-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
VofpN0V15Q7czcsU2PhU2QYn9c0vJNnUpzqeU6GI8Kpuaaj7HxEkJsLY0Adkp+fq
9q0ymqgzL8+XVayYg3U/mQ==
<SEC-DOCUMENT>0000950137-03-002253.txt : 20030421
<SEC-HEADER>0000950137-03-002253.hdr.sgml : 20030421
<ACCEPTANCE-DATETIME>20030421171206
ACCESSION NUMBER: 0000950137-03-002253
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 12
CONFORMED PERIOD OF REPORT: 20030201
FILED AS OF DATE: 20030421
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: BUCKLE INC
CENTRAL INDEX KEY: 0000885245
STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FAMILY CLOTHING STORES [5651]
IRS NUMBER: 470366193
STATE OF INCORPORATION: NE
FISCAL YEAR END: 0201
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-12951
FILM NUMBER: 03657221
BUSINESS ADDRESS:
STREET 1: 2407 W 24TH ST
CITY: KEARNEY
STATE: NE
ZIP: 68847
BUSINESS PHONE: 3082368491
MAIL ADDRESS:
STREET 1: P O BOX 1480
CITY: KEARNEY
STATE: NE
ZIP: 68848-1480
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>c76285e10vk.txt
<DESCRIPTION>ANNUAL REPORT
<TEXT>
<PAGE>
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 1, 2003
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ____________ to ____________
Commission File Number: 000-20132
THE BUCKLE, INC.
(Exact name of Registrant as specified in its charter)
NEBRASKA 47-0366193
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2407 WEST 24TH STREET, KEARNEY, NEBRASKA 68845-4915
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (308) 236-8491
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, $.01 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate whether the Registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes |X| No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K |_|.
The aggregate market value (based on the closing price of the New York Stock
Exchange) of the Common Stock of the Registrant held by non-affiliates of the
Registrant was $134,291,916.00 on March 24, 2003. For purposes of this response,
executive officers and directors are deemed to be the affiliates of the
Registrant and the holdings by non-affiliates was computed as 7,460,662 shares.
The number of shares outstanding of the Registrant's Common Stock, as of March
24, 2003, was 21,057,734.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement dated April 26, 2003 for Registrant's
2003 Annual Meeting of Shareholders to be held May 29, 2003 are incorporated by
reference in Part III.
<PAGE>
THE BUCKLE, INC.
FORM 10-K
FEBRUARY 1, 2003
TABLE OF CONTENTS
PAGE
----
PART I
Item 1. Business 3
Item 2. Properties 11
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
Item 5. Market for Registrant's Common Equity and Related 11
Shareholder Matters
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of Financial 12
Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 12
Item 8. Financial Statements and Supplementary Data 12
Item 9. Changes In and Disagreements With Accountants on 12
Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant 12
Item 11. Executive Compensation 12
Item 12. Security Ownership of Certain Beneficial Owners and
Management 13
Item 13. Certain Relationships and Related Transactions 13
Item 14. Controls and Procedures 13
PART IV
Item 15. Exhibits, Financial Statements, Schedules and Reports 13
on Form 8-K
2
<PAGE>
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 1, 2003, the Company operated 304 retail stores in 37 states
throughout the central United States, as well as in the northwest, southeast and
southwestern states under the names "Buckle" and "The Buckle." The Company
markets a wide selection of mostly brand name casual apparel including denims,
other casual bottoms, tops, sportswear, outerwear, accessories and footwear. The
Company emphasizes personalized attention to its customers and provides customer
services such as free alterations, free gift-wrapping, easy layaways and a
frequent shopper program. Most stores are located in regional, high-traffic
shopping malls, and this is the Company's strategy for future expansion. All of
the Company's central office functions, including purchasing, pricing,
advertising and distribution, are controlled from its headquarters and
distribution center in Kearney, Nebraska.
