UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the
Quarterly Period Ended October
28, 2006
o
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the
Transition Period from ____________ to ____________
Commission
File Number: 001-12951
THE
BUCKLE, INC.
(Exact
name of Registrant as specified in its charter)
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
___________________________________________________________
(Former
name, former address and former fiscal year if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. Yes þ
No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. (See definition of “accelerated
filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act). Check
one.
oLarge
accelerated filer; þ
Accelerated filer; o
Non-accelerated filer
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act).
Yes
o
No
þ
The
number of shares outstanding of the Registrant's Common Stock, as of November
24, 2006, was 19,272,685.
THE
BUCKLE, INC.
FORM
10-Q
INDEX
|
|
Pages
|
|
Part
I. Financial Information (unaudited)
|
|
|
|
|
Item
1.
|
Financial
Statements
|
3
|
|
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial
|
|
|
Condition
and Results of Operations
|
14
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
22
|
|
|
|
Item
4.
|
Controls
and Procedures
|
22
|
|
|
|
|
Part
II. Other Information
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
23
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
23
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
23
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
23
|
|
|
|
Item
5.
|
Other
Information
|
23
|
|
|
|
Item
6.
|
Exhibits
|
23
|
|
|
|
Signatures
|
24
|
THE
BUCKLE, INC.
BALANCE
SHEETS
(Amounts
in Thousands Except Share and Per Share Amounts)
(Unaudited)
|
|
October
28,
|
|
January
28,
|
|
|
|
2006
|
|
2006
|
|
ASSETS
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
10,053
|
|
$
|
23,438
|
|
Short-term
investments
|
|
|
131,299
|
|
|
134,672
|
|
Accounts
receivable, net of allowance of $62 and $94, respectively
|
|
|
5,164
|
|
|
4,824
|
|
Inventory
|
|
|
99,974
|
|
|
68,731
|
|
Prepaid
expenses and other assets
|
|
|
8,100
|
|
|
6,894
|
|
Total
current assets
|
|
|
254,590
|
|
|
238,559
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT:
|
|
|
213,714
|
|
|
199,618
|
|
Less
accumulated depreciation and amortization
|
|
|
(118,538
|
)
|
|
(108,222
|
)
|
|
|
|
95,176
|
|
|
91,396
|
|
|
|
|
|
|
|
|
|
LONG-TERM
INVESTMENTS
|
|
|
37,936
|
|
|
41,654
|
|
OTHER
ASSETS
|
|
|
2,624
|
|
|
2,657
|
|
|
|
|
|
|
|
|
|
|
|
$
|
390,326
|
|
$
|
374,266
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
19,126
|
|
$
|
11,119
|
|
Accrued
employee compensation
|
|
|
10,943
|
|
|
20,096
|
|
Accrued
store operating expenses
|
|
|
4,755
|
|
|
3,725
|
|
Gift
certificates redeemable
|
|
|
3,793
|
|
|
5,495
|
|
Income
taxes payable
|
|
|
7,139
|
|
|
4,696
|
|
Total
current liabilities
|
|
|
45,756
|
|
|
45,131
|
|
|
|
|
|
|
|
|
|
DEFERRED
COMPENSATION
|
|
|
3,203
|
|
|
2,518
|
|
DEFERRED
RENT LIABILITY
|
|
|
29,320
|
|
|
26,824
|
|
Total
liabilities
|
|
|
78,279
|
|
|
74,473
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY:
|
|
|
|
|
|
|
|
Common
stock, authorized 100,000,000 shares of $.01 par value; issued
and
|
|
|
|
|
|
|
|
outstanding;
19,200,516 and 19,339,153 shares, respectively
|
|
|
192
|
|
|
193
|
|
Additional
paid-in capital
|
|
|
26,741
|
|
|
39,651
|
|
Retained
earnings
|
|
|
285,114
|
|
|
261,948
|
|
Unearned
compensation - restricted stock
|
|
|
-
|
|
|
(1,999
|
)
|
Total
stockholders’ equity
|
|
|
312,047
|
|
|
299,793
|
|
|
|
|
|
|
|
|
|
|
|
$
|
390,326
|
|
$
|
374,266
|
|
See
notes
to unaudited condensed financial statements.
THE
BUCKLE, INC.
STATEMENTS
OF INCOME
(Amounts
in Thousands Except Per Share Amounts)
(Unaudited)
|
|
Thirteen
Weeks Ended
|
|
Thirty-nine
Weeks Ended
|
|
|
|
October
28,
|
|
October
29,
|
|
October
28,
|
|
October
29,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
SALES,
Net of returns and allowances
|
|
$
|
143,084
|
|
$
|
138,067
|
|
$
|
355,088
|
|
$
|
347,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF SALES (Including buying,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
distribution
and occupancy costs)
|
|
|
84,435
|
|
|
81,818
|
|
|
223,344
|
|
|
217,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
58,649
|
|
|
56,249
|
|
|
131,744
|
|
|
129,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
|
|
|
28,095
|
|
|
27,060
|
|
|
72,102
|
|
|
69,674
|
|
General
and administrative
|
|
|
4,713
|
|
|
4,096
|
|
|
12,254
|
|
|
12,074
|
|
|
|
|
32,808
|
|
|
31,156
|
|
|
84,356
|
|
|
81,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
FROM OPERATIONS
|
|
|
25,841
|
|
|
25,093
|
|
|
47,388
|
|
|
47,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME, Net
|
|
|
2,193
|
|
|
1,116
|
|
|
6,059
|
|
|
3,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
BEFORE INCOME TAXES
|
|
|
28,034
|
|
|
26,209
|
|
|
53,447
|
|
|
51,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION
FOR INCOME TAXES
|
|
|
10,373
|
|
|
9,619
|
|
|
19,793
|
|
|
19,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME
|
|
$
|
17,661
|
|
$
|
16,590
|
|
$
|
33,654
|
|
$
|
32,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS
PER SHARE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.92
|
|
$
|
0.85
|
|
$
|
1.75
|
|
$
|
1.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.89
|
|
$
|
0.82
|
|
$
|
1.69
|
|
$
|
1.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
weighted average shares
|
|
|
19,167
|
|
|
19,458
|
|
|
19,280
|
|
|
19,756
|
|
Diluted
weighted average shares
|
|
|
19,799
|
|
|
20,184
|
|
|
19,961
|
|
|
20,597
|
|
See
notes
to unaudited condensed financial statements.
THE
BUCKLE, INC.
STATEMENTS
OF STOCKHOLDERS' EQUITY
(Amounts
in Thousands Except Share and Per Share Amounts)
(Unaudited)
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Common
|
|
Paid-in
|
|
Retained
|
|
Unearned
|
|
|
|
|
|
Stock
|
|
Capital
|
|
Earnings
|
|
Compensation
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL
2006
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
January 28, 2006
|
|
$
|
193
|
|
$
|
39,651
|
|
$
|
261,948
|
|
$
|
(1,999
|
)
|
$
|
299,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassify
unearned compensation
|
|
|
-
|
|
|
(1,999
|
)
|
|
-
|
|
|
1,999
|
|
|
-
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
33,654
|
|
|
-
|
|
|
33,654
|
|
Dividends
paid on common stock,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($0.17
per share)
|
|
|
-
|
|
|
-
|
|
|
(6,647
|
)
|
|
-
|
|
|
(6,647
|
)
|
($0.20
per share)
|
|
|
-
|
|
|
-
|
|
|
(3,841
|
)
|
|
-
|
|
|
(3,841
|
)
|
Common
stock (166,913 shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
issued
on exercise of stock options
|
|
|
2
|
|
|
3,124
|
|
|
-
|
|
|
-
|
|
|
3,126
|
|
Issuance
of non-vested stock (136,000 shares)
|
|
|
1
|
|
|
(1
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
Amortization
of non-vested stock grants
|
|
|
-
|
|
|
908
|
|
|
-
|
|
|
-
|
|
|
908
|
|
Forfeiture
of non-vested stock (5,350 shares)
|
|
|
-
|
|
|
(12
|
)
|
|
-
|
|
|
-
|
|
|
(12
|
)
|
Stock
option expense
|
|
|
-
|
|
|
1,110
|
|
|
-
|
|
|
-
|
|
|
1,110
|
|
Common
stock (436,200 shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
purchased
and retired
|
|
|
(4
|
)
|
|
(16,040
|
)
|
|
-
|
|
|
-
|
|
|
(16,044
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
October 28, 2006
|
|
$
|
192
|
|
$
|
26,741
|
|
$
|
285,114
|
|
$
|
-
|
|
$
|
312,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
January 29, 2005
|
|
$
|
217
|
|
$
|
26,857
|
|
$
|
305,854
|
|
$
|
-
|
|
$
|
332,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
-
|
|
|
-
|
|
|
32,764
|
|
|
-
|
|
|
32,764
|
|
Dividends
paid on common stock,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($0.12
per share)
|
|
|
-
|
|
|
-
|
|
|
(2,264
|
)
|
|
-
|
|
|
(2,264
|
)
|
($0.15
per share)
|
|
|
-
|
|
|
-
|
|
|
(2,925
|
)
|
|
-
|
|
|
(2,925
|
)
|
($0.17
per share)
|
|
|
-
|
|
|
-
|
|
|
(3,321
|
)
|
|
-
|
|
|
(3,321
|
)
|
Common
stock (787,778 shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
issued
on exercise of stock options
|
|
|
7
|
|
|
11,415
|
|
|
-
|
|
|
-
|
|
|
11,422
|
|
Issuance
of non-vested stock (77,500 shares)
|
|
|
1
|
|
|
2,669
|
|
|
-
|
|
|
(2,670
|
)
|
|
-
|
|
Amortization
of non-vested stock grants
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
504
|
|
|
504
|
|
Common
stock (3,018,875 shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
purchased
and retired
|
|
|
(30
|
)
|
|
(641
|
)
|
|
(83,970
|
)
|
|
-
|
|
|
(84,641
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
October 29, 2005
|
|
$
|
195
|
|
$
|
40,300
|
|
$
|
246,138
|
|
$
|
(2,166
|
)
|
$
|
284,467
|
|
See
notes
to unaudited condensed financial statements.
