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
3, 2007
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 incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
2407
West 24th Street, Kearney, Nebraska
|
68845-4915
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant's
telephone number, including area code: (308)
236-8491
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
by check mark if the registrant is a well-known seasoned issuer, as defined
in
Rule 405 of the Securities Act.
Yes
o
No
þ
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act.
Yes
o
No
þ
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 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 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.
o
Large
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
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 $348,270,190.02 on July 29, 2006. 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 8,796,923
shares.
The
number of shares outstanding of the Registrant's Common Stock, as of March
29,
2007, was 29,876,089.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the definitive Proxy Statement dated April 27, 2007 for Registrant’s 2007
Annual Meeting of Shareholders to be held May 31, 2007 are incorporated by
reference in Part III.
The
Buckle, Inc.
Form
10-K
February
3, 2007
Table
of Contents
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Page
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Part
I
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Item
1.
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Business
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3
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Item
1A.
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Risk
Factors
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11
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Item
1B.
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Unresolved
Staff Comments
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12
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Item
2.
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Properties
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13
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Item
3.
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Legal
Proceedings
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13
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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13
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Part
II
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Item
5.
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Market
for Registrant's Common Equity, Related Shareholder Matters and
Issuer
Purchases of Equity Securities
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13
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Item
6.
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Selected
Financial Data
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15
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Item
7.
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations
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15
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Item
7A.
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Quantitative
and Qualitative Disclosures About Market Risk
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15
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Item
8.
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Financial
Statements and Supplementary Data
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15
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Item
9.
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Changes
In
and Disagreements With Accountants on Accounting and Financial
Disclosure
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16
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Item
9A.
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Controls
and Procedures
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16
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Item
9B.
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Other
Information
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18
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Part
III
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Item
10.
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Directors,
Executive Officers and Corporate Governance
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18
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Item
11.
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Executive
Compensation
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18
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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18
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Item
13.
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Certain
Relationships and Related Transactions
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18
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Item
14.
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Principal
Accountant Fees and Services
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18
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Part
IV
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Item
15.
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Exhibits
and Financial Statements Schedules
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18
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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 3, 2007, the Company operated 350 retail stores in 38 states
throughout the continental United States, excluding the northeast, 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 customer services such
as
free alterations, free gift-wrapping, easy layaways, the Buckle private label
credit card and a frequent shopper program. Most stores are located in regional,
high-traffic shopping malls and lifestyle centers, and this is the Company's
strategy for future expansion. The majority of the Company's central office
functions, including purchasing, pricing, accounting, advertising and
distribution, are controlled from its headquarters and distribution center
in
Kearney, Nebraska. However, the men’s buying team and the marketing team have
had a portion of their employees in Kansas City, Missouri for several years
and
the Company is currently in the process of relocating the entire men’s buying
team to a new office in Overland Park, Kansas.
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
and
opened its first mall store. The Company has experienced significant growth
over
the past ten years, growing from 181 stores at the start of 1997 to 350 stores
by the close of fiscal 2006. The Company changed its corporate name to The
Buckle, Inc. on April 23, 1991. All references herein to fiscal 2006 refer
to
the 53-week period ended February 3, 2007. Fiscal 2005 refers to the 52-week
period ended January 28, 2006 and fiscal 2004 refers to the 52-week period
ended
January 29, 2005.
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.
Available
Information
The
Company’s annual reports on Form 10-K, along with all other reports and
amendments filed with or furnished to the Securities and Exchange Commission,
are publicly available free of charge on the Investor Information section of
the
Company’s website at www.buckle.com
as soon
as reasonably practicable after the Company files such materials with, or
furnishes them to, the Securities and Exchange Commission. The Company’s
corporate governance policies, ethics code and Board of Directors’ committee
charters are also posted within this section of the website. The information
on
the Company’s website is not part of this or any other report The Buckle, Inc.
files with, or furnishes to, the Securities and Exchange Commission.
Marketing
and Merchandising
The
Company's marketing and merchandising strategy is designed to create customer
loyalty by offering a wide selection of key brand name and private label
merchandise and providing a broad range of value-added services. The Company
believes it provides a unique specialty apparel store with merchandise designed
to appeal to the fashion conscious 12 to 24-year old. The merchandise mix
includes denims, casual bottoms, tops, sportswear, outerwear, accessories and
footwear. Denim is a significant contributor to total sales (44.6% of fiscal
2006 net sales) and is a key to the Company's merchandising strategy. The
Company believes it attracts customers with a wide selection of key brands
plus
private label denim and a wide variety of fits, finishes and styles. Shirts
and
tops are also significant contributors to total sales (31.0% of fiscal 2006
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
2006
|
|
Fiscal
2005
|
|
Fiscal
2004
|
|
Denims
|
|
|
44.6
|
%
|
|
42.7
|
%
|
|
40.3
|
%
|
Tops
(including sweaters)
|
|
|
31.0
|
|
|
29.8
|
|
|
31.8
|
|
Accessories
|
|
|
9.2
|
|
|
10.2
|
|
|
11.4
|
|
Footwear
|
|
|
7.0
|
|
|
8.1
|
|
|
7.6
|
|
Outerwear
|
|
|
2.3
|
|
|
3.5
|
|
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2.5
|
|
Sportswear/fashions
|
|
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3.9
|
|
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3.1
|
|
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4.2
|
|
Casual
bottoms
|
|
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1.9
|
|
|
2.5
|
|
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2.1
|
|
Other
|
|
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Brand
name merchandise accounted for approximately 67% of the Company's sales during
fiscal 2006. 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 they believe is unique in color and style. While the
brands offered by the Company change to meet current customer preferences,
the
Company currently offers brands such as Lucky Brand Dungarees, Silver, Big
Star,
Fossil, Hurley, Guess, Quiksilver/Roxy, 7 Diamonds, Billabong, and OBEY. The
Company expects that brand name merchandise will continue to constitute the
majority of sales.