Incorporated in Nebraska in 1948, the Company commenced business under the name
Mills Clothing, Inc., a conventional men's clothing store with only one
location. In 1967, a second store, under the trade name Brass Buckle, was
purchased. In the early 1970s, the store image changed to that of a jeans store
with a wide selection of denims and shirts. The first branch store was opened in
Columbus, Nebraska, in 1976. In 1977, the Company began selling young women's
apparel as well, and opened its first mall store. The Company has experienced
significant growth over the past ten years, growing from 104 stores at the start
of 1993 to 304 stores by the close of fiscal 2002. The Company changed its
corporate name to The Buckle, Inc. on April 23, 1991. All references herein to
fiscal 2002 refer to the 52-week period ended February 1, 2003. Fiscal 2001
refers to the 52-week period ended February 2, 2002 and fiscal 2000 refers to
the 53-week period ended February 3, 2001.
The Company's principal executive offices and distribution center are located at
2407 West 24th Street, Kearney, Nebraska 68845. The Company's telephone number
is (308) 236-8491. The Company publishes its corporate web site at
www.buckle.com.
MARKETING AND MERCHANDISING
The Company's marketing and merchandising strategy is designed to create
customer loyalty by offering a wide selection of key brand name merchandise and
providing a broad range of value-added services. The Company provides a unique
specialty apparel store with merchandise designed to appeal to the fashion
conscious 12-to 24-year old. The merchandise mix includes denims, slacks/casual
bottoms, tops, sweaters, sportswear, outerwear, accessories and footwear. Denim
is a significant contributor to total sales (32.8% of fiscal 2002 net sales) and
is a key to the Company's merchandising concept. The Company believes it
attracts customers with a selection of key brands and a wide variety of fits,
finishes and styles in denim. Shirts and tops are also significant contributors
to the total sales (32.0% of fiscal 2002 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.
<TABLE>
<CAPTION>
Percentage of Net Sales
-----------------------
Merchandise Group Fiscal Fiscal Fiscal
----------------- 2002 2001 2000
---- ---- ----
<S> <C> <C> <C>
Denims 32.8% 28.8% 26.6%
Slacks/Casual Bottoms 3.7 5.0 5.4
Tops (including sweaters) 32.0 33.5 32.2
Sportswear/Fashion Clothes 4.8 5.7 6.5
Outerwear 3.7 2.9 3.3
Accessories 11.3 11.0 9.1
Footwear 11.4 11.8 14.4
Little Guys/Gals 0.1 1.0 2.2
Other 0.2 0.3 0.3
----- ----- -----
Total 100.0% 100.0% 100.0%
====== ====== ======
</TABLE>
3
<PAGE>
Brand name merchandise constitutes nearly 90% of the Company's sales volume. The
remaining balance is comprised of private label merchandise that is manufactured
to the Company's specifications. The Company's merchandisers continually work
with manufacturers and vendors to produce brand name merchandise that is unique
in color and style. While the brands offered by the Company change to meet
current customer preferences, the Company currently offers brands such as Lucky
Brand Dungarees, Silver, Fossil, Billabong, Ecko, Quiksilver and Roxy. The
Company believes brand name merchandise will continue to constitute a
substantial majority of sales.
Management believes the Company provides a unique store setting by maintaining a
high level of customer service and by offering a wide selection of fashionable,
quality merchandise at good values. The Company believes that it is essential to
create an enjoyable shopping atmosphere and, in order to fulfill this mission,
we must provide 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 which 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 five to six percent of net sales have been made on a layaway
basis.
Merchandising and pricing decisions are made centrally; however, the Company's
distribution system allows for variation in the mix of merchandise distributed
to each store. 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, including varying styles and colors
that differ from prior merchandise. The Company also has a transfer program that
shifts specific merchandise to locations where it is selling best. This
distribution and transfer system helps to maintain customer satisfaction by
providing in-stock popular items and reducing the need to mark down slow-moving
merchandise at a particular location. The Company believes the reduced markdowns
justify the incremental costs of distribution associated with the transfer
system. The Company does not hold storewide off-price sales at anytime.
During fiscal 2002, the Company unveiled a totally new store design and
corporate logo. The company worked with a national design firm to review
architectural elements, including all wall systems, lighting, finishes and
fixtures. The new design has been very positively received by guests, landlords
and management. The last prior update to the store look was in fiscal 1997. New
materials include: wood flooring, enhanced graphic elements, corrugated metals
and Icon brand elements. Accessory and shoe fixtures were developed and rolled
out to all stores in fiscal 2002. The Company opened the first new prototype
stores in the summer of 2002 with all subsequent remodels and new stores
featuring the new design. At the end of fiscal 2002, a total of 15 stores had
the new look - eight new stores and seven remodeled locations.
