-public companies. 17. "Traditional Cash Flow" shall mean, for the fiscal year of the Borrower, the aggregate amount of the following items properly shown on its year-end income statement, determined in accordance with generally accepted accounting principles consistently applied: (i) net income after taxes; (ii) amortization expense; (iii) depreciation and depletion expense; (iv) deferred tax expense; and (v) similar types of noncash charges against income which the Bank determines, in its sole discretion, to be appropriate "add-backs." DEFAULT AND ACCELERATION: Borrower will be in default under this Note if: (i) the Borrower fails to pay when due any principal, interest or other amounts due under this Note, or (ii)the Borrower fails to perform or observe any term or covenant of this Note or any related documents or perform under any other agreement with the Bank, or (iii) the Borrower or any subsidiary fails to perform or observe any agreement with any other creditor that relates to indebtedness or contingent liabilities which would allow the maturity of such indebtedness or obligation to be accelerated. or (iv) the Borrower changes its legal form of organization, or (v) any representation or warranty made by the Borrower in applying for the loan evidenced by this Note is untrue in any material respect, or (vi) a garnishment, levy or writ of attachment, or any local, state, or federal notice of tax lien or levy is served upon the Bank for the attachment of property of the Borrower or any subsidiary that is in the Bank's possession or for indebtedness owed to the Borrower or any subsidiary by the Bank, or (vii) any Guaranty given in connection herewith may have become, in the Bank's judgment, unenforceable, or (viii) the Bank at any time, in good faith, believes that the Borrower will not be able to pay this Note when it is due, then or at any time thereafter unless such default is cured the Bank may, at is opinion, declare all unpaid principal, accrued interest, fees and all other amounts payable under this Note to be immediately due and payable, without notice or demand to the Borrower, and if this Note evidences a line of credit, terminate the line of credit without notice to the Borrower. If, however, this Note is payable on demand, nothing herein contained shall preclude or limit the Bank from demanding payment of this Note at any time and for any reason, without notice. AUTOMATIC ACCELERATION: If, with or without the Borrower's consent, a custodian, trustee or receiver is appointed for any of the Borrower's or any subsidiary's properties, or if a petition is filed by or against the Borrower or any subsidiary under the United States Bankruptcy Code, or if the Borrower is dissolved or liquidated (if an entity), or dies (if an individual), the unpaid principal, accrued interest and all other amounts payable under this Note will automatically become due and payable without notice or demand and, if this Note evidences a line of credit, the line of credit will automatically terminate. REMEDIES ON DEFAULT: If the indebtedness evidenced hereby is not paid at maturity, whether by acceleration or otherwise, the Bank shall have all of the rights and remedies provided by any law and/or by agreement of the Borrower, including but not limited to all of the rights and remedies of a secured party under the Uniform Commercial Code. Any requirement of reasonable notice mandated by the Uniform Commercial Code shall be met if the Bank sends such notice to the Borrower at least ten (10) days prior to the date of sale, disposition or other event giving rise to the required notice. The Borrower shall be liable for any deficiency remaining after disposition of any property in which the Bank has a security interest to secure payment of the indebtedness evidenced hereby, and the computation of such deficiency or of the amount required to redeem such property shall include, unless otherwise prohibited by law, reasonable attorney's fees and legal expenses. WAIVER: Each endorser hereof or any other party liable for the indebtedness evidenced hereby severally waives demand, presentment, notice of dishonor and protest of this Note, and consents to any extension or postponement of time of its payment without limit as to the number or period thereof, to any substitution, exchange or release of all or any part of any collateral securing this Note, to the addition of any party hereto, and to the release or discharge of, or suspension of any rights and remedies against, any person who may be liable hereon for the payment of the indebtedness evidenced hereby. AMENDMENT OR MODIFICATION OF TERMS: Any amendment or modification of this Note must be in writing and singed by the party against whom enforcement of such amendment or modification is sought. The Bank may change any of the repayment terms of this Note, including extensions of time and renewals, and release or add any party liable on this Note, or agree to the substitution or release of any security collateralizing this Note without notifying or releasing from liability any accommodation party, endorser, or guarantor. The Bank may suspend or waive any rights or remedies that it may have against any person who may be liable for its repayment. MISCELLANEOUS: No delay on the part of the Bank in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Bank of any right or remedy shall preclude any other future exercise thereof or the exercise of any other right or remedy. No waiver or indulgence by the Bank of any default shall be effective unless in writing and singed by the Bank, nor shall a waiver by the Bank on one occasion be constructed as a bar to, or waiver of, any such right on any future occasion. Any reference to the Bank herein shall be deemed to include any subsequent holder of this Note. This Note is accepted in the stave where the Bank is located, and shall be governed by the laws of the state where the Bank is located. The Borrower agrees to pay all costs in connection with the borrowing represented by this Note or security given, including any taxes, stamp, insurance or otherwise, payable by reason of the execution and delivery of this Note and any relation documents. In the event the Bank is required to collect this Note following its Due Date or the bankruptcy of any maker hereof, the Borrower will pay the Bank such further amounts as shall be sufficient to cover the costs and expenses incurred in collecting this Note and liquidating any security or guaranties given in support hereof, including reasonable attorneys' fees and expenses required to take such actions in any court, including any bankruptcy court. ARBITRATION: The Bank and Borrower agree, at the request of either party, to submit to binding arbitration all claims, disputes and controversies whether in tort, contract, or otherwise, except "core proceedings" under the U.S. Bankruptcy Code arising between themselves and their respective employees, officers, directors, attorneys and other agents, which relate in any way without