Management
believes the Company provides a unique store environment by maintaining a high
level of personalized service and by offering a wide selection of fashionable,
quality merchandise. The Company believes it is essential to create an enjoyable
shopping atmosphere and, in order to fulfill this mission, it must employ highly
motivated employees who give personal attention to customers. Each salesperson
is educated to help create a complete look for the customer by helping them
find
the best fits and showing merchandise as coordinating outfits. The Company
also
incorporates specialized services such as free alterations, free gift wrapping,
layaways, a frequent shopper card, the Buckle private label credit card and
a
special order system that allows stores to obtain specifically requested
merchandise from other Company stores. 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 three percent of net sales
has been made on a layaway basis.
Merchandising
and pricing decisions are made centrally; however, the Company's distribution
system allows for variation in the mix of merchandise distributed to each store.
This allows individual store inventories to 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. The Company also has a transfer program that shifts
certain 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 distribution costs associated with the transfer system. The Company
does not hold storewide off-price sales at anytime.
The
Company continually evaluates the store design as part of the overall shopping
experience and feels the fiscal 2002 re-design continues to be very well
received by guests and developers. This store design contains warm woods, real
brick finishes and an appealing ceiling and lighting layout to provide a
comfortable environment for the guest. The Company has developed modifications
to the store design for specialized venues including lifestyle centers and
larger mall fronts. The signature Buckle-B icon and red color are used
throughout the store on fixtures, graphic images and print materials to
reinforce the brand identity. To enhance selling and product presentation,
new
tables and fixtures were added to the Company’s signature store design in both
fiscal 2006 and 2005. The new tables and fixtures were also rolled out to select
existing stores to update their looks as well.
Marketing
and Advertising
In
fiscal
2006, the Company spent $6.5 million or 1.2% of net sales on seasonal marketing
campaigns, advertising, promotions, online marketing and in-store point of
sale
materials. Seasonal image and promotional signs are presented in store window
displays and on merchandising presentations throughout the store to complement
the product and reinforce the brand's image. Promotions such as sweepstakes,
gift with purchase offers and special events are offered to enhance the guest
shopping experience. Seasonal brochures featuring current fashion trends and
product selection are distributed through the stores, at special events and
in
new markets. Magazine advertising in leading teen publications is used during
key seasons to introduce new merchandise, build awareness and brand the Buckle's
image. Editorial product placement in national and regional magazines creates
exposure for seasonal merchandise and the Buckle's private label brands. The
Buckle partners with key merchandise vendors on joint advertising and
promotional opportunities that expand the marketing reach and position the
Buckle as the destination store for these specialty branded fashions.
The
Company offers programs to strengthen relationships with loyal guests. The
Company continues to support 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 extends
exclusive benefits to active Buckle Cardholders such as bonus rewards and
special targeted mailings. The Buckle continues to build on its B-Rewards
incentive program, which is offered exclusively to Buckle Cardholders.
Qualifying Cardholders are mailed B-Rewards merchandise certificates at the
end
of each Rewards period inviting them back into the store at the start of the
next season. After successfully testing the program during fiscal 2005, the
Company added a student credit card program for all stores in July 2006. The
Buckle Card marketing program is partially funded by WFNNB, a third-party bank
that owns the Buckle Card accounts.
The
Company publishes a corporate web site at www.buckle.com. The Company’s web site
serves as a second retail touch-point for cross-channel marketing, reaching
a
growing online audience. Buckle.com is an eCommerce enabled channel with an
interactive, entertaining, informative and brand building environment where
guests can shop, enter sweepstakes, fill out a wish list, find out about career
opportunities and read the latest Buckle financial news. The Company has an
opt-in email database. National email campaigns are sent bi-monthly and targeted
weekly messages are sent notifying guests of the latest store promotions and
product offerings. Search engine and affiliate marketing programs are managed
to
increase online and in-store traffic as well as conversion rates. Buckle’s
online store was launched April 26, 1999 as a marketing tool, to extend the
Company’s brand beyond the physical locations. Offering a growing selection of
the merchandise inventory online, the Company presents the online store as
a
“taste test” in new markets as well as a cross-channel tool in existing markets,
which means guests can shop both in the physical stores and via the online
store. On October 19, 2006, the Company launched a redesigned Buckle.com on
the
Escalate E-Commerce platform. The new Buckle.com includes new search features
which allow guests to shop by special attributes, including brand and
size.
Store
Operations
The
Company has an Executive Vice President of Sales, a Vice President of Sales,
26
district managers and 57 area managers. The majority of the district managers
and each of the area managers also serve as manager of their home base store.
In
general, 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. In addition
to
sharing career opportunities with current Buckle employees, the Company also
recruits interns and management trainees from college campuses. A majority
of
the Company’s store managers, all of its area and district managers and most of
its upper level management are former salespeople, including the President
and
CEO, Dennis H. Nelson and Chairman, Daniel J. Hirschfeld. Recognizing talent
and
promoting managers from within allows the Company to build a strong foundation
for management.
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
performance of stores in their district/area. Store managers perform sales
training for new employees at the store level. Salespeople displaying particular
talent are generally assigned to stores operated by district managers for
training to become a store manager.
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 all of the Company’s stores as well as surveillance camera systems in
approximately 85% of the stores. As a result, the Company achieved a merchandise
shrinkage rate of 0.7% of net sales for fiscal 2006, 0.6% of net sales for
fiscal 2005 and 0.7% for fiscal year 2004.
The
average store is approximately 4,900 square feet (of which the Company estimates
an average of approximately 80% is selling space), and stores range in size
from
2,600 square feet to 8,475 square feet.