The basic overall store architectural design presents a unique atmosphere in
which the store's architectural elements, including feature display walls,
provide a backdrop and create a strong visual presentation for the customer.
Special care is taken to provide a comfortable environment to which customers
can relate.
MARKETING AND ADVERTISING
In fiscal 2002, the Company spent $4.4 million (net co-op reimbursements) or
1.1% of net sales on advertising, promotions and in-store point of sale
materials. In-store seasonal sign kits, promotional signage, image brochures and
catalogs are used to enhance merchandising presentations and the stores' image.
Promotions such as sweepstakes, gift with purchase offers and special events are
designed to create a unique shopping experience for Buckle guests. Magazine
advertising in leading teen publications is used during key seasons to introduce
new merchandise, build awareness and brand the Buckle's image. The Buckle
partners with key vendors on magazine opportunities and special promotions to
extend its marketing reach. Radio advertising continues as a media source used
to support special events and promotions such as sweepstakes, grand openings and
end-of-season sales in approximately 75% of the Company's markets.
In 2002, along with the new store concept, the Company rolled out a new logo to
create a stronger brand identity for the Buckle. The new logo includes a B-Icon
element and signature red color. All marketing materials and supplies were
redesigned to translate the new brand identity throughout the Company including
the retail stores, online and corporate communication.
4
<PAGE>
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 coupons and other
special targeted mailings. In 2002, the Buckle introduced B-Rewards, an
exclusive rewards program for Buckle Cardholders. Qualifying Cardholders are
mailed B-Rewards merchandise certificates at the end of each Rewards program
inviting them back into the store at the start of the next season. 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
visitors can get the latest Buckle fashion information with special features
including an online denim guide, "look" suggestions and style boutiques. The
Company has an opt-in online database and sends periodic and targeted e-mail
campaigns to notify members of the latest store promotions and product
offerings. Online guests can shop, enter sweepstakes, fill out a wish list, find
out about career opportunities, and read the latest Buckle financial news. The
Buckle Online Store was launched April 26, 1999 as a marketing tool, to extend
the Company's brand beyond the physical locations. Offering a 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.
STORE OPERATIONS
The Company has an Executive Vice President of Sales, a Vice President of Sales,
15 district managers and 61 area managers. Ten of the district managers and all
of the area managers also serve as manager of their home base store. Each store
has one manager, one or two assistant managers, one to three additional
full-time salespeople and up to 20 part-time salespeople. Most stores have peak
levels of staff during the back-to-school and Christmas seasons. Almost every
location also employs a seamstress.
The Company places great importance on educating quality personnel. Along with
sharing career opportunities with Buckle employees, the Company 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
sales performance of stores in their district/area. Store managers perform sales
training of new employees at the store level. Salespeople displaying particular
talent are generally assigned to stores operated by district managers for
training as a store manager.
The Company has established a comprehensive program stressing the prevention and
control of shrinkage losses. Steps taken to reduce shrinkage include monitoring
cash refunds, voids, inappropriate discounts, employee sales and
returns-to-vendor. The Company also has electronic article surveillance systems
in approximately 99% of the Company's stores as well as surveillance camera
systems in approximately 71% of the stores. As a result, the Company achieved a
merchandise shrinkage rate of 0.6% of net sales for fiscal 2002, 0.7% of net
sales for fiscal 2001 and 0.6% for fiscal year 2000.
The average store is approximately 4,800 square feet (of which the Company
estimates an average of approximately 80% is selling space), and stores range in
size from 2,600 square feet to 8,475 square feet.
5
<PAGE>
PURCHASING AND DISTRIBUTION
The Company has a very experienced buying team. The buying team includes the
President, the Vice President of Women's Merchandising, one women's
merchandiser, seven women's buyers, and three men's merchandisers and two men's
buyers. The top five members of this buying team combined, have 110 years of
experience with the Company. The experience and leadership within the buying
team contributes significantly to the company's success by enabling the buying
team to react quickly to changes in fashion and by providing extensive knowledge
of sources for branded and private label goods.