THE
BUCKLE, INC.
STATEMENTS
OF CASH FLOWS
(Amounts
in Thousands)
(Unaudited)
|
|
Thirty-nine
Weeks Ended
|
|
|
|
October
28,
|
|
October
29,
|
|
|
|
2006
|
|
2005
(1)
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
Net
income
|
|
$
|
33,654
|
|
$
|
32,764
|
|
Adjustments
to reconcile net income to net cash flows
|
|
|
|
|
|
|
|
from
operating activities:
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
13,619
|
|
|
12,525
|
|
Compensation
expense - non-vested stock
|
|
|
908
|
|
|
504
|
|
Compensation
expense - stock options
|
|
|
1,110
|
|
|
-
|
|
Forfeiture
of restricted stock
|
|
|
(12
|
)
|
|
-
|
|
Excess
tax benefit from employee stock option exercises
|
|
|
(1,153
|
)
|
|
-
|
|
Other
|
|
|
135
|
|
|
(90
|
)
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(340
|
)
|
|
(1,375
|
)
|
Inventory
|
|
|
(31,243
|
)
|
|
(33,006
|
)
|
Prepaid
expenses
|
|
|
(1,206
|
)
|
|
(377
|
)
|
Accounts
payable
|
|
|
7,500
|
|
|
4,188
|
|
Accrued
employee compensation
|
|
|
(9,153
|
)
|
|
(5,104
|
)
|
Accrued
store operating expenses
|
|
|
1,030
|
|
|
422
|
|
Gift
certificates redeemable
|
|
|
(1,702
|
)
|
|
(1,447
|
)
|
Long-term
liabilities and deferred compensation
|
|
|
3,181
|
|
|
2,059
|
|
Income
taxes payable
|
|
|
2,443
|
|
|
2,221
|
|
|
|
|
|
|
|
|
|
Net
cash flows from operating activities
|
|
|
18,771
|
|
|
13,284
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(17,032
|
)
|
|
(19,975
|
)
|
Proceeds
from sale of property and equipment
|
|
|
5
|
|
|
182
|
|
Change
in other assets
|
|
|
33
|
|
|
-
|
|
Purchases
of investments
|
|
|
(49,648
|
)
|
|
(59,613
|
)
|
Proceeds
from sales/maturities of investments
|
|
|
56,739
|
|
|
152,235
|
|
|
|
|
|
|
|
|
|
Net
cash flows from investing activities
|
|
|
(9,903
|
)
|
|
72,829
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Proceeds
from the exercise of stock options
|
|
|
3,126
|
|
|
11,422
|
|
Excess
tax benefit from employee stock option exercises
|
|
|
1,153
|
|
|
-
|
|
Purchases
of common stock
|
|
|
(16,044
|
)
|
|
(84,641
|
)
|
Payment
of dividends
|
|
|
(10,488
|
)
|
|
(8,510
|
)
|
|
|
|
|
|
|
|
|
Net
cash flows from financing activities
|
|
|
(22,253
|
)
|
|
(81,729
|
)
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(13,385
|
)
|
|
4,384
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, Beginning of period
|
|
|
23,438
|
|
|
16,196
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, End of period
|
|
$
|
10,053
|
|
$
|
20,580
|
|
|
|
|
|
|
|
|
|
(1)
As
restated, see note 6.
See
notes
to unaudited condensed financial statements.
THE
BUCKLE, INC.
NOTES
TO
UNAUDITED CONDENSED FINANCIAL STATEMENTS
THIRTEEN
AND THIRTY-NINE WEEKS ENDED OCTOBER 28, 2006 AND OCTOBER 29, 2005
1.
|
Management
Representation
-
The accompanying unaudited financial statements have been prepared
in
accordance with accounting principles generally accepted in the United
States of America for interim financial information. Accordingly,
they do
not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for
complete
financial statements. In the opinion of management, all adjustments
necessary for the fair presentation of the results of operations
for the
interim periods have been included. All such adjustments are of a
normal
recurring nature. Because of the seasonal nature of the business,
results
for interim periods are not necessarily indicative of a full year's
operations. The accounting policies followed by The Buckle, Inc.
(the
“Company”) and additional footnotes are reflected in the financial
statements for the fiscal year ended January 28, 2006, included in
The
Buckle, Inc.'s 2005 Form 10-K/A.
|
2.
|
Stock-Based
Compensation
-
The Company has several stock option plans which allow for granting
of
stock options to employees, executives and directors; as described
more
fully in the notes included in the Company’s 2005 Annual Report. As of
October 28, 2006, 317,795 shares were available for grant under the
various stock option plans, of which 201,800 were available for grant
to
executive officers. Also as of October 28, 2006, 16,850 shares were
available for grant under the Company’s 2005 Restricted Stock Plan, all of
which were available for grant to executive officers.
|
During
fiscal 2006, the Company granted 136,000 shares of non-vested common stock
under
its 2005 Restricted Stock Plan. These grants resulted in $125 and $406 of
compensation expense recognized during the thirteen and thirty-nine week periods
ended October 28, 2006, respectively. Due to participants terminating their
employment prior to the vesting date, 5,200 of these shares were forfeited.
The
remaining shares will vest over a period of four years only upon certification
by the Compensation Committee of the Board of Directors that the Company has
achieved its pre-established performance targets based on growth in fiscal
2006
pre-bonus, pre-tax net income.
During
fiscal 2005, the Company granted 77,500 shares of non-vested common stock under
its 2005 Restricted Stock Plan. These grants resulted in $219 and $490 of
compensation expense recognized during thirteen and thirty-nine week periods
ended October 28, 2006, respectively. The same grants resulted in $85 and $504
of compensation expense recognized during the thirteen and thirty-nine week
periods ended October 29, 2005, respectively. Due to participants terminating
their employment, 150 of these shares were forfeited and the vesting for 3,400
of these shares was accelerated. Upon certification by the Compensation
Committee that the Company achieved its performance target for fiscal 2005,
20%
of the non-forfeited shares vested on March 24, 2006, with the remaining
non-forfeited, non-accelerated shares vesting 20% on February 3, 2007, 30%
on
February 2, 2008, and 30% on January 31, 2009.
Beginning
with the first quarter of fiscal 2006, the Company adopted FASB Statement No.
123 (revised 2004) Share-Based Payment (“SFAS 123(R)”) utilizing the modified
prospective approach and did not restate financial results for prior periods.