Purchasing
and Distribution
The
Company has an experienced buying team. The buying team includes the President,
Vice President of Women’s Merchandising, Vice President of Men’s Merchandising,
six women’s buyers and five men’s buyers. The two Vice Presidents of
Merchandising have over 50 years of combined 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 as well
as from agents who source goods from foreign manufacturers. The Company's
merchandising team shops and monitors U.S. fashion centers (in New York and
on
the West Coast) to stay abreast of the latest trends. 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, private label manufacturer or supplier. The Company
plans its private label production with several private label vendors three
to
six months in advance of product delivery. The Company requires its vendors
to
sign and adhere to its Code of Conduct and Standards of Engagement, which
addresses adherence to legal requirements regarding employment practices and
health, safety, and environmental regulations.
In
fiscal
2006, Koos Manufacturing, Inc. (one of the Company’s private label vendors) and
Lucky Brand Dungarees made up 21.1% and 16.1% of the Company’s net sales,
respectively. No other vendor accounted for more than 10% of the Company’s
sales. Other current significant vendors include Silver, Big Star, Fossil,
Hurley, Billabong, Guess, Quiksilver/Roxy, 7 Diamonds, and OBEY. 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.
The
Buckle stores generally carry the same merchandise, with quantity and seasonal
variations based upon historical sales data, climate and perceived local
customer demand. 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, creating
excitement within each store and providing customers with a reason to shop
often.
The
Company completed an 82,200 square foot expansion to its corporate headquarters
facility during fiscal 2005. This expansion houses the Company’s online
fulfillment and customer service center and allows additional space for the
supplies and returns-to-vendor departments. The online fulfillment center
occupies approximately 100,000 square feet of space on three levels. The Company
plans to renovate the space vacated by supplies and returns in fiscal 2007
to
add new office space. The current distribution center should 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 direct 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 timely restocking of in-season
merchandise, the Company warehouses a portion of initial shipments for later
distribution. 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, 2007, the Company operated 351 stores in 38 states, including 2 stores
opened and 1 closed during fiscal 2007. The existing stores are in 4 downtown
locations, 9 strip centers, 20 lifestyle centers and 318 shopping malls. The
Company anticipates opening approximately 20 new stores in fiscal 2007. For
fiscal 2007, 16 of the new stores are expected to be located in higher traffic
shopping malls and 4 of the new stores are expected to be located in lifestyle
centers. The following table lists the location of existing stores as of April
1, 2007:
|
|
|
|
Location
of Stores
|
|
|
State
|
|
Number
of Stores
|
|
State
|
|
Number
of Stores
|
|
State
|
|
Number
of Stores
|
Alabama
|
|
7
|
|
Louisiana
|
|
8
|
|
Oregon
|
|
2
|
Arizona
|
|
8
|
|
Michigan
|
|
18
|
|
Pennsylvania
|
|
6
|
Arkansas
|
|
6
|
|
Minnesota
|
|
12
|
|
South
Carolina
|
|
1
|
California
|
|
14
|
|
Mississippi
|
|
5
|
|
South
Dakota
|
|
3
|
Colorado
|
|
13
|
|
Missouri
|
|
12
|
|
Tennessee
|
|
11
|
Florida
|
|
9
|
|
Montana
|
|
5
|
|
Texas
|
|
38
|
Georgia
|
|
4
|
|
Nebraska
|
|
14
|
|
Utah
|
|
10
|
Idaho
|
|
5
|
|
Nevada
|
|
2
|
|
Virginia
|
|
2
|
Illinois
|
|
16
|
|
New
Mexico
|
|
4
|
|
Washington
|
|
10
|
Indiana
|
|
13
|
|
North
Carolina
|
|
8
|
|
West
Virginia
|
|
2
|
Iowa
|
|
18
|
|
North
Dakota
|
|
3
|
|
Wisconsin
|
|
13
|
Kansas
|
|
17
|
|
Ohio
|
|
13
|
|
Wyoming
|
|
1
|
Kentucky
|
|
5
|
|
Oklahoma
|
|
13
|
|
Total
|
|
351
|
|
|
|
|
|
|
|
|
|
|
|
The
Buckle has grown significantly over the past ten years, with the number of
stores increasing from 181 at the beginning of 1997 to 350 at the end of fiscal
2006. 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 1997 to the end of fiscal 2006:
Total
Number of Stores Per Year
|
|
Fiscal
Year
|
|
Open
at start
of
year
|
|
Opened
in Current Year
|
|
Closed
in Current Year
|
|
Total
|
|
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
|
|
2002
|
|
|
295
|
|
|
11
|
|
|
2
|
|
|
304
|
|
2003
|
|
|
304
|
|
|
16
|
|
|
4
|
|
|
316
|
|
2004
|
|
|
316
|
|
|
13
|
|
|
2
|
|
|
327
|
|
2005
|
|
|
327
|
|
|
15
|
|
|
4
|
|
|
338
|
|
2006
|
|
|
338
|
|
|
17
|
|
|
5
|
|
|
350
|
|
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 4,250 to 5,000 square feet for its stores.
The
projected cost of opening a store with the new design is approximately $867,000,
including construction costs of approximately $656,000 (prior to any
construction allowance received) and inventory costs of approximately $211,000,
net of accounts payable.
The
Company anticipates opening approximately 20 new stores during fiscal 2007
and
completing approximately 12 remodels. 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 2007, it is estimated
that
approximately 7 to 8 stores will receive full remodeling. The Company has
budgeted a total of $28 to $30 million for new store construction, remodeling,
technology upgrades and improvements at the corporate headquarters during fiscal
2007.
The
Company plans to expand in 2007 by opening stores in existing markets. 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.
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 iSeries) 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.
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
virtual private network for communication with the stores also supports the
Company’s intranet site. The intranet allows stores to view various types of
information from the corporate office. Stores also have access to a variety
of
tools such as a product search feature with pictures, printable forms and links
to transmit various requests and information to the corporate
office.
