(Former name, former address, and former fiscal year if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, $0.01 par value
BKE
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for a shorter period that the registrant was required to submit such files). Yesþ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o; Accelerated filerþ;
Non-accelerated filer o; Smaller reporting company o;
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ
The number of shares outstanding of the Registrant's Common Stock, $0.01 par value, as of December 3, 2021, was 49,783,381.
(Amounts in Thousands Except Share and Per Share Amounts)
(Unaudited)
ASSETS
October 30, 2021
January 30, 2021
CURRENT ASSETS:
Cash and cash equivalents
$
468,733
$
318,789
Short-term investments
11,302
3,359
Receivables
5,629
2,823
Inventory
100,593
101,063
Prepaid expenses and other assets
11,771
11,190
Total current assets
598,028
437,224
PROPERTY AND EQUIPMENT
454,118
451,357
Less accumulated depreciation and amortization
(354,834)
(350,942)
99,284
100,415
OPERATING LEASE RIGHT-OF-USE ASSETS
264,183
279,358
LONG-TERM INVESTMENTS
20,024
18,320
OTHER ASSETS
12,311
10,497
Total assets
$
993,830
$
845,814
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable
$
63,518
$
43,399
Accrued employee compensation
49,473
35,865
Accrued store operating expenses
30,789
20,303
Gift certificates redeemable
11,146
14,279
Current portion of operating lease liabilities
84,365
81,762
Income taxes payable
4
10,751
Total current liabilities
239,295
206,359
DEFERRED COMPENSATION
20,024
18,320
NON-CURRENT OPERATING LEASE LIABILITIES
208,707
224,506
Total liabilities
468,026
449,185
COMMITMENTS
STOCKHOLDERS’ EQUITY:
Common stock, authorized 100,000,000 shares of $0.01 par value; 49,783,381 and 49,407,731 shares issued and outstanding at October 30, 2021 and January 30, 2021 respectively
498
494
Additional paid-in capital
165,612
158,058
Retained earnings
359,694
238,077
Total stockholders’ equity
525,804
396,629
Total liabilities and stockholders’ equity
$
993,830
$
845,814
See notes to unaudited condensed consolidated financial statements.
3
THE BUCKLE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands Except Per Share Amounts)
(Unaudited)
Thirteen Weeks Ended
Thirty-Nine Weeks Ended
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
SALES, Net of returns and allowances
$
319,432
$
251,005
$
913,677
$
582,443
COST OF SALES (Including buying, distribution, and occupancy costs)
158,366
134,055
463,039
345,286
Gross profit
161,066
116,950
450,638
237,157
OPERATING EXPENSES:
Selling
67,771
52,894
190,827
124,655
General and administrative
11,080
9,930
33,912
29,026
78,851
62,824
224,739
153,681
INCOME FROM OPERATIONS
82,215
54,126
225,899
83,476
OTHER INCOME, Net
192
1,020
465
1,998
INCOME BEFORE INCOME TAXES
82,407
55,146
226,364
85,474
INCOME TAX EXPENSE
20,190
13,511
55,459
20,941
NET INCOME
$
62,217
$
41,635
$
170,905
$
64,533
EARNINGS PER SHARE:
Basic
$
1.27
$
0.85
$
3.49
$
1.32
Diluted
$
1.26
$
0.85
$
3.46
$
1.32
Basic weighted average shares
48,946
48,714
48,946
48,718
Diluted weighted average shares
49,362
48,987
49,338
48,941
See notes to unaudited condensed consolidated financial statements.
4
THE BUCKLE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in Thousands Except Share and Per Share Amounts)
(Unaudited)
Number of Shares
Common Stock
Additional Paid-in Capital
Retained Earnings
Total
FISCAL 2021
BALANCE, August 1, 2021
49,783,381
$
498
$
163,148
$
313,906
$
477,552
Net income
—
—
—
62,217
62,217
Dividends paid on common stock, ($0.33 per share)
—
—
—
(16,429)
(16,429)
Issuance of non-vested stock, net of forfeitures
—
—
—
—
—
Amortization of non-vested stock grants, net of forfeitures
—
—
2,464
—
2,464
BALANCE, October 30, 2021
49,783,381
$
498
$
165,612
$
359,694
$
525,804
BALANCE, January 31, 2021
49,407,731
$
494
$
158,058
$
238,077
$
396,629
Net income
—
—
—
170,905
170,905
Dividends paid on common stock, ($0.99 per share)
—
—
—
(49,288)
(49,288)
Issuance of non-vested stock, net of forfeitures
375,650
4
(4)
—
—
Amortization of non-vested stock grants, net of forfeitures
—
—
7,558
—
7,558
BALANCE, October 30, 2021
49,783,381
$
498
$
165,612
$
359,694
$
525,804
FISCAL 2020
BALANCE, August 2, 2020
49,407,731
$
494
$
154,517
$
259,296
$
414,307
Net income
—
—
—
41,635
41,635
Dividends paid on common stock, ($0.30 per share)
—
—
—
(14,799)
(14,799)
Issuance of non-vested stock, net of forfeitures
—
—
—
—
—
Amortization of non-vested stock grants, net of forfeitures
—
—
1,261
—
1,261
Common stock purchased and retired
—
—
—
—
—
BALANCE, October 31, 2020
49,407,731
$
494
$
155,778
$
286,132
$
442,404
BALANCE, February 2, 2020
49,205,681
$
492
$
152,258
$
236,398
$
389,148
Net income
—
—
—
64,533
64,533
Dividends paid on common stock, ($0.30 per share)
—
—
—
(14,799)
(14,799)
Issuance of non-vested stock, net of forfeitures
227,050
2
(2)
—
—
Amortization of non-vested stock grants, net of forfeitures
—
—
3,894
—
3,894
Common stock purchased and retired
(25,000)
—
(372)
—
(372)
BALANCE, October 31, 2020
49,407,731
$
494
$
155,778
$
286,132
$
442,404
See notes to unaudited condensed consolidated financial statements.