Upon adoption of SFAS 123(R), management determined that the cumulative effect
adjustment from estimated forfeitures was immaterial and, as such, no cumulative
effect was recorded. Compensation expense was recognized in each of the first
three quarters of fiscal 2006 for new awards, based on the grant date fair
value, as well as for the portion of awards granted in previous fiscal years
that was not vested as of the beginning of the fiscal year. The fair value
of
non-vested common stock awards is the stock price on the date of grant, while
the fair value of stock options is determined using the Black-Scholes option
pricing model. The adoption of SFAS 123(R) resulted in $327 and $1,110 of stock
option compensation expense recognized during the thirteen and thirty-nine
week
periods ended October 28, 2006, respectively. Stock option expense is allocated
to cost of sales, selling expense, and general and administrative expense in
a
method similar to that of allocating accrued incentive bonus expense. As a
result of adopting SFAS No. 123(R), stock option compensation expense reduced
the Company’s fiscal 2006 third quarter after-tax net income by $205, or $.01
per share for both basic and diluted earnings per share, and its fiscal 2006
year-to-date after-tax net income by $694, or $.04 per share for both basic
and
diluted earnings per share.
THE
BUCKLE, INC.
NOTES
TO
UNAUDITED CONDENSED FINANCIAL STATEMENTS
THIRTEEN
AND THIRTY-NINE WEEKS ENDED OCTOBER 28, 2006 AND OCTOBER 29, 2005
Prior
to
fiscal 2006, the Company accounted for its equity awards under the recognition
and measurement principles of APB Opinion No. 25, Accounting
for Stock Issued to Employees,
and
related interpretations. For all periods prior to fiscal 2006, there is no
recorded expense from the issuance of stock options, as all options granted
under the various plans had an exercise price equal to the market value of
the
common stock on the date of grant.
The
following table illustrates the effect on net income and earnings per share
if
the Company had applied the fair value recognition provisions of FASB Statement
No. 123, Accounting
for Stock-Based Compensation,
to
stock-based employee compensation during the thirteen and thirty-nine weeks
ended October 29, 2005.
|
|
Thirteen
Weeks Ended
|
|
Thirty-nine
Weeks Ended
|
|
|
|
October
29, 2005
|
|
October
29, 2005
|
|
|
|
|
|
|
|
Net
income, as reported
|
|
$
|
16,590
|
|
$
|
32,764
|
|
Add:
Stock-based employee compensation expense
|
|
|
|
|
|
|
|
included
in reported net income, net of related
|
|
|
|
|
|
|
|
tax
effects
|
|
|
53
|
|
|
419
|
|
Deduct:
Total stock-based employee compensation
|
|
|
|
|
|
|
|
expense
determined under fair value based method
|
|
|
|
|
|
|
|
for
all awards, net of related tax effects
|
|
|
(512
|
)
|
|
(1,839
|
)
|
|
|
|
|
|
|
|
|
Pro
forma net income
|
|
$
|
16,131
|
|
$
|
31,344
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
Basic
- as reported
|
|
$
|
0.85
|
|
$
|
1.66
|
|
|
|
|
|
|
|
|
|
Basic
- pro forma
|
|
$
|
0.83
|
|
$
|
1.59
|
|
|
|
|
|
|
|
|
|
Diluted
- as reported
|
|
$
|
0.82
|
|
$
|
1.59
|
|
|
|
|
|
|
|
|
|
Diluted
- pro forma
|
|
$
|
0.80
|
|
$
|
1.52
|
|
The
weighted average grant date fair value of options granted during the thirty-nine
week period ended October 28, 2006 was $14.95 per option. The weighted average
grant date fair value of options granted during the thirty-nine week period
ended October 29, 2005 was $13.48 per option. The fair value of options granted
during each of the thirty-nine week periods was estimated at the date of grant
using the Black-Scholes option pricing model with the following
assumptions:
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Risk-free
interest rate (1)
|
|
|
4.50
- 5.00
|
%
|
|
4.25
|
%
|
Dividend
yield (2)
|
|
|
1.60
- 2.00
|
%
|
|
1.70
|
%
|
Expected
volatility (3)
|
|
|
45.0
|
%
|
|
50.0
|
%
|
Expected
lives (4)
|
|
|
7.0
years
|
|
|
7.0
years
|
|
(1)
Based on
the U.S. Treasury yield curve in effect at the time of grant with a term
consistent with the
expected lives of stock options.
(2)
Based on
expected dividend yield as of the date of grant.
(3)
Based on
historical volatility over a period consistent with the expected lives of
options.
(4)
Based on
historical and expected exercise behavior.
THE
BUCKLE, INC.
NOTES
TO
UNAUDITED CONDENSED FINANCIAL STATEMENTS
THIRTEEN
AND THIRTY-NINE WEEKS ENDED OCTOBER 28, 2006 AND OCTOBER 29, 2005
Options
granted during the thirty-nine week period ended October 28, 2006 and
thirty-nine week period ended October 29, 2005 were granted under the Company’s
1993 Director Stock Option Plan. Grants were made with an option price equal
to
the market value of the Company’s common stock on the date of grant and a
contractual term of ten years. Options granted under the plan typically vest
25%
on the date of grant and 25% on each of the next three successive anniversaries
of the date of grant. Stock options granted in prior fiscal years, that were
not
vested as of the beginning of fiscal 2006, were also granted with an option
price equal to the market value on the date of grant, have ten-year contractual
terms, and generally vest no later than three years from the date of grant.
A
summary of the Company’s stock-based compensation activity related to stock
options for the thirty-nine week periods ended October 28, 2006 and October
29,
2005 is as follows:
|
|
2006
|
|
2005
|
|
|
|
|
|
Weighted
|
|
Aggregate
|
|
|
|
Weighted
|
|
Aggregate
|
|
|
|
|
|
Average
|
|
Intrinsic
|
|
|
|
Average
|
|
Intrinsic
|
|
|
|
|
|
Exercise
|
|
Value
|
|
|
|
Exercise
|
|
Value
|
|
|
|
Number
|
|
Price
|
|
(in
thousands)
|
|
Number
|
|
Price
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
- beginning
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
year
|
|
|
2,543,911
|
|
$
|
21.39
|
|
|
|
|
|
3,457,219
|
|
$
|
19.40
|
|
|
|
|
Granted
|
|
|
18,300
|
|
|
34.59
|
|
|
|
|
|
18,000
|
|
|
28.28
|
|
|
|
|
Expired/terminated
|
|
|
(10,446
|
)
|
|
25.53
|
|
|
|
|
|
(24,574
|
)
|
|
26.39
|
|
|
|
|
Exercised
|
|
|
(166,913
|
)
|
|
18.73
|
|
|
|
|
|
(787,778
|
)
|
|
14.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
- end of quarter
|
|
|
2,384,852
|
|
$
|
21.66
|
|
$
|
41,772
|
|
|
2,662,867
|
|
$
|
20.85
|
|
$
|
36,824
|
|
Exercisable
- end of quarter
|
|
|
1,958,672
|
|
$
|
20.57
|
|
$
|
36,459
|
|
|
2,066,742
|
|
$
|
19.34
|
|
$
|
31,699
|
|
The
following table summarizes information about stock options outstanding as of
October 28, 2006:
|
|
Options
Outstanding
|
|
Options
Exercisable
|
|
Range
of
Exercise
Prices
|
|
Number
Outstanding
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
Weighted
Average
Exercise
Price
|
|
Number
Exercisable
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
Weighted
Average
Exercise
Price
|
|
8.670
|
|
9.292
|
|
|
47,800
|
|
|
0.27
|
|
|
9.26
|
|
|
47,800
|
|
|
0.27
|
|
|
9.26
|
|
11.750
|
|
17.010
|
|
|
471,260
|
|
|
4.89
|
|
|
16.46
|
|
|
471,260
|
|
|
4.89
|
|
|
16.46
|
|
17.188
|
|
23.950
|
|
|
1,127,494
|
|
|
3.19
|
|
|
20.93
|
|
|
1,127,494
|
|
|
3.19
|
|
|
20.93
|
|
25.750
|
|
41.870
|
|
|
738,298
|
|
|
5.19
|
|
|
26.92
|
|
|
312,118
|
|
|
6.57
|
|
|
27.19
|
|
|
|
|
|
|
2,384,852
|
|
|
4.09
|
years
|
$
|
21.66
|
|
|
1,958,672
|
|
|
4.07
|
years
|
$
|
20.57
|
|
The
total
intrinsic value of value of options exercised during the thirty-nine week
periods ended October 28, 2006 and October, 29 2005, respectively, was $3,634
and $20,153. The Company received cash from the exercise of stock options during
the thirty-nine week period ended October 28, 2006 of $3,126. Cash received
for
the thirty-nine week period ended October 29, 2005 was $11,422. The excess
tax
benefit realized from the exercise of options was $1,153 for the thirty-nine
week period ended October 28, 2006. As of October 28, 2006, there was $1,470
of
unrecognized compensation expense related to non-vested stock options. It is
expected that this expense will be recognized over a weighted average period
of
approximately 2.0 years.