The
Company is committed to ongoing review of the MIS and EDP systems to maintain
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 3, 2007, the Company had approximately 6,100 employees - approximately
1,300 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, began work for the Company on the sales floor. The Company
experiences high turnover of store and distribution center employees, primarily
due to the number of part-time employees. However, the Company has not
experienced significant difficulty in hiring qualified personnel. Of the total
employees, approximately 390 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.
An
employee must be at least 20 years of age and work a minimum of 1,000 hours
during the plan year to be eligible for the 401(k) plan. 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 3, 2007, 1,089 employees participated in the medical plan, 1,099
in
the dental plan, 993 in the life insurance plan, 299 in the supplemental life
insurance plan, 955 in the long-term disability plan and 767 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 it is able to compete favorably
with other merchandisers, including department stores and specialty retailers,
with respect to each of these factors, the Company believes it competes mainly
on the basis of customer service and merchandise selection.
In
the
men's merchandise area, the Company competes with specialty retailers such
as
Abercrombie & Fitch, American Eagle Outfitters, Hollister, Hot Topic, Gap
and Pacific Sunwear. The men's market also competes with certain department
stores, such as Dillards, Federated stores, Parisian, Saks, Bon-Ton stores
and
other local or regional department stores and specialty retailers, as well
as
with mail order and internet retailers.
In
the
women's merchandise area, the Company competes with specialty retailers such
as
Abercrombie & Fitch, American Eagle Outfitters, Express, Aeropostale,
Hollister, Gap, Maurices, Pacific Sunwear, Wet Seal, Forever 21, and Vanity.
The
women's market also competes with department stores, such as Dillards, Federated
stores, Parisian, Saks, Bon-Ton stores and certain local or regional department
stores and specialty retailers, as well as with mail order and internet
retailers.
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”,
“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 65. 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 57. 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 48.
Ms.
Rhoads is the Vice President of 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 while attending Kearney State College (now
the University of Nebraska - Kearney) 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 Buckle since November 1987.
James
E. Shada, age 51.
Mr.
Shada is Executive Vice President of Sales and a Director of the Company. He
was
elected Executive Vice President on May 31, 2001 and served as Vice President
of
Sales from April 19, 1991 until such date. Mr. Shada was elected Director of
the
Company on May 30, 2002. He began employment with the Company in November 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 site selection and development and the education of personnel
as store managers and as area and district managers.
Brett
P. Milkie, age 47.
Mr.
Milkie is Vice President of Leasing. He was elected Vice President of 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.
Kari
G. Smith, age 43.
Ms.
Smith is Vice President of 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. 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
K. Whisler, age 50. 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.
Kyle
L. Hanson, age 42.
Ms.
Hanson is the Corporate Secretary and General Counsel. She has held this
position since February 2001. Ms. Hanson joined the Company in May 1998 as
General Counsel. She also worked for the Company as a part-time salesperson
while attending Kearney State College (now the University of Nebraska -
Kearney). Ms. Hanson was previously First Vice President and Trial Attorney
for
Mutual of Omaha Companies for 2 years and an attorney with Kutak Rock law firm
in Omaha from 1990 to 1996.
Robert
M. Carlberg, age 44.
Mr.
Carlberg is Vice President of Men’s Merchandising. He has held this position
since December 11, 2006. Mr. Carlberg started with the Company as a salesperson
and also worked as a store manager and as an area and district leader while
being involved and traveling with the Men’s Merchandising team. He has been
full-time with the merchandising team since January 2001.
ITEM
1A - RISK FACTORS
Cautionary
Statement Pursuant to the Private Securities Litigation Reform Act of 1995
and
Risk Factors
Certain
statements herein, including anticipated store openings, trends in or
expectations regarding The Buckle, Inc.’s revenue and net earnings growth,
comparable store sales growth, cash flow requirements and capital expenditures,
all constitute “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are based on currently
available operating, financial and competitive information and are subject
to
various risks and uncertainties. Actual future results and trends may differ
materially depending on a variety of factors, including, but not limited to,
changes in product mix, changes in fashion trends and/or pricing, competitive
factors, general economic conditions, economic conditions in the retail apparel
industry, successful execution of internal performance and expansion plans
and
other risks detailed herein and in The Buckle, Inc.’s other filings with the
Securities and Exchange Commission.
A
forward-looking statement is neither a prediction nor a guarantee of future
events or circumstances, and those future events or circumstances may not occur.
Users should not place undue reliance on the forward-looking statements, which
are accurate only as of the date of this report. The Company is under no
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. The following are
material risk factors.
Merchandising/Fashion
Sensitivity.
The
Company’s success is largely dependent upon its ability to gauge the fashion
tastes of its customers and to provide merchandise that satisfies customer
demand in a timely manner. The Company’s failure to anticipate, identify or
react appropriately and timely to the changes in fashion trends would reduce
the
Company’s net sales and profitability. Misjudgments or unanticipated fashion
changes could have a negative impact on the Company’s image with its customers,
which would also reduce the Company’s net sales and profitability.
Private
Label Merchandise.
Sales
from private label merchandise accounted for approximately 33% of the net sales
for both fiscal 2006 and fiscal 2005. The Company may increase or decrease
the
percentage of net sales in private label merchandise in the future. The
Company’s private label products generally earn a higher margin than branded
product. Thus, reductions in the private label mix would decrease the Company’s
merchandise margin and, as a result, reduce net earnings.
Fluctuations
in Comparable Store Net Sales Results.
The
Company’s comparable store net sales results have fluctuated in the past and are
expected to continue to fluctuate in the future. A variety of factors affect
comparable sales results, including changes in fashion trends, changes in the
Company’s merchandise mix, calendar shifts of holiday periods, actions by
competitors, weather conditions and general economic conditions. As a result
of
these or other factors, the Company’s future comparable sales could decrease,
reducing overall net sales and profitability. These reductions could also cause
the market price of the Company’s common stock to decline.