5
THE BUCKLE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Thirty-Nine Weeks Ended
October 30, 2021
October 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
170,905
$
64,533
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization
14,032
15,693
Amortization of non-vested stock grants, net of forfeitures
7,558
3,894
Deferred income taxes
(1,814)
(935)
Other
432
115
Changes in operating assets and liabilities:
Receivables
(1,945)
1,373
Inventory
470
2,551
Prepaid expenses and other assets
(581)
(814)
Accounts payable
18,964
31,435
Accrued employee compensation
13,608
682
Accrued store operating expenses
11,171
4,844
Gift certificates redeemable
(3,133)
(3,226)
Income taxes payable
(11,608)
5,243
Other assets and liabilities
2,998
943
Net cash flows from operating activities
221,057
126,331
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment
(12,178)
(4,554)
Change in other assets
—
92
Purchases of investments
(14,981)
(16,074)
Proceeds from sales/maturities of investments
5,334
20,330
Net cash flows from investing activities
(21,825)
(206)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of common stock
—
(372)
Payment of dividends
(49,288)
(14,799)
Net cash flows from financing activities
(49,288)
(15,171)
NET INCREASE IN CASH AND CASH EQUIVALENTS
149,944
110,954
CASH AND CASH EQUIVALENTS, Beginning of period
318,789
220,969
CASH AND CASH EQUIVALENTS, End of period
$
468,733
$
331,923
See notes to unaudited condensed consolidated financial statements.
6
THE BUCKLE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN AND THIRTY-NINE WEEKS ENDED OCTOBER 30, 2021 AND OCTOBER 31, 2020
(Dollar Amounts in Thousands Except Share and Per Share Amounts)
(Unaudited)
1.Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments necessary for the fair presentation of the results of operations for the interim periods have been included. All such adjustments are of a normal recurring nature. Because of the seasonal nature of the business, results for interim periods are not necessarily indicative of a full year's operations. The accounting policies followed by the Company and additional footnotes are reflected in the consolidated financial statements for the fiscal year ended January 30, 2021, included in The Buckle, Inc.'s 2020 Form 10-K. The condensed consolidated balance sheet as of January 30, 2021 is derived from audited financial statements.
For purposes of this report, unless the context otherwise requires, all references herein to the “Company”, “Buckle”, “we”, “us”, or similar terms refer to The Buckle, Inc. and its subsidiary.
The Company follows generally accepted accounting principles (“GAAP”) established by the Financial Accounting Standards Board (“FASB”). References to GAAP in these notes are to the FASB Accounting Standards Codification (“ASC”).
2.Revenues
The Company is a retailer of medium to better priced casual apparel, footwear, and accessories for fashion conscious young men and women. The Company operates its business as one reportable segment. The Company sells its merchandise through its retail stores and e-Commerce platform. The Company had 441 stores located in 42 states throughout the United States as of October 30, 2021 and 446 stores in 42 states as of October 31, 2020. During the thirty-nine week period ended October 30, 2021, the Company opened 1 new store, substantially remodeled 10 stores, and closed 3 stores, which includes no new stores, 3 substantially remodeled stores, and 1 closed store for the third quarter. During the thirty-nine week period ended October 31, 2020, the Company opened 3 new stores, substantially remodeled 3 stores, and closed 5 stores, which includes no new stores, 2 substantially remodeled stores, and no closed stores for the third quarter.
Revenue for fiscal 2020 was significantly affected by the impacts of COVID-19. The Company temporarily closed all of its brick and mortar stores beginning March 18, 2020 to protect the health and welfare of its guests, teammates, and communities. The Company began the process of reopening certain stores the week of April 26, 2020, following all appropriate federal, state, and local reopening guidelines. The store closings had a significant impact on the Company's revenue for the thirty-nine week period ended October 31, 2020, which was down $46,808 or 7.4% from the same thirty-nine week period in the prior year. The Company's online store remained open without interruption and experienced significant growth during the thirty-nine week period ended October 31, 2020, growing $50,046 or 67.3% compared to the same thirty-nine week period in the prior year.
For the thirteen week periods ended October 30, 2021 and October 31, 2020, online revenues accounted for 15.8% and 18.5%, respectively, of the Company's net sales. For the thirty-nine week periods ended October 30, 2021 and October 31, 2020, online revenues accounted for 16.2% and 21.4%, respectively. No sales to an individual customer or country, other than the United States, accounted for more than 10% of net sales.
7
The following is information regarding the Company’s major product lines, stated as a percentage of the Company’s net sales:
Thirteen Weeks Ended
Thirty-Nine Weeks Ended
Merchandise Group
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Denims
41.3
%
41.8
%
39.1
%
39.0
%
Tops (including sweaters)
32.1
31.9
29.7
30.5
Footwear
9.5
9.8
9.5
9.5
Accessories
8.5
8.4
9.1
8.9
Sportswear/Fashions
2.1
2.4
8.1
8.1
Outerwear
2.2
2.1
1.1
1.2
Casual bottoms
1.1
0.9
0.9
0.8
Youth
3.2
2.7
2.5
2.0
100.0
%
100.0
%
100.0
%
100.0
%
3.Earnings Per Share
Basic earnings per share data are based on the weighted average outstanding common shares during the period. Diluted earnings per share data are based on the weighted average outstanding common shares and the effect of all dilutive potential common shares.
Thirteen Weeks Ended
Thirteen Weeks Ended
October 30, 2021
October 31, 2020
Net Income
Weighted Average Shares (a)
Per Share Amount
Net Income
Weighted Average Shares (a)
Per Share Amount
Basic EPS
$
62,217
48,946
$
1.27
$
41,635
48,714
$
0.85
Effect of Dilutive Securities:
Non-vested shares
—
416
(0.01)
—
273
—
Diluted EPS
$
62,217
49,362
$
1.26
$
41,635
48,987
$
0.85
Thirty-Nine Weeks Ended
Thirty-Nine Weeks Ended
October 30, 2021
October 31, 2020
Net Income
Weighted Average Shares (a)
Per Share Amount
Net Income
Weighted Average Shares (a)
Per Share Amount
Basic EPS
$
170,905
48,946
$
3.49
$
64,533
48,718
$
1.32
Effect of Dilutive Securities:
Non-vested shares
—
392
(0.03)
—
223
—
Diluted EPS
$
170,905
49,338
$
3.46
$
64,533
48,941
$
1.32
(a)Shares in thousands.