THE
BUCKLE, INC.
NOTES
TO
UNAUDITED CONDENSED FINANCIAL STATEMENTS
THIRTEEN
AND THIRTY-NINE WEEKS ENDED OCTOBER 28, 2006 AND OCTOBER 29, 2005
A
summary
of the Company’s stock-based compensation activity related to grants of
non-vested shares of common stock for the thirty-nine week periods ended October
28, 2006 and October 29, 2005 is as follows:
|
|
2006
|
|
2005
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
|
|
Average
|
|
|
|
|
|
Grant
Date
|
|
|
|
Grant
Date
|
|
|
|
Number
|
|
Fair
Value
|
|
Number
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
Non-Vested
- beginning
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
year
|
|
|
77,500
|
|
$
|
34.47
|
(1)
|
|
-
|
|
|
n/a
|
|
Granted
|
|
|
136,000
|
|
|
35.25
|
|
|
77,500
|
|
|
34.47
|
(1)
|
Forfeited
|
|
|
(5,350
|
)
|
|
35.23
|
|
|
-
|
|
|
n/a
|
|
Vested
|
|
|
(18,190
|
)
|
|
34.47
|
(1)
|
|
-
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Vested
- end of quarter
|
|
|
189,960
|
|
$
|
35.01
|
|
|
77,500
|
|
$
|
34.47
|
(1)
|
(1)
Non-vested shares granted during fiscal 2005. In accordance with APB No.
25,
these awards have been valued using the
closing price of the Company's common stock at the end of the performance
period.
As
of
October 28, 2006, there was $3,109 of unrecognized compensation expense related
to grants of non-vested shares. It is expected that this expense will be
recognized over a weighted average period of approximately 2.8 years.
3.
|
Description
of the Business
-
The Company is a retailer of medium to better priced casual apparel,
footwear and accessories for fashion conscious young men and women.
The
Company operates its business as one reportable industry segment.
The
Company had 352 stores located in 38 states throughout the central,
northwestern and southern regions of the United States as of October
28,
2006, and 337 stores in 38 states as of October 29, 2005. During
the third
quarter of fiscal 2006, the Company opened six new stores and
substantially renovated six stores. During the third quarter of fiscal
2005, the Company opened four new stores and substantially renovated
three
stores.
|
The
following is information regarding the Company’s major product lines, stated as
a percentage of the Company’s net sales:
|
|
Percentage
of Net Sales
|
|
Percentage
of Net Sales
|
|
|
|
Thirteen
Weeks Ended
|
|
Thirty-nine
Weeks Ended
|
|
Merchandise
Group
|
|
October
28, 2006
|
|
October
29, 2005
|
|
October
28, 2006
|
|
October
29, 2005
|
|
|
|
|
|
|
|
|
|
|
|
Denims
|
|
|
47.6
|
%
|
|
44.2
|
%
|
|
43.6
|
%
|
|
41.7
|
%
|
Tops
(including sweaters)
|
|
|
31.5
|
|
|
30.0
|
|
|
30.7
|
|
|
30.3
|
|
Accessories
|
|
|
8.1
|
|
|
9.4
|
|
|
8.6
|
|
|
9.6
|
|
Footwear
|
|
|
6.6
|
|
|
8.2
|
|
|
7.5
|
|
|
8.6
|
|
Sportswear/Fashions
|
|
|
1.5
|
|
|
0.8
|
|
|
5.5
|
|
|
4.4
|
|
Casual
bottoms
|
|
|
1.7
|
|
|
2.6
|
|
|
2.3
|
|
|
2.7
|
|
Outerwear
|
|
|
2.9
|
|
|
4.7
|
|
|
1.7
|
|
|
2.6
|
|
Other
|
|
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
THE
BUCKLE, INC.
NOTES
TO
UNAUDITED CONDENSED FINANCIAL STATEMENTS
THIRTEEN
AND THIRTY-NINE WEEKS ENDED OCTOBER 28, 2006 AND OCTOBER 29, 2005
4.
|
Net
Income Per Share
-
Basic earnings per share data are based on the weighted average
outstanding common shares during the period. Diluted earnings per
share
data are based on the weighted average outstanding common shares
and the
effect of all dilutive potential common shares, including stock options
and non-vested shares. Options to purchase 300 shares of common stock
for
the thirteen and thirty-nine week periods ended October 28, 2006,
are not
included in the computation of diluted earnings per share because
the
options would be considered anti-dilutive. There were no anti-dilutive
options for the thirteen and thirty-nine week periods ended October
29,
2005.
|
|
|
Thirteen
Weeks Ended
|
|
Thirteen
Weeks Ended
|
|
|
|
October
28, 2006
|
|
October
29, 2005
|
|
|
|
|
|
|
|
Per
Share
|
|
|
|
|
|
Per
Share
|
|
|
|
Income
|
|
Shares
|
|
Amount
|
|
Income
|
|
Shares
|
|
Amount
|
|
Basic
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
17,661
|
|
|
19,167
|
|
$
|
0.92
|
|
$
|
16,590
|
|
|
19,458
|
|
$
|
0.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of Dilutive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
non-vested
shares
|
|
|
-
|
|
|
632
|
|
|
(0.03
|
)
|
|
-
|
|
|
726
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$
|
17,661
|
|
|
19,799
|
|
$
|
0.89
|
|
$
|
16,590
|
|
|
20,184
|
|
$
|
0.82
|
|
|
|
Thirty-nine
Weeks Ended
|
|
Thirty-nine
Weeks Ended
|
|
|
|
October
28, 2006
|
|
October
29, 2005
|
|
|
|
|
|
|
|
Per
Share
|
|
|
|
|
|
Per
Share
|
|
|
|
Income
|
|
Shares
|
|
Amount
|
|
Income
|
|
Shares
|
|
Amount
|
|
Basic
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
33,654
|
|
|
19,280
|
|
$
|
1.75
|
|
$
|
32,764
|
|
|
19,756
|
|
$
|
1.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of Dilutive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
non-vested
shares
|
|
|
-
|
|
|
681
|
|
|
(0.06
|
)
|
|
-
|
|
|
841
|
|
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$
|
33,654
|
|
|
19,961
|
|
$
|
1.69
|
|
$
|
32,764
|
|
|
20,597
|
|
$
|
1.59
|
|
THE
BUCKLE, INC.
NOTES
TO
UNAUDITED CONDENSED FINANCIAL STATEMENTS
THIRTEEN
AND THIRTY-NINE WEEKS ENDED OCTOBER 28, 2006 AND OCTOBER 29, 2005
5.
|
Related
Party Transactions
-
On March 24, 2005, the Company entered
into an agreement with Daniel J. Hirschfeld, founder and Chairman,
to
purchase a total of 3,000,000 shares of the Company’s outstanding stock
from Mr. Hirschfeld. The shares represented approximately 13.8% of
the
Company’s total shares of Common Stock then outstanding. The shares were
purchased for $28.00 per share, or a total purchase price of $84
million. The
Company retired the purchased shares, reducing the total shares
outstanding and reducing Mr. Hirschfeld’s ownership percentage to
approximately 53%.
|
The
stock
repurchase transaction was negotiated by a Special Committee of The Buckle,
Inc.’s Board of Directors. The Special Committee, comprised of all of the
Company’s independent Directors, approved the transaction. In connection with
this transaction, the Special Committee received a written fairness opinion
from
Houlihan Lokey Howard & Zukin Financial Advisors, Inc., an international
investment bank.
6.
Restatement
of Financial Statements
Subsequent
to the issuance of its fiscal 2004 financial statements and during the
completion of its fiscal 2005 year-end control procedures relating to the
accounting for and disclosure of cash and cash equivalents, management
discovered an error related to the prior presentation of investments held in
auction-rate securities, which are highly liquid investments that are reset
through a “dutch auction” process that occurs every 7 to 49 days, depending on
the terms of the individual security, on the balance sheet and in the statement
of cash flows. As a result, the balance sheet as of January 29, 2005 and the
statements of cash flows for the fiscal years ended January 29, 2005 and January
31, 2004 were restated in the Company’s fiscal 2005 Annual Report on Form
10-K/A.
Subsequent
to filing the fiscal 2005 Annual Report on Form 10-K and as a result of control
procedures performed during the first quarter of fiscal 2006 relating to the
accounting for and disclosure of cash and cash equivalents, management
discovered additional errors in the prior presentation of investments held
in
auction-rate securities and the classification of certain other investment
securities. These additional errors were identified and corrected prior to
the
filing of the Company’s Interim Report on Form 10-Q for the quarter ended April
29, 2006.