Expansion
and Management of Growth.
The
Buckle, Inc.’s continued growth depends on its ability to open and operate
stores on a profitable basis and management’s ability to manage planned
expansion. During fiscal 2007, the Company plans to open 20 new stores. This
expansion is dependent upon factors such as the ability to locate and obtain
favorable store sites, negotiate acceptable lease terms, obtain necessary
merchandise and hire and train qualified management and other employees. There
may be factors outside of the Company’s control that affect the ability to
expand, including general economic conditions. There is no assurance that the
Company will be able to achieve its planned expansion or that such expansion
will be profitable. If the Company fails to manage its store growth, there
would
be less growth in the Company’s net sales from new stores and less growth in
profitability. If the Company opened unprofitable store locations, there could
be a reduction in net earnings, even with the resulting growth in the Company’s
net sales.
Reliance
on Key Personnel.
The
continued success of The Buckle, Inc. is dependent to a significant degree
on
the continued service of key personnel, including senior management. The loss
of
a member of senior management could create additional expense in covering their
position as well as cause a reduction in net sales, thus reducing in net
earnings. The Company’s success in the future will also be dependent upon the
Company’s ability to attract and retain qualified personnel. The Company’s
failure to attract and retain qualified personnel could reduce the number of
new
stores the Company could open in a year which would cause net sales to decline,
could create additional operating expenses and could reduce overall
profitability for the Company.
Dependence
on a Single Distribution Facility and Third-Party Carriers.
The
distribution function for all of the Company’s stores is handled from a single
facility in Kearney, Nebraska. Any significant interruption in the operation
of
the distribution facility due to natural disasters, system failures or other
unforeseen causes would impede the distribution of merchandise to the stores,
causing a decline in store inventory, a reduction in store sales and a reduction
in company profitability. Interruptions in service by common carriers could
also
delay shipment of goods to Company store locations. Additionally, there can
be
no assurance that the current facilities will be adequate to support the
Company’s future growth.
Reliance
on Foreign Sources of Production. The
Company purchases a portion of its private label merchandise through Sourcing
agents in foreign markets. In addition, some of the Company’s domestic vendors
manufacture goods overseas. The Company does not have any long-term merchandise
supply contracts and its imports are subject to existing or potential duties,
tariffs and quotas. The Company faces a variety of risks associated with doing
business overseas including competition for facilities and quotas, political
instability, possible new legislation relating to imports that could limit
the
quantity of merchandise that may be imported, imposition of duties, taxes and
other charges on imports and local business practice and political issues which
may result in adverse publicity. The Company’s inability to rely on foreign
sources of production due to these or other causes could reduce the amount
of
inventory the Company is able to purchase, hold up the timing on the receipt
of
new merchandise and reduce merchandise margins if comparable inventory is
purchased from branded sources. Any or all of these changes would cause a
decrease in the Company’s net sales and in net earnings.
Dependence
upon Maintaining Sales and Profit Growth in the Highly Competitive Retail
Apparel Industry.
The
specialty retail industry is highly competitive. The Company competes primarily
on the basis of fashion, selection, quality, price, location, service and store
environment. The Company faces a variety of competitive challenges,
including:
|
· |
anticipating
and responding timely to changing customer demands and preferences;
|
· |
effectively
marketing both branded and private label merchandise to consumers
in
several diverse market segments and maintaining favorable brand
recognition;
|
· |
providing
unique, high-quality merchandise in styles, colors and sizes that
appeal
to consumers;
|
|
· |
sourcing
merchandise efficiently;
|
|
· |
competitively
pricing merchandise and creating customer perception of
value;
|
|
· |
increased
labor costs, including increases in health care benefits and worker’s
compensation costs.
|
There
is
no assurance that the Company will be able to compete successfully in the
future.
Reliance
on Consumer Spending Trends.
The
continued success of the Company depends, in part, upon numerous factors that
impact the levels of individual disposable income and thus, consumer spending.
Factors include the political environment, economic conditions, employment,
consumer debt, interest rates, inflation and consumer confidence. A decline
in
consumer spending, for any reason, could have an adverse effect on the Company’s
net sales, gross profits and results from operations.
Modifications
and/or Upgrades to Information Technology Systems May Disrupt
Operations.
The
Company relies upon its various information systems to manage its operations
and
regularly evaluates its information technology in order for management to
identify investment opportunities for maintaining, modifying, upgrading or
replacing these systems. There are inherent risks associated with replacing
or
changing these systems. Any delays, errors in capturing data or difficulties
in
transitioning to these or other new systems, or in integrating these systems
with the Company’s current systems, or any other disruptions affecting the
Company’s information systems, could have a material adverse impact on the
Company’s business.
The
Company cautions that the risk factors described above could cause actual
results to vary materially from those anticipated from any forward-looking
statements made by or on behalf of the Company. Management cannot assess the
impact of each factor on the Company’s business or the extent to which any
factor, or combination of factors, may cause actual results to vary from those
contained in forward-looking statements.
ITEM
1B - UNRESOLVED STAFF COMMENTS
None.
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 on or before
January 31st
of each
of the following years:
Year
|
|
Number
of expiring leases
|
|
2008
|
|
|
63
|
|
2009
|
|
|
38
|
|
2010
|
|
|
58
|
|
2011
|
|
|
43
|
|
2012
|
|
|
32
|
|
2013
|
|
|
22
|
|
2014
|
|
|
30
|
|
2015
and later
|
|
|
65
|
|
Total
|
|
|
351
|
|
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 currently provides approximately 261,200 square feet of space, which
includes approximately 82,200 square feet related to the Company’s 2006
addition. The Company also owns a 40,000 square foot building with warehouse
and
office space near the corporate headquarters. This building also houses the
Company’s screenprinting operations. The Company also acquired the lease, with
favorable terms, on the land the building is built upon. The lease is currently
in the second of ten five-year renewal options, which expires on October 31,
2011.