8
4.Investments
The following is a summary of investments as of October 30, 2021:
Amortized Cost or Par Value
Gross Unrealized Gains
Gross Unrealized Losses
Other-than- Temporary Impairment
Estimated Fair Value
Held-to-Maturity Securities:
State and municipal bonds
$
11,302
$
6
$
—
$
—
$
11,308
Trading Securities:
Mutual funds
$
16,205
$
3,819
$
—
$
—
$
20,024
The following is a summary of investments as of January 30, 2021:
Amortized Cost or Par Value
Gross Unrealized Gains
Gross Unrealized Losses
Other-than- Temporary Impairment
Estimated Fair Value
Held-to-Maturity Securities:
State and municipal bonds
$
3,359
$
7
$
—
$
—
$
3,366
Trading Securities:
Mutual funds
$
16,121
$
2,199
$
—
$
—
$
18,320
The amortized cost and fair value of debt securities by contractual maturity as of October 30, 2021 is as follows:
Amortized Cost
Fair Value
Held-to-Maturity Securities
Less than 1 year
$
11,302
$
11,308
1 - 5 years
—
—
$
11,302
$
11,308
As of October 30, 2021 and January 30, 2021, all of the Company's investments in held-to-maturity securities are classified in short-term investments. Trading securities are held in a Rabbi Trust, intended to fund the Company’s deferred compensation plan, and are classified in long-term investments.
5.Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories:
•Level 1 – Quoted market prices in active markets for identical assets or liabilities. Short-term and long-term investments with active markets or known redemption values are reported at fair value utilizing Level 1 inputs.
•Level 2 – Observable market-based inputs (either directly or indirectly) such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or inputs that are corroborated by market data.
•Level 3 – Unobservable inputs that are not corroborated by market data and are projections, estimates, or interpretations that are supported by little or no market activity and are significant to the fair value of the assets.
9
As of October 30, 2021 and January 30, 2021, the Company held certain assets that are required to be measured at fair value on a recurring basis including its investments in trading securities.
The Company’s financial assets measured at fair value on a recurring basis are as follows:
Fair Value Measurements at Reporting Date Using
Quoted Prices in Active Markets for Identical Assets
Significant Observable Inputs
Significant Unobservable Inputs
October 30, 2021
(Level 1)
(Level 2)
(Level 3)
Total
Trading securities (including mutual funds)
$
20,024
$
—
$
—
$
20,024
Fair Value Measurements at Reporting Date Using
Quoted Prices in Active Markets for Identical Assets
Significant Observable Inputs
Significant Unobservable Inputs
January 30, 2021
(Level 1)
(Level 2)
(Level 3)
Total
Trading securities (including mutual funds)
$
18,320
$
—
$
—
$
18,320
Securities included in Level 1 represent securities which have publicly traded quoted prices.
The carrying value of cash equivalents approximates fair value due to the low level of risk these assets present and their relatively liquid nature, particularly given their short maturities. The Company also holds certain financial instruments that are not carried at fair value on the condensed consolidated balance sheets, including held-to-maturity securities. Held-to-maturity securities consist primarily of state and municipal bonds. The fair values of these debt securities are based on quoted market prices and yields for the same or similar securities, which the Company determined to be Level 2 inputs. As of October 30, 2021, the fair value of held-to-maturity securities was $11,308 compared to the carrying amount of $11,302. As of January 30, 2021, the fair value of held-to-maturity securities was $3,366 compared to the carrying amount of $3,359.
The carrying values of receivables, accounts payable, accrued expenses, and other current liabilities approximates fair value because of their short-term nature. From time to time, the Company measures certain assets at fair value on a non-recurring basis, specifically long-lived assets evaluated for impairment. These are typically store specific assets, which are reviewed for impairment when circumstances indicate impairment may exist due to the questionable recoverability of the carrying values of long-lived assets. If expected future cash flows related to a store’s assets are less than their carrying value, an impairment loss would be recognized for the difference between the carrying value and the estimated fair value of the store's assets. The fair value of the store's assets is estimated utilizing an income-based approach based on the expected cash flows over the remaining life of the store's lease.
Given the substantial reduction in the Company's sales (and the related impact on cash flow projections) as a result of store closures due to the COVID-19 pandemic, an impairment assessment was triggered for certain stores as of May 2, 2020. This analysis resulted in $1,000 of store-related asset impairment charges in the fiscal quarter ended May 2, 2020. There was no impairment related to long-lived assets for all other periods presented.
10
6.Leases
The Company's lease portfolio is primarily comprised of leases for retail store locations. The Company also leases certain equipment and corporate office space. Store leases for new stores typically have an initial term of 10 years, with options to renew for an additional 1 to 5 years. The exercise of lease renewal options is at the Company's sole discretion and is included in the lease term for calculations of its right-of-use assets and liabilities when it is reasonably certain that the Company plans to renew these leases. Certain store lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation. Lease agreements do not contain any residual value guarantees, material restrictive covenants, or options to purchase the leased property.
The Company has elected to apply the practical expedient to account for lease components (e.g. fixed payments for rent, insurance, and real estate taxes) and non-lease components (e.g. fixed payments for common area maintenance) together as a single component for all underlying asset classes. Additionally, the Company elected as an accounting policy to exclude short-term leases from the recognition requirements.