The
correction of these additional errors resulted in a decrease in cash and cash
equivalents and an increase in short-term and long-term investments on the
balance sheet as of January 28, 2006 and corresponding adjustments to cash
flows
from investing activities on the statement of cash flows for the thirty-nine
week period ended October 29, 2005. The additional errors did not impact the
statements of income or statements of stockholders’ equity. The statement of
cash flows for the thirty-nine weeks ended October 29, 2005 has been restated
in
this Interim Report on Form 10-Q in order to reflect the correction of these
additional errors.
The
following is a summary of the significant effects of the restatement:
|
|
Statements
of Cash Flows
|
|
|
|
As
|
|
|
|
|
|
|
|
previously
|
|
|
|
|
|
Fiscal
quarter ended October 29, 2005
|
|
reported
|
|
Adjustments
|
|
As
restated
|
|
Cash
Flows from Investing Activities
|
|
|
|
|
|
|
|
Purchases
of investments
|
|
$
|
(16,310
|
)
|
$
|
(43,303
|
)
|
$
|
(59,613
|
)
|
Proceeds
from sales/maturities of investments
|
|
|
21,439
|
|
|
130,796
|
|
|
152,235
|
|
Net
decrease in cash and cash equivalents
|
|
|
(83,109
|
)
|
|
87,493
|
|
|
4,384
|
|
THE
BUCKLE, INC.
NOTES
TO
UNAUDITED CONDENSED FINANCIAL STATEMENTS
THIRTEEN
AND THIRTY-NINE WEEKS ENDED OCTOBER 28, 2006 AND OCTOBER 29, 2005
7.
Other
Income
The
following table summarizes the Company’s Other Income for the thirteen and
thirty-nine week periods included in the statements of income:
|
|
Thirteen
Weeks Ended
|
|
Thirty-nine
Weeks Ended
|
|
|
|
October
28, 2006
|
|
October
29, 2005
|
|
October
28, 2006
|
|
October
29, 2005
|
|
|
|
|
|
|
|
|
|
|
|
Interest/dividends
from investments
|
|
$
|
2,093
|
|
$
|
1,061
|
|
$
|
5,033
|
|
$
|
3,642
|
|
Insurance
proceeds
|
|
|
-
|
|
|
-
|
|
|
470
|
|
|
-
|
|
VISA/Mastercard
settlement
|
|
|
-
|
|
|
-
|
|
|
356
|
|
|
-
|
|
Miscellaneous
|
|
|
100
|
|
|
55
|
|
|
200
|
|
|
211
|
|
Other
Income, net
|
|
$
|
2,193
|
|
$
|
1,116
|
|
$
|
6,059
|
|
$
|
3,853
|
|
Other
income for the second quarter of fiscal 2006 included proceeds received from
the
settlement of Hurricane Katrina insurance claims and settlement of a lawsuit
related to Visa/Mastercard interchange fees. These proceeds had a $0.02 per
share impact on both the Company’s reported after-tax basic and diluted earnings
per share for the quarter ended July 29, 2006.
8.
Recently
Issued Accounting Pronouncements
On
July
13, 2006, the FASB issued Interpretation 48 (“FIN 48”), Accounting
for Uncertainty in Income Taxes - an Interpretation of FASB Statement No.
109.
The
Interpretation provides a consistent recognition threshold and measurement
attribute, as well as clear criteria for subsequently recognizing, derecognizing
and measuring uncertain tax positions for financial statement purposes. The
Interpretation also requires expanded disclosure with respect to the uncertainty
in income taxes. FIN 48 will be effective at the beginning of the Company’s 2007
fiscal year. The Company is currently assessing the effect of this pronouncement
on the financial statements.
9.
Supplemental
Cash Flow Information
The
Company had non-cash investing activities during the thirty-nine week periods
ended October 28, 2006 and October 29, 2005 of $507 and $0, respectively. The
non-cash investing activity related to unpaid purchases of property, plant
and
equipment included in accounts payable as of the end of the quarter. Amounts
reported as unpaid purchases are recorded as cash outflows from investing
activities for purchases of property, plant and equipment in the statement
of
cash flows in the period they are paid.
Additional
cash flow information for the Company includes cash paid for income taxes during
the thirty-nine week periods ended October 28, 2006 and October 29, 2005 of
$17,816 and $16,865, respectively.
THE
BUCKLE, INC.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The
following discussion should be read in conjunction with the Financial Statements
and notes thereto of the Company included in this Form 10-Q. The following
is
management’s discussion and analysis of certain significant factors which have
affected the Company’s financial condition and results of operations during the
periods included in the accompanying financial statements.
EXECUTIVE
OVERVIEW
Management
considers the following items to be key performance indicators in evaluating
Company performance.
Comparable
Store Sales
- Stores
are deemed to be comparable stores if they were open in the prior year on the
first day of the fiscal period being presented. Stores which have been
remodeled, expanded and/or relocated, but would otherwise be included as
comparable stores, are not excluded from the comparable store sales calculation.
Management considers comparable store sales to be an important indicator of
current company performance, helping leverage certain fixed costs when results
are positive. Negative comparable store sales results could reduce net sales
and
have a negative impact on operating leverage, thus reducing net earnings.
Net
Merchandise Margins
-
Management evaluates the components of merchandise margin including initial
markup and the amount of markdowns during a period. Any inability to obtain
acceptable levels of initial markups or any significant increase in the
Company’s use of markdowns, could have an adverse effect on the Company’s gross
margin and results of operations.
Operating
Margin
-
Operating margin is a good indicator for management of the Company’s success.
Operating margin can be positively or negatively affected by comparable store
sales, merchandise margins, occupancy costs and the Company’s ability to control
operating costs.
Cash
Flow and Liquidity (working capital)
-
Management reviews current cash and short-term investments along with cash
flow
from operating, investing and financing activities to determine the Company’s
short-term cash needs for operations and expansion. The Company believes that
existing cash 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.
THE
BUCKLE, INC.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS
OF OPERATIONS
The
table
below sets forth the percentage relationships of sales and various expense
categories in the Statements of Income for each of the thirteen and thirty-nine
week periods ended October 28, 2006, and October 29, 2005:
|
|
Percentage
of Net Sales
|
|
Percentage
|
|
Percentage
of Net Sales
|
|
Percentage
|
|
|
|
Thirteen
Weeks Ended
|
|
Increase/
|
|
Thirty-nine
Weeks Ended
|
|
Increase/
|
|
|
|
October
28, 2006
|
|
October
29, 2005
|
|
(Decrease)
|
|
October
28, 2006
|
|
October
29, 2005
|
|
(Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
3.6
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
2.1
|
%
|
Cost
of sales (including buying,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
distribution
and occupancy costs)
|
|
|
59.0
|
%
|
|
59.3
|
%
|
|
3.2
|
%
|
|
62.9
|
%
|
|
62.7
|
%
|
|
2.5
|
%
|
Gross
profit
|
|
|
41.0
|
%
|
|
40.7
|
%
|
|
4.3
|
%
|
|
37.1
|
%
|
|
37.3
|
%
|
|
1.5
|
%
|
Selling
expenses
|
|
|
19.6
|
%
|
|
19.6
|
%
|
|
3.8
|
%
|
|
20.3
|
%
|
|
20.0
|
%
|
|
3.5
|
%
|
General
and administrative expenses
|
|
|
3.3
|
%
|
|
3.0
|
%
|
|
15.1
|
%
|
|
3.4
|
%
|
|
3.5
|
%
|
|
1.5
|
%
|
Income
from operations
|
|
|
18.1
|
%
|
|
18.1
|
%
|
|
3.0
|
%
|
|
13.4
|
%
|
|
13.8
|
%
|
|
-1.3
|
%
|
Other
income, net
|
|
|
1.5
|
%
|
|
0.8
|
%
|
|
96.6
|
%
|
|
1.7
|
%
|
|
1.1
|
%
|
|
57.3
|
%
|
Income
before income taxes
|
|
|
19.6
|
%
|
|
18.9
|
%
|
|
7.0
|
%
|
|
15.1
|
%
|
|
14.9
|
%
|
|
3.1
|
%
|
Provision
for income taxes
|
|
|
7.3
|
%
|
|
7.0
|
%
|
|
7.8
|
%
|
|
5.6
|
%
|
|
5.5
|
%
|
|
3.7
|
%
|
Net
income
|
|
|
12.3
|
%
|
|
11.9
|
%
|
|
6.5
|
%
|
|
9.5
|
%
|
|
9.4
|
%
|
|
2.7
|
%
|
Net
sales
increased from $138.1 million in the third quarter of fiscal 2005 to $143.1
million in the third quarter of fiscal 2006, a 3.6% increase. Comparable store
sales decreased by $0.1 million, or 0.1%, for the thirteen week period ended
October 28, 2006, compared to the same period in the prior year. The comparable
store sales decrease was primarily due to a decrease in the number of
transactions at comparable stores during the period, partially offset by a
6.1%
increase in the average retail price per piece of merchandise sold during the
period and a 2.7% increase in the average number of units sold per transaction.