The Company purchases products from manufacturers within the United States and
from some foreign manufacturers. The Company's merchandising team monitors U.S.
fashion centers (in New York and on the West Coast) and shops high fashion
stores to adapt new ideas to The Buckle. The Company continually monitors fabric
selection, quality and delivery schedules. The Company has not experienced any
material difficulties with merchandise manufactured in foreign countries. The
Company does not have long-term or exclusive contracts with any brand name
manufacturer or supplier. The Company does have a long term relationship with an
agent in Hong Kong for the manufacture of The Buckle, Inc.'s private label
merchandise. An agreement with this company was entered into on November 28,
1994, for orders placed subsequent to that date.
In fiscal 2002, Lucky Brand Dungarees made up 25.0% of the Company's net sales.
No other vendor accounted for more than 10% of the Company's sales. Other
current significant vendors include Fossil, Silver, Billabong, Ecko, Quiksilver
and Roxy. 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 interest. The Company uses a centralized receiving and
distribution center located within the corporate headquarters building in
Kearney, Nebraska. Merchandise is received daily in Kearney where it is sorted,
tagged with bar-coded tickets (unless the vendor UPC code can be used or the
merchandise is pre-ticketed), and packaged for distribution to individual stores
primarily via United Parcel Service. The Company's goal is to ship the majority
of its merchandise out to the stores within one to two business days of receipt.
This system allows stores to receive new merchandise almost every day, creating
excitement within each store and providing customers with a good reason to shop
often. When available, the Company uses merchandise "pre-packs" to expedite the
movement of product through the distribution center.
The Company's current building space and distribution system will allow for
handling of up to 450 stores. The Company has developed an effective
computerized system for tracking merchandise from the time it is checked in at
the Company's distribution center until it arrives at the stores and is sold to
a customer. The system's function is to insure that store shipments are
delivered accurately and promptly, to account for inventory and to assist in
allocating merchandise among stores. Management can track, on a daily basis,
which merchandise is selling at specific locations and directs transfers of
merchandise from one store to another as necessary. This allows stores to carry
a reduced inventory while at the same time satisfying customer demands.
To reduce inter-store shipping costs and provide a more timely restocking of
in-season merchandise, the Company has increased its focus on warehousing a
portion of initial shipments. Sales reports are then used to replenish, on a
basis of one to three times each week, those stores that are experiencing the
greatest success selling specific styles, colors and sizes of merchandise. This
system is also designed to prevent an over-crowded look in the stores at the
beginning of a season.
6
<PAGE>
STORE LOCATIONS AND EXPANSION STRATEGIES
As of April 1, 2003, the Company operated 307 stores in 37 states, including 3
stores opened in fiscal 2003. The existing stores are in 4 downtown locations,
11 strip centers, 5 lifestyle centers and 287 shopping malls. The Company
anticipates opening approximately 12 additional new stores in fiscal 2003. All
new stores for fiscal 2003 are expected to be located in higher traffic shopping
malls except for one which is expected to be located in a lifestyle center. The
following table lists the location of existing stores as of April 1, 2003.
<TABLE>
<CAPTION>
Location of Stores
------------------
State Number of Stores State Number of Stores
----- ---------------- ----- ----------------
<S> <C> <C> <C>
Alabama 4 Montana 5
Arizona 6 Nebraska 15
Arkansas 5 New Mexico 4
California 9 North Carolina 7
Colorado 10 North Dakota 3
Florida 3 Ohio 13
Georgia 3 Oklahoma 14
Idaho 5 Oregon 2
Illinois 16 Pennsylvania 4
Indiana 12 South Carolina 1
Iowa 20 South Dakota 3
Kansas 16 Tennessee 7
Kentucky 5 Texas 32
Louisiana 7 Utah 8
Michigan 18 Virginia 1
Minnesota 10 Washington 5
Mississippi 5 West Virginia 2
Missouri 12 Wisconsin 14
Wyoming 1
---
Total 307
===
</TABLE>
The Buckle has grown significantly over the past ten years, with the number of
stores increasing from 104 at the beginning of 1993 to 304 at the end of fiscal
2002. 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 1993 to the end of fiscal 2002:
Total Number of Stores Per Year
<TABLE>
<CAPTION>
Fiscal Open at start Opened in Closed in
Year of year Current Year Current Year Total
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993 104 27 - 131
1994 131 16 - 147
1995 147 17 - 164
1996 164 17 - 181
1997 181 19 1 199
1998 199 24 1 222
1999 222 27 1 248
2000 248 28 2 274
2001 274 24 3 295
2002 295 11 2 304
</TABLE>
7
<PAGE>
The Company's criteria used when considering a particular location for
expansion include:
1. Market area, including proximity to existing markets to capitalize
on name recognition;
2. Trade area population (number, average age, and college population);
3. Economic vitality of market area;
4. Mall location, anchor tenants, tenant mix, average sales per square
foot;
5. Available location within a mall, square footage, storefront width,
and facility of using the current store design;
6. Availability of suitable management personnel for the market;
7. Cost of rent, including minimum rent, common area and extra charges;
8. Estimated construction costs, including landlord charge backs and
tenant allowances.