During the period of store closures in fiscal 2020 in response to the COVID-19 pandemic, the Company paid essentially full rent for the month of April but was then able to negotiate substantial rent deferrals for May and June. Consistent with guidance in the FASB Staff Q&A regarding lease concessions related to the effects of the COVID-19 pandemic, the Company made the election to treat all lease concessions as though the enforceable rights and obligations existed in each contract and, therefore, did not apply the lease modification guidance in ASC 842. As such, these deferrals had no impact on rent expense. Amounts deferred and payable in future periods have been included in "accounts payable" on the Company's condensed consolidated balance sheets.
Lease expense is included in cost of sales in the condensed consolidated statements of income. The components of total lease cost are as follows:
Thirteen Weeks Ended
Thirty-Nine Weeks Ended
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Operating lease cost
$
23,614
$
24,322
$
70,941
$
73,343
Variable lease cost (a)
5,552
6,908
14,560
13,064
Total lease cost
$
29,166
$
31,230
$
85,501
$
86,407
(a) Includes variable payments related to both lease and non-lease components, such as contingent rent payments based on performance and payments related to taxes, insurance, and maintenance costs. Also includes payments related to short-term leases with periods of less than twelve months.
Supplemental cash flow information related to leases is as follows:
Thirteen Weeks Ended
Thirty-Nine Weeks Ended
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
26,166
$
25,070
$
75,390
$
65,280
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases
$
25,436
$
7,659
$
62,178
$
13,629
The Company uses its incremental borrowing rate as the discount rate to determine the present value of lease payments. As of October 30, 2021, the weighted-average remaining lease term was 4.4 years and the weighted-average discount rate was 3.7%.
11
The table below reconciles undiscounted future lease payments (e.g. fixed payments for rent, insurance, real estate taxes, and common area maintenance) for each of the next five fiscal years and the total of the remaining years to the operating lease liabilities recorded on the condensed consolidated balance sheet as of October 30, 2021:
Fiscal Year
Operating Leases (a)
2021 (remaining)
$
24,501
2022
92,186
2023
73,614
2024
52,457
2025
32,297
Thereafter
43,446
Total lease payments
318,501
Less: Imputed interest
25,429
Total operating lease liability
$
293,072
(a) Operating lease payments exclude $17,602 of legally binding minimum lease payments for leases signed, but not yet commenced.
7.Supplemental Cash Flow Information
The Company had non-cash investing activities during the thirty-nine week periods ended October 30, 2021 and October 31, 2020 of ($1,155) and $297, respectively. The non-cash investing activity relates to the change in the balance of unpaid purchases of property, plant, and equipment included in accounts payable as of the end of the period. The liability for unpaid purchases of property, plant, and equipment included in accounts payable was $1,874 and $719 as of October 30, 2021 and January 30, 2021, respectively. Amounts reported as unpaid purchases are recorded as cash outflows from investing activities for purchases of property, plant, and equipment in the condensed consolidated statement of cash flows in the period they are paid.
Additional cash flow information for the Company includes cash paid for income taxes during the thirty-nine week periods ended October 30, 2021 and October 31, 2020 of $68,882 and $16,632, respectively.
8.Stock-Based Compensation
The Company has several stock option plans which allow for granting of stock options to employees, executives, and directors. The Company has not granted any stock options since fiscal 2008 and there are currently no stock options outstanding. The Company also has a restricted stock plan that allows for the granting of non-vested shares of common stock to employees and executives and a restricted stock plan that allows for the granting of non-vested shares of common stock to non-employee directors. As of October 30, 2021, 956,153 shares were available for grant under the Company’s various restricted stock plans, of which 874,592 shares were available for grant to executive officers.
Compensation expense was recognized during fiscal 2021 and fiscal 2020 for equity-based grants, based on the grant date fair value of the awards. The fair value of grants of non-vested common stock awards is the stock price on the date of grant.
Information regarding the impact of compensation expense related to grants of non-vested shares of common stock is as follows:
Thirteen Weeks Ended
Thirty-Nine Weeks Ended
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Stock-based compensation expense, before tax
$
2,464
$
1,261
$
7,558
$
3,894
Stock-based compensation expense, after tax
$
1,860
$
952
$
5,706
$
2,940
12
Non-vested shares of common stock granted during the thirty-nine week periods ended October 30, 2021 and October 31, 2020 were granted pursuant to the Company’s 2005 Restricted Stock Plan and the Company’s 2008 Director Restricted Stock Plan. Shares granted under the 2005 Plan are typically "performance based" and vest over a period of four years, only upon certification by the Compensation Committee of the Board of Directors that the Company has achieved its pre-established performance targets for the fiscal year.Certain shares granted under the 2005 Plan, however, are "non-performance based" and vest over a period of four years without being subject to the achievement of performance targets.Shares granted under the 2008 Director Plan vest 25% on the date of grant and then in equal portions on each of the first three anniversaries of the date of grant.
A summary of the Company’s stock-based compensation activity related to grants of non-vested shares of common stock for the thirty-nine week period ended October 30, 2021 is as follows:
Shares
Weighted Average Grant Date Fair Value
Non-Vested - beginning of year
538,750
$
22.28
Granted
381,300
39.32
Forfeited
(5,650)
24.61
Vested
(76,860)
24.71
Non-Vested - end of quarter
837,540
$
29.80
As of October 30, 2021, there was $12,005 of unrecognized compensation expense related to grants of non-vested shares. It is expected that this expense will be recognized over a weighted average period of approximately 2.1 years. The total fair value of shares vested during the thirty-nine week periods ended October 30, 2021 and October 31, 2020 was $3,098 and $748, respectively.
9.Recently Issued Accounting Pronouncements
The Company has considered all recent accounting pronouncements and concluded that there are no recent accounting pronouncements that may have a material impact on the Company's consolidated financial statements, based on current information.
13
THE BUCKLE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto of the Company included in this Form 10-Q. All references herein to the “Company”, “Buckle”, “we”, “us”, or similar terms refer to The Buckle, Inc. and its subsidiary. The following is management’s discussion and analysis of certain significant factors which have affected the Company’s financial condition and results of operations during the periods included in the accompanying condensed consolidated financial statements.