The comparable store sales decrease for the period was offset by growth
attributable to the inclusion of a full three months of operating results for
eight new stores opened after the second quarter of fiscal 2005, to the opening
of fifteen new stores during the first three quarters of fiscal 2006 and to
growth in online sales.
Net
sales
increased from $347.7 million in the first three quarters of fiscal 2005 to
$355.1 million for the first three quarters of fiscal 2006, a 2.1% increase.
Comparable store sales decreased by $7.0 million, or 2.1%, for the thirty-nine
week period ended October 28, 2006, compared to the same period in the prior
year. The comparable store sales decrease was primarily due to a decrease in
the
number of transactions at comparable stores during the period, partially offset
by a 4.9% increase in the average retail price per piece of merchandise sold
during the period and a 3.2% increase in the average number of units sold per
transaction. Sales growth for the thirty-nine week period was, therefore,
attributable to the inclusion of a full nine months of operating results for
15
new stores opened during fiscal 2005, to the opening of 15 new stores during
the
first three quarters of fiscal 2006 and to growth in online sales. Average
sales
per square foot decreased 3.1% from $209 for the thirty-nine weeks ended October
29, 2005, to $202 for the thirty-nine weeks ended October 28, 2006.
The
Company’s average retail price per piece of merchandise sold increased $2.46,
approximately 6.1%, during the third quarter of fiscal 2006 compared to the
third quarter of fiscal 2005. This $2.46 increase was primarily attributable
to
the following changes (with their corresponding effect on the overall average
price per piece): a 5.9% increase in denim price points ($1.13), an 8.1%
increase in knit shirt price points ($0.70), a 17.0% increase in woven shirt
price points ($0.32), a 3.2% increase in accessory price points ($0.11) and
a
shift in the merchandise mix ($0.19). These changes are primarily a reflection
of merchandise shifts in terms of brands; product styles, fabrics, details
and
finishes; and the mix of branded versus private label merchandise.
THE
BUCKLE, INC.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The
Company’s average retail price per piece of merchandise sold increased $1.83,
approximately 4.9%, during the first three quarters of fiscal 2006 compared
to
the first three quarters of fiscal 2005. This $1.83 increase was primarily
attributable to the following changes (with their corresponding effect on the
overall average price per piece): a 6.1% increase in denim price points ($0.98),
a 3.8% increase in knit shirt price points ($0.33), a 9.9% increase in woven
shirt price points ($0.18), a 4.7% increase in footwear price points ($0.13),
a
3.9% increase in accessory price points ($0.13) and a shift in the merchandise
mix ($0.10). These changes are primarily a reflection of merchandise shifts
in
terms of brands; product styles, fabrics, details and finishes; and the mix
of
branded versus private label merchandise.
Gross
profit after buying, occupancy and distribution expenses increased $2.4 million
in the third quarter of fiscal 2006 to $58.6 million, a 4.3% increase. As a
percentage of net sales, gross profit increased from 40.7% in the third quarter
of fiscal 2005 to 41.0% in the third quarter of fiscal 2006. The increase in
gross profit, as a percentage of net sales, resulted primarily from a 0.8%
improvement (as a percentage of net sales) in actual merchandise margins
achieved through timely sell-through on new products and a slight increase
in
sales of private label merchandise, which achieves higher margins as a result
of
greater initial markup. Gross profit was also impacted by a 0.1% reduction,
as a
percentage of net sales, in expense related to the incentive bonus accrual.
These improvements were partially offset by increases in occupancy expense
(0.3%, as a percentage of net sales) and distribution expense (0.3%, as a
percentage of net sales).
Year-to-date,
gross profit increased $2.0 million for the first thirty-nine weeks of fiscal
2006 to $131.7 million, a 1.5% increase. As a percentage of net sales, gross
profit decreased from 37.3% for the first three quarters of fiscal 2005 to
37.1%
for the first three quarters of fiscal 2006. The decrease in gross profit,
as a
percentage of net sales, resulted primarily from de-leveraged occupancy expense
(0.6%, as a percentage of net sales) and distribution expense (0.1%, as a
percentage of net sales). These increases were partially offset by a 0.4%
improvement, as a percentage of net sales, in actual merchandise margins and
a
0.1% reduction, as a percentage of net sales, in the incentive bonus
accrual.
Selling
expenses increased from $27.1 million for the third quarter of fiscal 2005
to
$28.1 million for the third quarter of fiscal 2006, a 3.8% increase. As a
percentage of net sales, selling expense was 19.6% for both the third quarter
of
fiscal 2006 and the third quarter of fiscal 2005. Increases in store salaries
(0.2%, as a percentage of net sales), stock option compensation expense as
a
result of result of FASB Statement 123(R) adoption during fiscal 2006 (0.2%,
as
a percentage of net sales) and certain other selling expenses were offset by
a
0.4% reduction, as a percentage of net sales, in expense related to the
incentive bonus accrual and reductions in certain other selling
expenses.
Year-to-date,
selling expense increased from $69.7 million in the first three quarters of
fiscal 2005 to $72.1 million for the first three quarters of fiscal 2006, a
3.5%
increase. As a percentage of net sales, selling expense increased from 20.0%
in
fiscal 2005 to 20.3% in fiscal 2006. The increase in selling expense, as a
percentage of net sales, resulted primarily from increases in internet-related
fulfillment and marketing expenses (0.3%, as a percentage of net sales), stock
option compensation expense (0.2%, as a percentage of net sales), store salaries
(0.2%, as a percentage of net sales), store fixture expense (0.2%, as a
percentage of net sales), bankcard fees (0.1%, as a percentage of net sales)
and
certain other selling expenses. These increases were partially offset by a
0.6%
reduction, as a percentage of net sales, in the incentive bonus accrual, a
0.1%
reduction, as a percentage of net sales, in advertising spending and a 0.1%
reduction, as a percentage of net sales, in payroll tax expense, as well as
reductions in certain other selling expenses.
General
and administrative expenses increased from $4.1 million in the third quarter
of
fiscal 2005 to $4.7 million in the third quarter of fiscal 2006, a 15.1%
increase. As a percentage of net sales, general and administrative expenses
increased from 3.0% for the third quarter of fiscal 2005 to 3.3% for the third
quarter of fiscal 2006. The increase in general and administrative expenses,
as
a percentage of net sales, resulted primarily from increases in equity
compensation expense (0.2%, as a percentage of net sales), compensation expense
related to unrealized gains in the Company’s non-qualified deferred compensation
plan (0.1%, as a percentage of net sales), home office payroll expense (0.1%,
as
a percentage of net sales), professional fees (0.1%, as a percentage of net
sales) and certain other general and administrative expenses (0.2%, as a
percentage of net sales). These increases were partially offset by a 0.3%
reduction, as a percentage of net sales, in expense related to the incentive
bonus accrual and a 0.1% reduction, as a percentage of net sales, in corporate
aircraft expenses.
THE
BUCKLE, INC.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Year-to-date,
general and administrative expense increased from $12.1 million for the first
three quarters of fiscal 2005 to $12.3 million for the first three quarters
of
fiscal 2006, a 1.5% increase. As a percentage of net sales, general and
administrative expense decreased from 3.5% in fiscal 2005 to 3.4% in fiscal
2006. The reduction in general and administrative expenses, as a percentage
of
net sales, resulted primarily from a 0.3% reduction, as a percentage of net
sales, in expense related to the incentive bonus accrual, a 0.1% reduction,
as a
percentage of net sales, in professional fees (primarily related to fees
incurred in the first quarter of fiscal 2005 as a result of the Company’s stock
repurchase from its founder) and a 0.1% reduction, as a percentage of net sales,
in corporate aircraft expenses. These reductions were partially offset by
increases in equity compensation expense (0.2%, as a percentage of net sales),
home office payroll expense (0.1%, as a percentage of net sales) and certain
other general and administrative expenses (0.1%, as a percentage of net sales).