The Company generally seeks sites of 4,000 to 5,000 square feet for its stores.
The projected cost of opening a store with the new design is approximately
$710,000, including construction costs of approximately $540,000 (prior to any
construction allowance received) and inventory costs of approximately $170,000,
net of accounts payable.
The Company anticipates opening approximately 15 new stores during fiscal 2003
and completing the remodeling of approximately 15 existing stores. Remodels
range from partial to full, with construction costs for a full remodel being
nearly the same as for a new store. Of the stores scheduled for remodeling
during fiscal 2003, it is estimated that each will receive full remodeling. The
Company has budgeted a total of $19.6 million (before estimated construction
allowances from landlords of $2.8 million) for new store construction,
remodeling, technology upgrades and improvements at the corporate headquarters
during fiscal 2003.
The Company plans to expand in 2003 by opening stores in existing markets and
plans to open a store in one new state. New store openings are generally
scheduled to coincide with the increased customer traffic of the Easter,
back-to-school or Christmas holiday shopping seasons.
The Company believes that, given the time required for training personnel,
staffing a store and developing adequate district and regional managers, its
current management infrastructure is sufficient to support its currently planned
rate of growth.
The Company's ability to expand in the future will depend, in part, on general
business conditions, the ability to find suitable malls with acceptable sites on
satisfactory terms, the availability of financing and the readiness of trained
store managers. There can be no assurance that the Company's expansion plans
will be fulfilled in whole or in part, or that leases under negotiation for
planned new sites will be obtained on terms favorable to the Company.
MANAGEMENT INFORMATION SYSTEMS
The Company's management information systems (MIS) and electronic data
processing systems (EDP) consist of a full range of retail, financial and
merchandising systems, including purchasing, inventory distribution and control,
sales reporting, accounts payable and merchandise management.
The system includes PC based point-of-sale (POS) registers equipped with bar
code readers in each store. These registers are polled nightly by the central
computer (IBM AS/400) using a virtual private network for collection of
comprehensive data, including complete item-level sales information, employee
time clocking, merchandise transfers and receipts, special orders, supply orders
and returns-to-vendor. In conjunction with the nightly polling, the central
computer sends the PC server messages from various departments at the Company
headquarters and price changes for the price lookup (PLU) file maintained within
the POS registers.
Each weekday morning, the Company initiates an electronic "sweep" of the
individual store bank accounts to the Company's primary concentration account.
This allows the Company to meet its obligations with a minimum of borrowing and
to invest excess cash on a timely basis.
Management monitors the performance of each of its stores on a continual basis.
Daily information is used to evaluate inventory, determine markdowns, analyze
profitability and assist management in the scheduling and compensation of
employees. Additionally, reports are generated verifying daily bank deposit
information against recorded sales, identifying transactions rung at prices that
differ from the PLU file, and listing selected "exception" transactions (e.g.
refunds, cash paid-outs, discounts). These reports are used to help assure
consistency among the stores and to help prevent losses due to error or
dishonesty.
8
<PAGE>
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, including timely information from the
advertising, merchandising and benefits departments. Stores can also perform
product searches with pictures on the intranet and request employee numbers for
new teammates.
The Company is committed to ongoing review of the MIS and EDP systems to provide
productive, timely information and effective controls. This review includes
testing of new products and systems to assure that the Company is aware of
technological developments. Most important, continual feedback is sought from
every level of the Company to assure that information provided is pertinent to
all aspects of the Company's operations.