EXECUTIVE OVERVIEW
Company management considers the following items to be key performance indicators in evaluating Company performance.
Comparable Store Sales – Stores are deemed to be comparable stores if they were open in the prior year on the first day of the fiscal period being presented. Stores which have been remodeled, expanded, and/or relocated, but would otherwise be included as comparable stores, are not excluded from the comparable store sales calculation. Online sales are included in comparable store sales. Management considers comparable store sales to be an important indicator of current Company performance, helping leverage certain fixed costs when results are positive. Negative comparable store sales results could reduce net sales and have a negative impact on operating leverage, thus reducing net earnings.
Net Merchandise Margins – Management evaluates the components of merchandise margin including initial markup and the amount of markdowns during a period. Any inability to obtain acceptable levels of initial markups or any significant increase in the Company’s use of markdowns could have an adverse effect on the Company’s gross margin and results of operations.
Operating Margin – Operating margin is a good indicator for management of the Company’s success. Operating margin can be positively or negatively affected by comparable store sales, merchandise margins, occupancy costs, and the Company’s ability to control operating costs.
Cash Flow and Liquidity (working capital) – Management reviews current cash and short-term investments along with cash flow from operating, investing, and financing activities to determine the Company’s short-term cash needs for operations and expansion. The Company believes that existing cash, short-term investments, and cash flow from operations will be sufficient to fund current and long-term anticipated capital expenditures and working capital requirements for the next several years.
14
RESULTS OF OPERATIONS
The following table sets forth certain financial data expressed as a percentage of net sales and the percentage change in the dollar amount of such items compared to the prior period:
Percentage of Net Sales
Percentage of Net Sales
For Thirteen Weeks Ended
Percentage
For Thirty-Nine Weeks Ended
Percentage
October 30, 2021
October 31, 2020
Increase/(Decrease)
October 30, 2021
October 31, 2020
Increase/(Decrease)
Net sales
100.0
%
100.0
%
27.3
%
100.0
%
100.0
%
56.9
%
Cost of sales (including buying, distribution, and occupancy costs)
49.6
%
53.4
%
18.1
%
50.7
%
59.3
%
34.1
%
Gross profit
50.4
%
46.6
%
37.7
%
49.3
%
40.7
%
90.0
%
Selling expenses
21.2
%
21.1
%
28.1
%
20.9
%
21.4
%
53.1
%
General and administrative expenses
3.5
%
3.9
%
11.6
%
3.7
%
5.0
%
16.8
%
Income from operations
25.7
%
21.6
%
51.9
%
24.7
%
14.3
%
170.6
%
Other income, net
0.1
%
0.4
%
(81.1)
%
0.1
%
0.4
%
(76.7)
%
Income before income taxes
25.8
%
22.0
%
49.4
%
24.8
%
14.7
%
164.8
%
Income tax expense
6.3
%
5.4
%
49.4
%
6.1
%
3.6
%
164.8
%
Net income
19.5
%
16.6
%
49.4
%
18.7
%
11.1
%
164.8
%
Results for the thirty-nine week period ended October 31, 2020 were significantly impacted by the Company’s closure of all brick and mortar stores due to the COVID-19 pandemic beginning March 18, 2020.
Net sales increased from $251.0 million in the third quarter of fiscal 2020 to $319.4 million in the third quarter of fiscal 2021, a 27.3% increase. Comparable store net sales for the thirteen week quarter ended October 30, 2021 increased 27.3% from comparable store net sales for the prior year thirteen week period ended October 31, 2020. Total sales growth for the period was the result of a 30.0% increase in the number of transactions and a 1.2% increase in the average unit retail, partially offset by a 3.5% reduction in the average number of units sold per transaction. Online sales for the quarter increased 9.0% to $50.5 million for the thirteen week period ended October 30, 2021 compared to $46.4 million for the thirteen week period ended October 31, 2020.
Net sales increased from $582.4 million for the first three quarters of fiscal 2020 to $913.7 million for the first three quarters of fiscal 2021, a 56.9% increase. Comparable store net sales for the thirty-nine week period ended October 30, 2021 increased 56.7% from comparable store net sales for the prior year thirty-nine week period ended October 31, 2020. Total sales growth for the year-to-date period was the result of an 57.2% increase in the number of transactions and a 2.5% increase in the average unit retail, partially offset by a 2.8% reduction in the average number of units sold per transaction. Online sales for the year-to-date period increased 18.7% to $147.7 million for the thirty-nine week period ended October 30, 2021 compared to $124.4 million for the thirty-nine week period ended October 31, 2020.
The Company's average retail price per piece of merchandise sold increased $0.57, or 1.2%, during the third quarter of fiscal 2021 compared to the third quarter of fiscal 2020. This $0.57 increase was primarily attributable to the following changes (with their corresponding effect on the overall average price per piece): a 4.3% increase in average knit shirt price points ($0.48), a 7.0% increase in average accessories price points ($0.26), an increase in average price points for certain other merchandise categories ($0.13), and a shift in the merchandise mix ($0.20); which were partially offset by a 2.5% reduction in average denim price points (-$0.50). These changes are primarily a reflection of merchandise shifts in terms of brands and product styles, fabrics, details, and finishes.
15
For the year-to-date period, the Company's average retail price per piece of merchandise sold increased $1.10, or 2.5%, compared to the same period in fiscal 2020. This $1.10 increase was primarily attributable to the following changes (with their corresponding effect on the overall average price per piece): a 3.9% increase in average knit shirt price points ($0.40), a 6.8% increase in average accessories price points ($0.26), an increase in average price points for certain other merchandise categories ($0.06), and a shift in the merchandise mix ($0.56); which were partially offset by a 1.0% reduction in average denim price points (-$0.18). These changes are primarily a reflection of merchandise shifts in terms of brands and product styles, fabrics, details, and finishes.