As
a
result of the above changes, the Company's income from operations increased
3.0%
to $25.8 million for the third quarter of fiscal 2006 compared to $25.1 million
for the third quarter of fiscal 2005. Income from operations was 18.1% of net
sales for both the third quarter of fiscal 2006 and the third quarter of fiscal
2005. Income from operations, for the thirty-nine week period ended October
28,
2006, decreased 1.3% to $47.4 million compared to $48.0 million for the same
thirty-nine week period in fiscal 2005. Income from operations was 13.4% of
net
sales for the first three quarters of fiscal 2006 compared to 13.8% for the
first three quarters of fiscal 2005.
Other
income for the quarter ended October 28, 2006, increased $1.1 million or 96.6%
from the quarter ended October 29, 2005. For the year-to-date period ended
October 28, 2006, other income increased $2.2 million or 57.3%. The increase
in
other income for both the third quarter and year-to-date periods of fiscal
2006
compared to the same periods in the prior year was primarily due to an increase
in income earned on the Company’s cash and investments, resulting from higher
interest rates and higher balances of cash and investments. Other income for
the
second quarter of fiscal 2006 also included proceeds received from the
settlement of Hurricane Katrina insurance claims and the settlement of a lawsuit
related to Visa/Mastercard interchange fees, as further described in Note 7.
Income
tax expense, as a percentage of pre-tax income, was 37.0% in the third quarter
of fiscal 2006 compared to 36.7% for the third quarter of fiscal 2005, bringing
net income to $17.7 million in the third quarter of fiscal 2006 compared to
$16.6 million in the third quarter of fiscal 2005. For the first three quarters
of fiscal 2006, income tax expense was 37.0% of pre-tax income compared to
36.8%
for the first three quarters of fiscal 2005, bringing net income to $33.7
million for the first three quarters of fiscal 2006 compared to $32.8 million
for the first three quarters of fiscal 2005.
LIQUIDITY
AND CAPITAL RESOURCES
As
of
October 28, 2006, the Company had working capital of $208.8 million, including
$10.1 million of cash and cash equivalents and short-term investments of $131.3
million. The Company's primary ongoing cash requirements are for inventory,
payroll, occupancy costs, dividend payments, new store expansion and remodeling.
Historically, the Company's primary source of working capital has been cash
flow
from operations. During the first three quarters of fiscal 2006 and 2005, the
Company's cash flow provided by operating activities was $18.8 million and
$13.3
million, respectively.
THE
BUCKLE, INC.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The
uses
of cash for both thirty-nine week periods include payment of annual bonuses
accrued at fiscal year end, changes in inventory and accounts payable for build
up of inventory levels, dividend payments and construction costs for new and
remodeled stores. The reduction in cash flow for the first nine months of fiscal
2006 compared to the first nine months of fiscal 2005 resulted primarily from
fewer proceeds from sales/maturities of investments (net of purchases of
investments), reduced proceeds from the exercise of stock options and increased
cash dividend payments, partially offset by a reduction in inventory build-up,
an increase in accounts payable, reduced purchases of property and equipment,
and a reduction in purchases of common stock, resulting from the repurchase
of
three million shares of common stock the first quarter of fiscal 2005, for
a
cash payout of $84 million.
During
the first three quarters of fiscal 2006 and 2005, the Company invested $15.2
million and $13.8 million, respectively, in new store construction, store
renovation and store technology upgrades. The Company also spent approximately
$1.8 million in the first three quarters of fiscal 2006 in capital expenditures
for its corporate headquarters and distribution center compared to $6.2 million
spent in the first three quarters of fiscal 2005.
During
the remainder of fiscal 2006, the Company anticipates completing approximately
three additional store construction projects, including approximately two new
stores and approximately one store to be remodeled and/or relocated. As of
October 28, 2006, eleven additional lease contracts have been signed.
Management
now estimates that total capital expenditures during fiscal 2006 will be
approximately $21.0 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. The Company has a consistent record of generating positive cash
flow each year and, as of October 28, 2006, had total cash and investments
of
$179.3 million. The Company does not currently have plans for a merger,
acquisition or accelerated store expansion. The Company’s plans for new store
expansion and remodels/relocations during the next three years are reasonably
consistent with its past three fiscal years’ average. Based upon past results
and current plans, management does not anticipate any material changes in the
Company’s need for cash in the upcoming year. 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 which
would
reduce the Company’s sales, net profitability and cash flows. Also, the
Company’s acceleration in store openings and/or remodels, or the Company
entering into a merger, acquisition or other financial related transaction,
could reduce the amount of cash available for further capital expenditures
and
working capital requirements.
The
Company has available an unsecured line of credit of $17.5 million with Wells
Fargo Bank, N.A. for operating needs and letters of credit. The line of credit
provides that outstanding letters of credit cannot exceed $10 million.
Borrowings under the line of credit provide for interest to be paid at a rate
equal to the prime rate established by the Bank. The Company has, from time
to
time, borrowed against these lines during periods of peak inventory build-up.
There were no bank borrowings during the first three quarters of fiscal 2006
or
2005.
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 sales and expenses during
the reporting period. The Company regularly evaluates its estimates, including
those related to inventory 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. Management believes that
the estimates and judgments used in preparing these financial statements were
the most appropriate at that time. Presented below are those critical accounting
policies that management believes require subjective and/or complex judgments
that could potentially affect reported results of operations.
THE
BUCKLE, INC.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
1.
|
Revenue
Recognition.
Sales are recorded upon the purchase of merchandise by customers.
The
Company accounts for layaway sales in accordance with SAB No. 101,
Revenue
Recognition,
recognizing revenue from sales made under its layaway program upon
delivery of the merchandise to the customer.
Revenue is not recorded when gift cards and gift certificates are
sold,
but rather when a card is redeemed for merchandise. A current liability
for unredeemed gift cards and gift certificates is recorded at the
time of
purchase. The liability recorded for unredeemed gift cards and gift
certificates was $3.8 million and $5.5 million as of October 28,
2006, and
January 28, 2006, respectively.
|
The
Company establishes a liability for estimated merchandise returns based upon
historical average sales return percentage, applying the percentage using the
assumption that merchandise returns will occur within nine days following the
sale. Customer returns could potentially exceed historical average and returns
may occur after the time period reserved for, thus reducing future net sales
results and potentially reducing future net earnings. The accrued liability
for
reserve for sales returns was $310,000 at October 28, 2006, and $308,000 at
January 28, 2006.
2.
|
Inventory.
Inventory is valued at the lower of cost or market. Cost is determined
using the average cost method that approximates the first-in, first-out
(FIFO) method. Management makes adjustments to inventory and cost
of goods
sold, based upon estimates, to reserve for merchandise obsolescence
and
markdowns that could affect market value, based on assumptions using
calculations applied to current inventory levels within each of four
different markdown levels. Management also reviews the levels of
inventory
in each markdown group and the overall aging of the inventory versus
the
estimated future demand for such product and the current market
conditions. Such judgments could vary significantly from actual results,
either favorably or unfavorably, due to fluctuations in future economic
conditions, industry trends, consumer demand and the competitive
retail
environment. Such changes in market conditions could negatively impact
the
sale of markdown inventory causing further markdowns or inventory
obsolescence, resulting in increased cost of goods sold from write-offs
and reducing the Company’s net earnings. The liability recorded as a
reserve for markdowns and/or obsolescence was $6.5 million as of
each
October 28, 2006 and January 28, 2006. We are not aware of any events,
conditions or changes in demand or price that would indicate that
our
inventory valuation may not be materially accurate at this
time.
|
3.
|
Income
Taxes.
The Company records a deferred tax asset and liability for expected
future
tax consequences resulting from temporary differences between financial
reporting and tax bases of assets and liabilities. The Company considers
future taxable income and ongoing tax planning in assessing the value
of
its deferred tax assets. If the Company determines that it is more
than
likely that these assets will not be realized, the Company would
reduce
the value of these assets to their expected realizable value, thereby
decreasing net income. Estimating the value of these assets is based
upon
the Company’s judgment. If the Company subsequently determined that the
deferred tax assets, which had been written down, would be realized
in the
future, such value would be increased. Adjustment would be made to
increase net income in the period such determination was
made.
|
4.
|
Operating
Leases.