limitation to this Note, including by way of example but not by way of limitation the negotiation, collateralization, administration, repayment, modification, default, termination and enforcement of the loans or credit evidenced by this Note. Arbitration under this Agreement will be governed by the Federal Arbitration Act (Title 9 of the United States Code), except in Colorado where it will be governed by Colorado law, and proceed in the city where the Bank's principal office is located, or such other location as the Bank and Borrower my agree and shall be conducted by the American Arbitration Association ("AAA") in accordance with the AAA's commercial arbitration rules ("AAA Rules"). Arbitration will be conducted before a single neutral arbitrator selected in accordance with AAA Rules and who shall be an attorney who has practiced commercial law for at least ten years. The arbitrator will determine whether an issue is arbitratable and will give effect to applicable statues of limitation. Judgement upon the arbitrator's award may be entered in any court having jurisdiction. The arbitrator has the discretion to decide, upon documents only or with a hearing, any motion to dismiss for failure to state a claim or any motion for summary judgment. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. The arbitrator will award costs and expenses in accordance with the provisions of this Note. Discovery will be governed by the rules of civil procedure in effect in the state where the Bank's principal office is located. Discovery must be completed at least 20 days before the hearing date and within 180 days of the commencement of arbitration. Each request for an extension and all other discovery disputes will be determined by the arbitrator upon a showing that the request is essential for the party's presentation and that no alternative means for obtaining information are available during the initial discovery period. This Agreement does not limit the right of either party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies such as setoff or repossession; or (iii) obtain provisional remedies such as replevin, injunctive relief, attachment or the appointment of a receiver during the pendency or before or after any arbitration proceeding. These exceptions do not constitute a waiver of the right or obligation of either party to submit any dispute to arbitration, including those arising from the exercise of these remedies. STATE LAW REQUIREMENTS: If the Bank is located in IOWA: IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS NOE AND AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCABLE. NO OTHER TERMS OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED. YOU MAY CHANGE THE TERMS OF THIS NOTE AND AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT. THIS NOTICE ALSO APPLIES TO ANY OTHER CREDIT AGREEMENTS (EXCEPT CONSUMER LOANS OR OTHER EXEMPT TRANSACTIONS) NOW IN EFFECT BETWEEN YOU AND THIS LENDER. BY SIGNING THIS NOTE AND AGREEMENT, THE BORROWER ACKNOWLEDGES RECEIPT OF A COPY OF THIS NOTE AND AGREEMENT. If the Bank is located in MINNESOTA: This extension of credit is made under (i) Minn. Stat 47 204 if this Note is from an individual and is secured by a first lien on residential real estate; (ii) Minn. Stat 334 01, subd. 2, if the initial advance under this Note is $100,000.00 or more and it is not secured by a first lien on residential real estate. If the Bank is located in NEBRASKA: A credit agreement must be in writing to be enforceable under law. To protect you and us from any misunderstandings or disappointments, any contract, promise, undertaking or offer to forebear repayment of money or to make any other financial accommodation in connection with is loan of money or grant or extension of credit, or any amendment of, cancellation of, waiver of, or substitution for any or all of the terms or provisions of any instrument or document executed in connection with this loan of money or grant or extension of credit, must be in writing to be effective. If the Bank is located in TEXAS: THIS WRITTEN LOAN AGREEMENTS REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRIDICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. CHAPTER 346 OF THE TEXAS FINANCE COSD OR ANY SUCCESSOR STATUTE WHICH REGULATE CERTAIN REVOLVING LOAN ACCOUNTS SHALL NOT APPLY TO THIS AGREEMENT. If the Bank is located in NORTH DAKOTA: In all events the Note Rate shall be the same rate after the Due Date as was in effect on the Due Date. If this Note is secured by a mortgage on real property located in North Dakota except a first mortgage, THIS OBLIGATION MAY BE THE BASIS FOR A PERSONAL ACTION AGAINST THE PROMISOR OR PROMISORS IN ADDITION TO THE OTHER REMEDIES ALLOWED BY LAW. (The term "Promisor" or "Promisors" means the Borrower herein). If the Note is secured by a mortgage on commercial real property located in North Dakota, the Bank has the right, following an event of default, to proceed to obtain and collect a deficiency judgment, together with foreclosure of the real property mortgaged under applicable laws. - -------------------------------------------------------------------------------- SIGNATURES - -------------------------------------------------------------------------------- Borrower's Name The Buckle, Inc. - -------------------------------------------------------------------------------- Signature Signature x_______________________________________________________________________________ Name and Title (if applicable) Name and Title (if applicable) Dennis Nelson, President & CEO - -------------------------------------------------------------------------------- Signature Signature x_______________________________________________________________________________ Name and Title (if applicable) Name and Title (if applicable) - -------------------------------------------------------------------------------- Street address City, State, Zip Code 2407 West 24th Street Kearney, NE 68847 - -------------------------------------------------------------------------------- Loan Purpose: [ ] Business, and/or [ ] this Note is given as replacement for, and not in satisfaction of the promissory note given by the Borrower to the Bank dated 05/31/2000. - -------------------------------------------------------------------------------- Bank's Name Wells Fargo Bank Nebraska, N.A. - -------------------------------------------------------------------------------- Signature - -------------------------------------------------------------------------------- Name and Title Larry Jepson, President 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 EX-23 11 c69084ex23.txt CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 33-48402, 33-70633, 33-70641 and 33-70643 of The Buckle, Inc. on Form S-8 of our report dated March 4, 2002, appearing in and incorporated by reference in the Annual Report on Form 10-K of The Buckle, Inc. for the year ended February 2, 2002. DELOITTE & TOUCHE LLP Omaha, Nebraska April 18, 2002 -----END PRIVACY-ENHANCED MESSAGE-----