Gross profit after buying, distribution, and occupancy expenses was $161.1 million in the third quarter of fiscal 2021, compared to $117.0 million in the third quarter of fiscal 2020. As a percentage of net sales, gross profit was 50.4% in the third quarter of fiscal 2021, compared to 46.6% in the third quarter of fiscal 2020. The gross margin increase was the result of leveraged occupancy, buying, and distribution expenses (3.15%, as a percentage of net sales) and an improvement in merchandise margins (0.65%, as a percentage of net sales).
Year-to-date, gross profit was $450.6 million for the thirty-nine week period ended October 30, 2021, compared to $237.2 million for the thirty-nine week period ended October 31, 2020. As a percentage of net sales, gross profit was 49.3% for the first three quarters of fiscal 2021, compared to 40.7% for the first three quarters of fiscal 2020. The gross margin increase for the year-to-date period was the result of leveraged occupancy, buying, and distribution expenses (7.30%, as a percentage of net sales) and an improvement in merchandise margins (1.30%, as a percentage of net sales).
Selling expenses were $67.8 million in the third quarter of fiscal 2021, compared to $52.9 million in the third quarter of fiscal 2020. As a percentage of net sales, selling expenses were 21.2% of net sales in the third quarter of fiscal 2021, compared to 21.1% in the third quarter of fiscal 2020. Year-to-date, selling expenses were $190.8 million for the first three quarters of fiscal 2021, compared to $124.7 million for the first three quarters of fiscal 2020. As a percentage of net sales, selling expenses were 20.9% of net sales for the first three quarters of fiscal 2021, compared to 21.4% for the first three quarters of fiscal 2020.
General and administrative expenses were $11.1 million in the third quarter of fiscal 2021, compared to $9.9 million in the third quarter of fiscal 2020. As a percentage of net sales, general and administrative expenses were 3.5% of net sales in the third quarter of fiscal 2021, compared to 3.9% in the third quarter of fiscal 2020. Year-to-date, general and administrative expenses were $33.9 million for the first three quarters of fiscal 2021, compared to $29.0 million for the first three quarters of fiscal 2020. As a percentage of net sales, general and administrative expenses were 3.7% of net sales in fiscal 2021, compared to 5.0% in fiscal 2020.
In total, selling, general, and administrative expenses were 24.7% of net sales for the third quarter of fiscal 2021, compared to 25.0% for the third quarter of fiscal 2020. The decrease was the result of a decrease in store labor-related expenses (0.90%, as a percentage of net sales) and sales leverage across several other expense categories (0.85%, as a percentage of net sales), which were partially offset by an increase in expense related to incentive and equity compensation accruals (1.45%, as a percentage of net sales).
For the 39-week year-to-date period, total selling, general, and administrative expenses were 24.6% of net sales for fiscal 2021, compared to 26.4% for fiscal 2020. The decrease was the result of a decrease in store labor-related expenses (1.70%, as a percentage of net sales) and sales leverage across several other expense categories (2.05%, as a percentage of net sales), which were partially offset by an increase in expense related to incentive and equity compensation accruals (1.95%, as a percentage of net sales).
As a result of the above changes, the Company's income from operations was $82.2 million, or 25.7% of net sales, for the third quarter of fiscal 2021, compared to income from operations of $54.1 million, or 21.6% of net sales, for the third quarter of fiscal 2020.
Year-to-date, income from operations was $225.9 million for the thirty-nine week period ended October 30, 2021 compared to $83.5 million for the thirty-nine week period ended October 31, 2020. Income from operations was 24.7% of net sales for the first three quarters of fiscal 2021 compared to 14.3% of net sales for the first three quarters of fiscal 2020.
Income tax expense as a percentage of pre-tax income was 24.5% for the third quarter of both fiscal 2021 and fiscal 2020, bringing the Company's net income to $62.2 million in the third quarter of fiscal 2021 compared to $41.6 million in the third quarter of fiscal 2020.
16
Income tax expense as a percentage of pre-tax income was 24.5% for both the first three quarters of fiscal 2021 and the first three quarters of fiscal 2020, bringing year-to-date net income to $170.9 million for fiscal 2021 compared to $64.5 million for fiscal 2020.
LIQUIDITY AND CAPITAL RESOURCES
As of October 30, 2021, the Company had working capital of $358.7 million, including $468.7 million of cash and cash equivalents and $11.3 million of short-term investments. The Company's cash receipts are generated from retail sales and from investment income, and the Company's primary ongoing cash requirements are for inventory, payroll, occupancy costs, dividend payments, new store expansion, remodeling, and other capital expenditures. Historically, the Company's primary source of working capital has been cash flow from operations. During the first three quarters of fiscal 2021 and fiscal 2020, the Company's cash flow from operations was $221.1 million and $126.3 million, respectively. Changes in operating cash flow between periods is primarily a function of changes in net income, along with changes in inventory and accounts payable based on the timing and amount of merchandise purchased in each respective period. Operating cash flow is also impacted by the timing of certain other payments, including rent and income taxes. The Company's strong operating cash flow for the first three quarters of fiscal 2021 compared to the first three quarters of fiscal 2020 is primarily attributable to the 164.8% or $106.4 million increase in net income.
The uses of cash for both thirty-nine week periods primarily include payment of annual bonuses accrued at fiscal year end, inventory purchases, dividend payments, construction costs for new and remodeled stores, other capital expenditures, and purchases of investment securities.
During the first three quarters of fiscal 2021 and 2020, the Company invested $11.5 million and $3.6 million, respectively, in new store construction, store renovation, and store technology upgrades. The Company also spent $0.7 million and $1.0 million in the first three quarters of fiscal 2021 and 2020, respectively, in capital expenditures for the corporate headquarters and distribution facility.