EMPLOYEES
As of February 1, 2003, the Company had approximately 5,800 employees -
approximately 1,103 of whom were full-time. The Company has an experienced
management team and substantially all of the management team, from store
managers through senior management, commenced work for the Company on the sales
floor. The Company experiences high turnover of store and distribution center
employees, primarily due to having a significant number of part-time employees.
However, the Company has not experienced significant difficulty in hiring
qualified personnel. Of the total employees, approximately 300 are employed at
the corporate headquarters and in the distribution center. None of the Company's
employees are represented by a union. Management believes that employee
relations are good.
The Company provides medical, dental, life insurance and long-term disability
plans, as well as a 401(k) and a section 125 cafeteria plan for eligible
employees. 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 1, 2003, 834 employees participated in the medical
plan, 844 in the dental plan, 824 in the life insurance plan, 782 in the
long-term disability plan and 313 in the cafeteria plan. With respect to the
medical, dental and life insurance plans, the Company pays 80% to 100% of the
employee's expected premium cost plus 20% to 100% of the expected cost of
dependent coverage under the health plan. The exact percentage is based upon the
employee's term of employment and job classification within the Company. In
addition, all employees receive discounts on company merchandise.
COMPETITION
The men's and women's apparel industries are highly competitive with fashion,
selection, quality, price, location, store environment and service being the
principal competitive factors. While the Company believes that it is able to
compete favorably with other merchandisers, including department stores and
specialty retailers, with respect to each of these factors, the Company believes
it competes mainly on the basis of customer service and merchandise selection.
In the men's merchandise areas, the Company competes with specialty retailers
such as Abercrombie & Fitch, American Eagle Outfitters, Gadzooks, Gap and
Pacific Sunwear. The men's market also competes with certain department stores,
such as Dillards, Federated stores, May Company stores, Saks and other local or
regional department stores and specialty retailers, as well as with mail order
and internet merchandisers.
In the women's merchandise area, the Company competes with specialty retailers
such as Abercrombie & Fitch, American Eagle Outfitters, Express, Gadzooks, Gap,
Maurices, Pacific Sunwear, Wet Seal and Vanity. The women's sales also compete
with department stores, such as Dillards, Federated stores, May Company stores,
Saks and certain local or regional department stores and specialty retailers, as
well as with mail order and internet merchandisers.
Many of the Company's competitors are considerably larger and have substantially
greater financial, marketing and other resources than the Company, and there is
no assurance that the Company will be able to compete successfully with them in
the future. Furthermore, while the Company believes it competes effectively for
favorable site locations and lease terms, competition for prime locations within
a mall is intense.
9
<PAGE>
TRADEMARKS
"BUCKLE", "BKLE", "RECLAIM", "BKE" and "THE BUCKLE" are federally registered
trademarks of the Company. The Company believes the strength of its trademarks
is of considerable value to its business, and its trademarks are important to
its marketing efforts. The Company intends to protect and promote its trademarks
as management deems appropriate.
EXECUTIVE OFFICERS OF THE COMPANY
The Executive Officers of the Company are listed below, together with brief
accounts of their experience and certain other information.
DANIEL J. HIRSCHFELD, AGE 61. 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 53. 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 44. Ms. Rhoads is the Vice-President - Finance, Treasurer,
Chief Financial Officer and a Director of the Company. Ms. Rhoads was elected a
Director on April 19, 1991. She worked in the corporate offices during college
and later worked part-time on the sales floor. Ms. Rhoads practiced as a CPA for
6 1/2 years, during which time she began working on tax and accounting matters
for the Company as a client. She has been employed with the Company since
November 1987.
JAMES E. SHADA, AGE 47. Mr. Shada is Executive Vice President - Sales and a
Director of the Company. He was elected Executive Vice President on May 31, 2001
and had served as Vice President of Sales from April 19, 1991 until such date.
Mr. Shada was elected a Director of the Company on May 30, 2002. He began
employment with the Company in November of 1978 as a salesperson. Between 1979
and 1985, he managed and opened new stores for the Company, and in 1985 Mr.