The Company leases retail stores under operating leases. Most lease
agreements contain tenant improvement allowances, rent holidays,
rent
escalation clauses and/or contingent rent provisions. For purposes
of
recognizing lease incentives and minimum rental expenses on a
straight-line basis over the terms of the leases, the Company uses
the
date of initial possession to begin amortization, which is generally
when
the Company enters the space and begins to make improvements in
preparation of intended use. For tenant improvement allowances and
rent
holidays, the Company records a deferred rent liability on the balance
sheets and amortizes the deferred rent over the terms of the leases
as
reductions to rent expense on the statements of
income.
|
For
scheduled rent escalation clauses during the lease terms or for rental payments
commencing at a date other than the date of initial occupancy, the Company
records minimum rental expenses on a straight-line basis over the terms of
the
leases on the statements of income. Certain leases provide for contingent rents,
which are determined as a percentage of gross sales in excess of specified
levels. The Company records a contingent rent liability on the balance sheets
and the corresponding rent expense when specified levels have been achieved
or
are reasonably probable to be achieved.
THE
BUCKLE, INC.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OFF-BALANCE
SHEET ARRANGEMENTS,
CONTRACTUAL
OBLIGATIONS AND COMMERCIAL COMMITMENTS
As
referenced in the tables below, 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 or cash flows. In addition, the commercial obligations and
commitments made by the Company are customary transactions which are similar
to
those of other comparable retail companies.
The
following tables identify the material obligations and commitments as of October
28, 2006:
|
|
Payments
Due by Period
|
|
Contractual
obligations (dollar amounts in thousands)
|
|
Total
|
|
Less
than 1 year
|
|
1-3
years
|
|
4-5
years
|
|
After
5 years
|
|
Long
term debt and purchase obligations
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Deferred
compensation
|
|
$
|
3,203
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
3,203
|
|
Operating
leases
|
|
$
|
219,574
|
|
$
|
35,323
|
|
$
|
66,804
|
|
$
|
52,096
|
|
$
|
65,351
|
|
Total
contractual obligations
|
|
$
|
222,777
|
|
$
|
35,323
|
|
$
|
66,804
|
|
$
|
52,096
|
|
$
|
68,554
|
|
|
|
Amount
of Commitment Expiration Per Period
|
|
Other
Commercial Commitments (dollar amounts in thousands)
|
|
Total
Amounts Committed
|
|
Less
than 1 year
|
|
1-3
years
|
|
4-5
years
|
|
After
5 years
|
|
Lines
of credit
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Total
commercial commitments
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
The
Company has available an unsecured line of credit of $17.5 million of which
$10
million is available for letters of credit, which is excluded from the preceding
table. Certain merchandise purchase orders require that the Company open letters
of credit. When the Company takes possession of the merchandise, it releases
payment on the letters of credit. The amounts of outstanding letters of credit
reported reflect the open letters of credit on merchandise ordered, but not
yet
received or funded. The Company believes it has sufficient credit available
to
open letters of credit for merchandise purchases. There were no bank borrowings
during the third quarter of fiscal 2006 or the third quarter of fiscal 2005.
The
Company had outstanding letters of credit totaling $556 and $895 at October
28,
2006 and January 28, 2006, respectively. The Company has no other off-balance
sheet arrangements.
THE
BUCKLE, INC.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SEASONALITY
AND INFLATION
The
Company's business is seasonal, with the Christmas season (from approximately
November 15 to December 30) and the back-to-school season (from approximately
July 15 to September 1) historically contributing the greatest volume of net
sales. For fiscal years 2003, 2004, and 2005, the Christmas and back-to-school
seasons accounted for approximately 40%, 38% and 37% 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 thirteen-week periods
ended October 28, 2006, and October 29, 2005.
RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS
On
December 16, 2004, the FASB issued Statement No. 123 (revised 2004) (“SFAS
123(R)”), “Share-Based Payment,” which was effective for fiscal years beginning
after June 15, 2005. SFAS 123(R) requires an entity to recognize compensation
expense in an amount equal to the fair value of share-based payments granted
to
employees. The Company adopted SFAS 123(R) effective with the first quarter
of
fiscal 2006 utilizing the modified prospective approach, with the Black-Scholes
option pricing model used to calculate the fair value of stock options.
Compensation expense was recorded for new awards based on their grant date
fair
value. Additionally, for the portion of previously issued and outstanding
awards, that were not vested as of the beginning of the fiscal year,
compensation expense was recorded based on previously disclosed SFAS 123
methodologies and valuations, beginning with the first quarter of fiscal 2006.
The adoption of “SFAS No. 123(R): Share-Based Payments” had a $0.01 and $0.04
per share impact on both the Company’s reported after-tax basic and diluted
earnings per share for the third quarter and for the first three quarters of
fiscal 2006, respectively. The adoption had no impact on reported basic or
diluted per share net earnings for the third quarter or first three quarters
of
fiscal 2005, as the Company has elected to utilize the modified prospective
approach.
On
July
13, 2006, the FASB issued Interpretation 48 (“FIN 48”), Accounting
for Uncertainty in Income Taxes - an Interpretation of FASB Statement No.
109.
The
Interpretation provides a consistent recognition threshold and measurement
attribute, as well as clear criteria for subsequently recognizing, derecognizing
and measuring uncertain tax positions for financial statement purposes. The
Interpretation also requires expanded disclosure with respect to the uncertainty
in income taxes. FIN 48 will be effective at the beginning of the Company’s 2007
fiscal year. The Company is currently assessing the effect of this pronouncement
on the financial statements.
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, as well as other risks and uncertainties inherent
in
the Company’s business and the retail industry in general. Any changes in these
factors could result in significantly different results for the Company. The
Company further cautions that the forward-looking information contained herein
is not exhaustive or exclusive. The Company does not undertake to update any
forward-looking statements, which may be made from time to time by or on behalf
of the Company.
THE
BUCKLE, INC.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ITEM
3 -
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
4 -
CONTROLS AND PROCEDURES
The
Company maintains a system of disclosure controls and procedures that are
designed to provide reasonable assurance that material information, which is
required to be timely disclosed, is accumulated and communicated to management
in a timely manner. An evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Rules
13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) was
performed as of the end of the period covered by this report. This evaluation
was performed under the supervision and with the participation of the Company’s
Chief Executive Officer and Chief Financial Officer.
Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company’s disclosure controls and procedures as of the end of
the period covered by this report were effective to provide reasonable assurance
that information required to be disclosed by the Company in the Company’s
reports that it files or submits under the Exchange Act is accumulated and
communicated to the management, including its Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure and are effective to provide reasonable assurance that such
information is recorded, processed, summarized and reported within the time
periods specified by the SEC’s rules and forms.
Change
in Internal Control Over Financial Reporting
There
were no changes in the Company's internal control over financial reporting
that
occurred during the Company's last fiscal quarter that have materially affected,
or are reasonably likely to materially affect, the Company's internal control
over financial reporting.
THE
BUCKLE, INC.
PART
II
-- OTHER INFORMATION
Item
1. Legal
Proceedings: None
Item
2. Unregistered
Sales of Equity Securities and Use of Proceeds:
The
following table sets forth information concerning purchases made by the Company
of its common stock for each of the months in the fiscal quarter ended October
28, 2006:
|
|
Total
Number
of
Shares
Purchased
|
|
Average
Price
Paid
Per
Share
|
|
Total
Number of
Shares
Purchased
as
Part of Publicly
Announced
Plans
|
|
Maximum
Number of Shares that May Yet Be Purchased
Under
Publicly
Announced
Plans
|
|
July
30, to August 26, 2006
|
|
|
119,300
|
|
|
34.71
|
|
|
119,300
|
|
|
476,800
|
|
August
27, to September 30, 2006
|
|
|
198,600
|
|
|
36.22
|
|
|
198,600
|
|
|
278,200
|
|
October
1, to October 28, 2006
|
|
|
24,800
|
|
|
37.97
|
|
|
24,800
|
|
|
253,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
shares yet to be purchased are remaining from a 1,000,000 share repurchase
plan, authorized by the Board of
Directors.
|
Item
3. Defaults
Upon Senior Securities: None
Item
4. Submission
of Matters to a Vote of Security
Holders: None
Item
5. Other
Information: None
Item
6.
Exhibits:
|
(a)
|
Exhibits
31.1 and 31.2 certifications, as well as Exhibits 32.1 and 32.2
Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to
Section 906 of the Sarbanes-Oxley Act of
2002.
|
THE
BUCKLE, INC.
SIGNATURES
Pursuant
to the requirements 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.
|
|
|
|
Dated: December
7, 2006
|
|
/s/ DENNIS
H.
NELSON |
|
DENNIS
H. NELSON, President and CEO |
|
|
|
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Dated: December
7, 2006
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/s/ KAREN
B.
RHOADS |
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KAREN
B. RHOADS, Vice President of
Finance and CFO
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