During the remainder of fiscal 2021, the Company anticipates completing eight additional store construction projects, which are all remodels/relocations. Management estimates that total capital expenditures during fiscal 2021 will be approximately $17.0 to $20.0 million, which includes primarily planned store projects and technology investments. The Company believes that existing cash and cash equivalents, investments, and cash flow from operations will be sufficient to fund current and long-term anticipated capital expenditures and working capital requirements for the next several years. The Company has a consistent record of generating positive cash flow from operations each year and, as of October 30, 2021, had total cash and investments of $500.1 million, including $20.0 million of long-term investments.
Future conditions, however, 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 $25.0 million with Wells Fargo Bank, N.A. for operating needs and letters of credit. The line of credit agreement has an expiration date of July 31, 2023 and provides that $10.0 million of the $25.0 million line is available for letters of credit. Borrowings under the line of credit provide for interest to be paid at a rate based on SOFR. The Company has, from time to time, borrowed against these lines of credit. There were no bank borrowings during the first three quarters of fiscal 2021 or 2020. The Company had no bank borrowings as of October 30, 2021 and was in compliance with the terms and conditions of the line of credit agreement.
17
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon The Buckle, Inc.’s condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires that management make estimates and judgments that affect the reported amounts of assets and liabilities, the 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, investments, incentive bonuses, 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 consolidated 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 critical accounting policies and estimates utilized by the Company in the preparation of its condensed consolidated financial statements for the period ended October 30, 2021 have not changed materially from those utilized for the fiscal year ended January 30, 2021, included in The Buckle Inc.’s 2020 Annual Report on Form 10-K.
1.Revenue Recognition. Retail store sales are recorded, net of expected returns, upon the purchase of merchandise by customers. Online sales are recorded, net of expected returns, when merchandise is tendered for delivery to the common carrier. Shipping fees charged to customers are included in revenue and shipping costs are included in selling expenses. The Company recognizes 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 or certificate is redeemed for merchandise. A current liability for unredeemed gift cards and certificates is recorded at the time the card or certificate is purchased. The liability recorded for unredeemed gift cards and gift certificates was $11.1 million and $14.3 million as of October 30, 2021 and January 30, 2021, respectively. Gift card and gift certificate breakage is recognized as revenue in proportion to the redemption pattern of customers by applying an estimated breakage rate. The estimated breakage rate is based on historical issuance and redemption patterns and is re-assessed by the Company on a regular basis. Sales tax collected from customers is excluded from revenue and is included as part of “accrued store operating expenses” on the Company's condensed consolidated balance sheets.
The Company establishes a liability for estimated merchandise returns, based upon the historical average sales return percentage, that is recognized at the transaction value. The Company also recognizes a return asset and a corresponding adjustment to cost of sales for the Company's right to recover returned merchandise, which is measured at the estimated carrying value, less any expected recovery costs. Customer returns could potentially exceed the historical average, thus reducing future net sales results and potentially reducing future net earnings. The accrued liability for reserve for sales returns was $3.7 million as of October 30, 2021 and $2.6 million as of January 30, 2021.
The Company's Buckle Rewards program allows participating guests to earn points for every qualifying purchase, which (after achievement of certain point thresholds) are redeemable as a discount off a future purchase. Reported revenue is net of both current period reward redemptions and accruals for estimated future rewards earned under the Buckle Rewards program. A liability has been recorded for future rewards based on the Company's estimate of how many earned points will turn into rewards and ultimately be redeemed prior to expiration. As of October 30, 2021 and January 30, 2021, $10.9 million and $10.2 million was included in "accrued store operating expenses" as a liability for estimated future rewards.
18
Through partnership with Comenity Bank, the Company offers a private label credit card ("PLCC"). Prior to October 2020, Customers with a PLCC were enrolled in our B-Rewards incentive program and earned points for every qualifying purchase on their card. At the end of each rewards period, customers who exceeded a minimum point threshold received a reward to be redeemed on a future purchase. The B-Rewards program also provided other discount and promotional opportunities to cardholders on a routine basis. Reported revenue was net of both current period reward redemptions, current period discounts and promotions, and accruals for estimated future rewards earned under the B-Rewards program. A liability was recorded for future rewards based on the Company's estimate of how many earned points would turn into rewards and ultimately be redeemed prior to expiration, which was included in "gift certificates redeemable" on the Company's consolidated balance sheets. In October 2020, the Company merged the B-Rewards program and the Buckle Rewards program enabling participating guests to earn additional points for qualifying purchases on their PLCC card under the newly enhanced Buckle Rewards program. Effective January 30, 2021, and for all future periods, the accrual for points earned under the combined Buckle Rewards program is included in "accrued store operating expenses" on the Company's consolidated balance sheets as referenced in the previous paragraph.
2.Inventory. Inventory is valued at the lower of cost or net realizable value. Cost is determined using an 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 account for merchandise obsolescence and markdowns that could affect net realizable value, based on assumptions using calculations applied to current inventory levels within each different markdown level. 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 adjustment to inventory for markdowns and/or obsolescence was $7.0 million as of October 30, 2021 and $10.8 million as of January 30, 2021.
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.Leases. The Company's lease portfolio is primarily comprised of leases for retail store locations. The Company also leases certain equipment and corporate office space. Store leases for new stores typically have an initial term of 10 years, with options to renew for an additional 1 to 5 years. The exercise of lease renewal options is at the Company's sole discretion and is included in the lease term for calculations of its right-of-use assets and liabilities when it is reasonably certain that the Company plans to renew these leases. Certain store lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation. Lease agreements do not contain any residual value guarantees, material restrictive covenants, or options to purchase the leased property.
The Company has elected to apply the practical expedient to account for lease components (e.g. fixed payments for rent, insurance, and real estate taxes) and non-lease components (e.g. fixed payments for common area maintenance) together as a single component for all underlying asset classes. Additionally, the Company elected as an accounting policy to exclude short-term leases from the recognition requirements.
Consistent with guidance in the FASB Staff Q&A regarding lease concessions related to the effects of the COVID-19 pandemic, the Company made the election to treat all lease concessions as though the enforceable rights and obligations existed in each contract and, therefore, did not apply the lease modification guidance in ASC 842.