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 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 2006.
PART
II
ITEM
5 - MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND
ISSUERS PURCHASE OF EQUITY SECURITIES
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. During the third quarter of fiscal
2003, the Board of Directors authorized the Company’s first ever cash dividend
of $.0667 per share to be paid quarterly, with the initial dividend payment
on
October 27, 2003 and the second quarterly dividend payment on January 27, 2004.
During fiscal 2004, the Company continued quarterly dividend payments with
$.0667 per share paid during each of the first two quarters and $.08 per share
for the third and fourth quarters. Dividend payments continued during fiscal
2005 with $.08 per share paid in the first quarter, $.10 per share paid in
the
second quarter and $.1133 per share paid in the third and fourth quarters.
The
Company continued the $.1133 per share cash dividends in the first and second
quarters of fiscal 2006, while in the third quarter of fiscal 2006, it paid
cash
dividends of $.1333 per share and in the fourth quarter of fiscal 2006, it
paid
cash dividends of $.20 per share. In addition, the Company paid a special
one-time cash dividend of $2.00 per share in the fourth quarter of fiscal 2006.
The dividend amounts paid prior to the Company’s January 12, 2007 3-for-2 stock
split have been adjusted to reflect the impact of the split. The Company plans
to continue its quarterly dividends during fiscal 2007.
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 February
3, 2007:
|
|
Total
Number
of
Shares
Purchased
|
|
Average
Price
Paid
Per
Share
|
|
Total
Number of
Shares
Purchased
as
Part of Publicly
Announced
Plans
|
|
Approximate
Number
of Shares Yet Be Purchased Under Publicly
Announced
Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oct.
29, 2006 to Nov. 25, 2006
|
|
|
-
|
|
$
|
0
|
|
|
-
|
|
|
|
|
|
380,100
|
|
Nov.
26, 2006 to Dec. 30, 2006
|
|
|
-
|
|
$
|
0
|
|
|
-
|
|
|
|
|
|
380,100
|
|
Dec.
31, 2006 to Feb. 3, 2007
|
|
|
-
|
|
$
|
0
|
|
|
-
|
|
|
|
|
|
380,100
|
|
|
|
|
-
|
|
$ |
0
|
|
|
-
|
|
|
|
|
|
|
|
|
The
Board of Directors authorized a 1,500,000 share repurchase plan.
This plan
had 380,100 shares remaining as of February 3, 2007. Shares have
been
adjusted to reflect the impact of the Company’s 3-for-2 stock split paid
in the form of a stock dividend on January 12,
2007.
|
Stock
Price Performance Graph
The
graph below compares the cumulative total return on common shares of the Company
for the last five fiscal years with the cumulative total return on the Russell
2000 Stock Index and a peer group of Retail Trade Stocks.
Total
Return Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/2/2002
|
|
2/1/2003
|
|
1/31/2004
|
|
1/29/2005
|
|
1/28/2006
|
|
2/3/2007
|
|
The
Buckle, Inc.
|
|
$
|
100.00
|
|
$
|
83.36
|
|
$
|
130.37
|
|
$
|
147.15
|
|
$
|
184.33
|
|
$
|
283.78
|
|
Peer
Group
|
|
$
|
100.00
|
|
$
|
92.17
|
|
$
|
127.34
|
|
$
|
179.64
|
|
$
|
186.73
|
|
$
|
231.62
|
|
Russell
2000
|
|
$
|
100.00
|
|
$
|
77.04
|
|
$
|
120.22
|
|
$
|
129.17
|
|
$
|
151.77
|
|
$
|
165.67
|
|
Source:
CTA Integrated Communications www.ctaintegrated.com (303) 665-4200. Data from
ReutersBRIDGE Data Networks
The
number of record holders of the Company’s common stock as of March 29, 2007 was
341. Based upon information from the principal market makers, the Company
believes there are approximately 2,500 beneficial owners. The closing price
of
the Company’s common stock on March 29, 2007 was $35.10.
Additional
information required by this item is incorporated by reference to the
information on page 36 of the Company’s 2006 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 in the Notes to
Financial Statements under Footnote I "Stock-Based Compensation" on pages 32
to
34 in the Company's Annual Report to Shareholders which is attached to this
Form
10-K and is incorporated by reference.
ITEM
6 - SELECTED FINANCIAL DATA
The
information required by this item is incorporated by reference to information
on
page 8 in the Company’s 2006 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 9 through 16 in the Company’s 2006 Annual Report
to Shareholders which is attached to this Form 10-K.
ITEM
7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
To
the
extent that the Company borrows under its line of credit facility, the Company
would be exposed to market risk related to changes in interest rates. As of
February 3, 2007, no borrowings were outstanding under our line of credit
facility. The Company is not a party to any derivative financial instruments.
Additionally, the Company is exposed to market risk related to interest rate
risk on the cash and investments in interest-bearing securities. These
investments have carrying values that are subject to interest rate changes
that
could impact earnings to the extent that the Company did not hold the
investments to maturity. If there are changes in interest rates, those changes
would also affect the investment income the Company earns on its cash and
investments. For each one-quarter percent decline in the interest/dividend
rate
earned on cash and investments (approximately a 7% change in the rate earned),
the Company’s net income would decrease approximately $310,000 or approximately
$.01 per share. This amount could vary based upon the number of shares of the
Company’s stock outstanding and the level of cash and investments held by the
Company.
ITEM
8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The
financial statements together with the report of Deloitte & Touche LLP, an
independent registered public accounting firm, dated April 16, 2007, (which
report expresses an unqualified opinion and includes an explanatory paragraph
relating to the Company’s adoption of Statement of Financial Accounting Standard
No. 123(R), Share-Based
Payment)
appearing on pages 17 through 36 of the Company’s 2006 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.
ITEM
9A - 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 are 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 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.
Management’s
Report on Internal Control over Financial Reporting
-
Management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules 13a-15(f)
and 15-d-15(f) under the Securities Exchange Act of 1934. The Company’s internal
control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with accounting
principles generally accepted in the United State of America (“GAAP”).
All
internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect
misstatements.
Management
has assessed the effectiveness of the Company’s internal control over financial
reporting as of February 3, 2007, based on the criteria set forth by the
Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission in
their Internal
Control-Integrated Framework.
In
making its assessment of internal control over financial reporting, management
has concluded that the Company’s internal control over financial reporting was
effective as of February 3, 2007.
The
Company’s independent registered public accounting firm, Deloitte & Touche
LLP, has audited management’s assessment of the Company’s internal control over
financial reporting. Their report appears herein.
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 reasonable likely to materially affect, the Company's internal control
over financial reporting.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Stockholders of
The
Buckle, Inc.
Kearney,
Nebraska
We
have
audited management's assessment, included in the accompanying Management’s
Report on Internal Control Over Financial Reporting,
that
The Buckle, Inc. (the “Company”) maintained effective internal control over
financial reporting as of February 3, 2007, based on criteria established
in Internal
Control - Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway Commission. The
Company's management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion
on
management's assessment and an opinion on the effectiveness of the Company's
internal control over financial reporting based on our audit.
We
have
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control
over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing
such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinions.
A
company's internal control over financial reporting is a process designed by,
or
under the supervision of, the company's principal executive and principal
financial officers, or persons performing similar functions, and effected by
the
company's board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain
to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors
of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the company's
assets that could have a material effect on the financial
statements.
Because
of the inherent limitations of internal control over financial reporting,
including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may not be prevented
or
detected on a timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
In
our
opinion, management's assessment that the Company maintained effective internal
control over financial reporting as of February 3,
2007,
is
fairly stated, in all material respects, based on the criteria established
in
Internal
Control - Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway Commission. Also,
in our opinion, the Company maintained effective internal control over financial
reporting as of February 3, 2007, based on the criteria established in
Internal
Control - Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway
Commission.
We
have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the financial statements as of and for the
year
ended February 3, 2007 of the Company and our report dated April 16,
2007 expressed an unqualified opinion on those financial statements and included
an explanatory paragraph relating to the Company’s adoption of Statement of
Financial Accounting Standards No. 123(R), Share-Based
Payment,
in
2006.
/s/
Deloitte & Touche LLP
Omaha,
Nebraska
April
16,
2007
ITEM
9B - OTHER INFORMATION
As
required by Section 303A of the New York Stock Exchange’s Corporate Governance
Standards, the Company’s Chief Executive Officer submitted a certification to
the New York Stock Exchange in fiscal 2006 that he was not aware of any
violation by the Company of the New York Stock Exchange’s Corporate Governance
Standards as of the date of the certification, June 30, 2006.
PART
III
ITEM
10 - DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE
GOVERNANCE
The
information required by this item appears under the captions "Executive Officers
of the Company" appearing on page 10 of this report, and "Election of Directors"
in the Company's Proxy Statement for its 2007 Annual Shareholders' Meeting
and
is incorporated by reference.
ITEM
11- EXECUTIVE COMPENSATION
Information
required by this item appears under the following captions in the Company's
Proxy Statement for its 2007 Annual Shareholders' Meeting and is incorporated
by
reference: “Executive Compensation and Other Information,” “Directors
Compensation” (included under the “Election of Directors” section), and “Report
of the Audit Committee,” including sub-captions “Option Grants in Last Fiscal
Year,” “Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End
Option Values,” “Employment Agreements,” and “Compensation Committee Interlocks
and Insider Participation.”
ITEM
12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The
information required by this item appears under the captions "Election of
Directors" in the Company's Proxy Statement for its 2007 Annual Shareholders'
Meeting and in the Notes to Financial Statements under Footnote I on pages
32 to
34 in the Annual Report to Shareholders for fiscal 2006, 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 for
its
2007 Annual Shareholders' Meeting and is incorporated by reference.
ITEM
14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information
regarding the fees billed by our independent registered public accounting firm
and the nature of services comprising the fees for each of the two most recent
fiscal years is set forth under the caption “Ratification of Independent
Accountants” in the Company’s Proxy Statement and is incorporated herein by
reference.
PART
IV
ITEM
15 - EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
(a)
(1) Financial Statements
The
Company’s 2006 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 36
and
they are hereby incorporated by reference to this report:
Report
of
Independent Registered Public Accounting Firm
Balance
Sheets as of February 3, 2007, and January 28, 2006
Statements
of Income for each of the three years in the period ended February 3,
2007
Statements
of Stockholders' Equity for each of the three years in the period ended February
3, 2007
Statements
of Cash Flows for each of the three years in the period ended February 3,
2007
Notes
to
Financial Statements
(a)
(2) Financial Statement Schedule
Report
of
Independent Registered Public Accounting Firm
Valuation
and Qualifying Account. This schedule is on page 20.
All
other
schedules are omitted because they are not applicable or the required
information is presented in the financial statements or notes thereto.
(b)
Exhibits
See
index
to exhibits on pages 21 and 22.
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 19, 2007 |
By: |
/s/ DENNIS
H.
NELSON |
|
Dennis
H. Nelson,
President
and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
Date:
April 19, 2007 |
By: |
/s/ KAREN
B.
RHOADS |
|
Karen
B. Rhoads,
Vice
President of Finance, Treasurer,
and
Chief Financial 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 19th
day of
April, 2007.
|
|
|
/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 and Director
|
|
Director
|
|
|
|
|
|
|
/s/
ROBERT E. CAMPBELL
|
|
/s/
JOHN P. PEETZ
|
Robert
E. Campbell
|
|
John
P. Peetz, III
|
Director
|
|
Director
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Stockholders of
The
Buckle, Inc.