19
5.Investments. Investments classified as short-term investments include securities with a maturity of greater than three months and less than one year. Available-for-sale securities are reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders’ equity (net of the effect of income taxes), using the specific identification method, until they are sold. Held-to-maturity securities are reported at amortized cost. Trading securities are reported at fair value, with unrealized gains and losses included in earnings, using the specific identification method.
OFF-BALANCE SHEET ARRANGEMENTS, CONTRACTUAL OBLIGATIONS, AND COMMERCIAL COMMITMENTS
As referenced in the table 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, results of operations, or cash flows. In addition, the commercial obligations and commitments made by the Company are customary transactions which the Company believes to be similar to those of other comparable retail companies.
The following table identifies the material obligations and commitments as of October 30, 2021:
Payments Due by Fiscal Year
Contractual obligations (dollar amounts in thousands):
Total
2021 (remaining)
2022-2023
2024-2025
Thereafter
Purchase obligations
$
13,590
$
6,502
$
5,654
$
1,434
$
—
Deferred compensation
20,024
—
—
—
20,024
Operating lease payments (a)
318,501
24,501
165,800
84,754
43,446
Total contractual obligations
$
352,115
$
31,003
$
171,454
$
86,188
$
63,470
(a) See Footnote 6 to the condensed consolidated financial statements.
The Company has available an unsecured line of credit of $25.0 million for operating needs and letters of credit, which is excluded from the preceding table. The line of credit agreement has an expiration date of July 31, 2023 and provides that $10.0 million of the $25.0 million line is available for letters of credit. 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 first three quarters of fiscal 2021 or the first three quarters of fiscal 2020. The Company had outstanding letters of credit totaling $5.1 million and $1.8 million as of October 30, 2021 and January 30, 2021, respectively. The Company has no other off-balance sheet arrangements.
SEASONALITY
The Company's business is seasonal, with the holiday season (from approximately November 15 to December 30) and the back-to-school season (from approximately July 15 to September 1) historically contributing the greatest volume of net sales. For fiscal years 2020, 2019, and 2018, the holiday and back-to-school seasons accounted for approximately 35% of the Company's fiscal year net sales. Quarterly results may vary significantly depending on a variety of factors including the timing and amount of sales and costs associated with the opening of new stores, the timing and level of markdowns, the timing of store closings, the remodeling of existing stores, competitive factors, and general economic conditions.
20
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.
ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk - 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, the Company’s net income would decrease approximately $0.5 million, or less than $0.01 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 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 the Company’s 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 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.
21
THE BUCKLE, INC.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings: None
Item 1A. Risk Factors:
Except as set forth below, there have been no material changes from the risk factors disclosed under “Item 1A - Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2021.
Vaccine mandates and other governmental requirements related to the ongoing COVID-19 pandemic could present material risks to our ongoing operations and results. On September 9, 2021, President Biden announced that he was directing the Occupational Safety and Health Administration (“OSHA”) to issue an emergency temporary standard (“ETS”) which, amongst other things, would mandate that private employers of more than 100 employees require that employees be fully vaccinated for COVID-19 or submit to weekly COVID-19 testing. On November 5, 2021, the ETS was published in the Federal Register which, by its terms, would apply to Buckle as a private employer of more than 100 employees. Subsequently, on November 6, 2021, the United States Court of Appeals for the Fifth Circuit granted an emergency stay of the ETS, and on November 12, 2021, the Court upheld its stay and prevented OSHA from enforcing the mandate “pending adequate judicial review” of a motion for permanent injunction. On November 16, 2021, OSHA announced that, to comply with the Court’s ruling, it would suspend all efforts to enforce and prepare for implementation of the ETS. Litigation related to the ETS has been consolidated and moved to the Sixth Circuit Court of Appeals and remains pending.
At the time of filing, the Company anticipates that, should the ETS or similar regulations go into effect, we would be required to comply. Although it is not possible to predict the impact of this regulation on our business, such a mandate could present risk to our retail store and distribution operations, along with employee retention and recruitment. Compliance with the ETS could also result in increased labor related costs, as well as further supply chain disruption.
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 30, 2021:
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
Aug. 1, 2021 to Aug. 28, 2021
-
-
-
410,655
Aug. 29, 2021 to Oct. 2, 2021
-
-
-
410,655
Oct. 3, 2021 to Oct. 30, 2021
-
-
-
410,655
-
-
-
The Board of Directors authorized a 1,000,000 share repurchase plan on November 20, 2008. The Company has 410,655 shares remaining to complete this authorization.
Item 3. Defaults Upon Senior Securities: None
Item 4. Mine Safety Disclosures: None
Item 5. Other Information: None
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Item 6. Exhibits:
Exhibit 31.1
Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer (Section 302 of the Sarbanes-Oxley Act of 2002)
Exhibit 31.2
Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer (Section 302 of the Sarbanes-Oxley Act of 2002)
Exhibit 32.1
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101
The following materials from The Buckle, Inc.’s Quarterly Report on Form 10-Q for the quarter ended October 30, 2021, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Income; (iii) Condensed Consolidated Statements of Stockholders’ Equity; (iv) Condensed Consolidated Statements of Cash Flows; and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and in detail.
Exhibit 104
Cover page formatted as Inline XBRL and contained in Exhibit 101
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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.
Date:
December 9, 2021
By:
/s/ DENNIS H. NELSON
DENNIS H. NELSON,
President and CEO
(principal executive officer)
Date:
December 9, 2021
By:
/s/ THOMAS B. HEACOCK
THOMAS B. HEACOCK,
Senior Vice President of Finance, Treasurer, and CFO
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101
The following materials from The Buckle, Inc.’s Quarterly Report on Form 10-Q for the quarter ended October 30, 2021, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Income; (iii) Condensed Consolidated Statements of Stockholders’ Equity; (iv) Condensed Consolidated Statements of Cash Flows; and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and in detail.
Exhibit 104
Cover page formatted as Inline XBRL and contained in Exhibit 101