Kearney,
Nebraska
We
have
audited the financial statements of The Buckle, Inc. (the “Company”) as of
February 3, 2007 and January 28, 2006, and for each of the three
fiscal years in the period ended February 3, 2007, management’s assessment
of the effectiveness of the Company’s internal control over financial reporting
as of February 3, 2007 and the effectiveness of the Company’s internal
control over financial reporting as of February 3, 2007 and have issued our
reports thereon dated April 16, 2007 (which report expresses an unqualified
opinion and includes an explanatory paragraph relating to the Company’s adoption
of Statement of Financial Accounting Standards No. 123(R), Share-Based
Payment
as
described in Note A) and have issued our reports thereon dated April 16,
2007; such financial statements and reports are included in your 2006 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 15(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.
/s/
Deloitte & Touche LLP
Omaha,
Nebraska
April
16,
2007
*
* * *
*
SCHEDULE
II - Valuation and Qualifying Accounts and Reserves
|
|
Allowance
for Doubtful Accounts
|
|
Balance,
January 31, 2004
|
|
$
|
181,000
|
|
|
|
|
|
|
Amounts
charged to costs and expenses
|
|
|
379,281
|
|
Write-off
of uncollectible accounts
|
|
|
(447,281
|
)
|
Balance
January 29, 2005
|
|
|
113,000
|
|
|
|
|
|
|
Amounts
charged to costs and expenses
|
|
|
319,377
|
|
Write-off
of uncollectible accounts
|
|
|
(338,377
|
)
|
Balance,
January 28, 2006
|
|
|
94,000
|
|
|
|
|
|
|
Amounts
charged to costs and expenses
|
|
|
237,598
|
|
Write-off
of uncollectible accounts
|
|
|
(259,598
|
)
|
Balance,
February 3, 2007
|
|
$
|
72,000
|
|
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
March 27, 2007
|
|
|
|
|
|
|
|
|
|
|
|
(10.5) |
|
Acknowledgment
for James E. Shada
|
|
|
|
|
|
|
dated
March 27, 2007
|
|
|
|
|
|
|
|
|
|
|
|
(10.6) |
|
Acknowledgment
for Brett P. Milkie
|
|
|
|
|
|
|
dated
March 27, 2007
|
|
|
|
|
|
|
|
|
|
|
|
(10.7) |
|
Acknowledgment
for Patricia K. Whisler
|
|
|
|
|
|
|
dated
March 27, 2007
|
|
|
|
|
|
|
|
|
|
|
|
(10.8) |
|
Acknowledgment
for Kari G. Smith
|
|
|
|
|
|
|
dated
March 27, 2007
|
|
|
|
|
|
|
|
|
|
|
|
(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) |
|
Revolving
Line of Credit Note and First
|
|
|
|
|
|
|
Amendment
to Credit Agreement, dated
|
|
|
|
|
|
|
August
1, 2006 between The Buckle, Inc. and
|
|
|
|
|
Wells
Fargo Bank, N.A. for a $17.5 million
|
|
|
|
|
|
|
line
of credit
|
|
|
|
|
(10.12) |
|
Credit
Agreement dated August 1, 2003
|
|
Exhibit
10.12 to Form 10-K
|
|
|
|
|
between
The Buckle, Inc. and Wells
|
|
filed
for the fiscal year ended
|
|
|
|
|
Fargo
Bank, N.A, regarding $17.5 million
|
|
January
31, 2004
|
|
|
|
|
line
of credit for working capital and letters
|
|
|
|
|
|
|
of
credit.
|
|
|
|
|
|
|
|
|
|
|
|
(10.17) |
|
1993
Director Stock Option Plan
|
|
Exhibit
A to Proxy Statement
|
|
|
|
|
|
|
for
Annual Meeting held
|
|
|
|
|
|
|
May
26, 1993
|
|
|
(10.23) |
|
1997
Executive Stock Option Plan
|
|
Exhibit
B to Proxy Statement
|
|
|
|
|
|
|
for
Annual Meeting held
|
|
|
|
|
|
|
May
28, 1998
|
|
|
(10.24) |
|
1998
Restricted Stock Plan
|
|
Exhibit
C to Proxy Statement
|
|
|
|
|
|
|
for
Annual Meeting held
|
|
|
|
|
|
|
May
28, 1998
|
|
|
(10.27) |
|
2004
Management Incentive Plan
|
|
Exhibit
A to Proxy Statement
|
|
|
|
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|
|
for
Annual Meeting held
|
|
|
|
|
|
|
May
28, 2004
|
|
|
(10.28) |
|
2005
Executive Incentive Plan
|
|
Exhibit
A to Proxy Statement
|
|
|
|
|
|
|
for
Annual Meeting held
|
|
|
|
|
|
|
June
2, 2005
|
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|
|
|
|
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|
(12)
|
|
Not
applicable |
|
|
|
|
|
|
|
|
|
(13)
|
|
2006
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 |
|
|
|
|
|
|
|
|
|
(31a)
|
|
Certification
Pursuant to 18 U.S.C. |
|
|
|
|
Section
1350, as Adopted Pursuant to |
|
|
|
|
Section
302 of the Sarbanes-Oxley Act of 2002. |
|
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|
(31b)
|
|
Certification
Pursuant to 18 U.S.C. |
|
|
|
|
Section
1350, as Adopted Pursuant to |
|
|
|
|
Section
302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
|
|
|
(32)
|
|
Certifications
Pursuant to 18 U.S.C. |
|
|
|
|
Section
1350, as Adopted Pursuant to |
|
|
|
|
Section
906 of the Sarbanes-Oxley Act of 2002. |
|
|