Shada became the Company's sales manager. He is also involved in other aspects
of the business including site selection and development and education of
personnel as store managers and as area and district managers.
BRETT P. MILKIE, AGE 43. Mr. Milkie is Vice President-Leasing. He was elected
Vice President-Leasing on May 30, 1996. Mr. Milkie was a leasing agent for a
national retail mall developer for 6 years prior to joining the company in
January 1992 as director of leasing.
KARI SMITH, AGE 39. Ms. Smith is Vice President - Sales. She has held this
position since May 31, 2001. Ms. Smith joined the Company May 16, 1978 as a
part-time salesperson. Later she became store manager in Great Bend, KS and then
began working with other stores as an area manager. Ms. Smith has continued to
develop her involvement with the sales management executive team, helping with
manager meetings and new store manager development, as well as providing support
for store managers, area managers and district managers.
PATRICIA WHISLER, AGE 46. 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.
10
<PAGE>
ITEM 2 - PROPERTIES
All of the store locations operated by the Company are leased facilities. Most
of the Company's stores have lease terms of approximately ten years and
generally do not contain renewal options. In the past, the Company has not
experienced problems renewing its leases, although no assurance can be given
that the Company can renew existing leases on favorable terms. The Company seeks
to negotiate extensions on leases for stores undergoing remodeling to provide
terms of approximately ten years after completion of remodeling. Consent of the
landlord generally is required to remodel or change the name under which the
Company does business. The Company has not experienced problems in obtaining
such consent in the past. Most leases provide for a fixed minimum rental plus an
additional rental cost based upon a set percentage of sales beyond a specified
breakpoint, plus common area and other charges.
The current terms of the Company's leases, including automatic renewal options,
expire as follows:
<TABLE>
<CAPTION>
During Fiscal Number of
Year expiring leases
--------------------------------------------------
<S> <C>
2003 51
2004 28
2005 27
2006 19
2007 23
2008 21
2009 49
2010 and later 86
--
Total 304
===
</TABLE>
The corporate headquarters and distribution center for the Company operate
within a facility purchased by the Company in 1988, and located in Kearney, NE.
The building provides approximately 179,000 square feet of space with over 70%
of the area being allocated for the distribution and returns-to-vendor
departments. During fiscal 2000, the Company purchased a 40,000 square foot
building with warehouse and office space near the corporate headquarters, which
will give the Company flexibility in its growth. The Company also acquired a
50-year lease, with favorable lease terms, on the land the building is built
upon.
ITEM 3 - LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. As of the date
of this form, the Company was not engaged in any legal proceedings that are
expected, individually or in the aggregate, to have a material adverse effect on
the Company.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth
quarter of fiscal 2002.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's common stock trades on the New York Stock Exchange under the
symbol BKE. Prior to the Company's initial public offering on May 6, 1992, there
was no public market for the Company's common stock. The Company has not paid
any cash dividends in fiscal 2002, 2001 or 2000, and has no current plans for
dividend payment.
The number of record holders of the Company's common stock as of March 24, 2003
was 404. Based upon information from the principal market makers, the Company
believes there are more than 3,000 beneficial owners. The closing price of the
Company's common stock on March 24, 2003 was $18.00.
11
<PAGE>
Additional information required by this item is incorporated by reference to the
information on page 33 of the Company's 2002 Annual Report to Shareholders under
the caption "Stock Prices by Quarter" which is attached to this Form 10-K. The
remainder of the information required by this item appears under the caption
"Equity Compensation Plan Information" in the Company's Proxy Statement for its
2003 Annual Shareholders' Meeting and is incorporated by reference.
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference to the
information on page 10 in the Company's 2002 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 11 through 15 in the Company's 2002 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 we borrow under our line of credit facility, we would be
exposed to market risk related to changes in interest rates. As of February 1,
2003, no borrowings were outstanding under our line of credit facility. We are
not a party to any derivative financial instruments. Additionally, we are
exposed to market risk related to interest rate risk on the short- and long-term
investments of excess cash in short- and long-term investment grade
interest-bearing securities. If there are changes in interest rates, those
changes would affect the investment income we earn on those investments.
We have certain investments that generate interest income. These investments
have carrying values that are subject to interest rate changes that could impact
our earnings to the extent that we did not hold the investments to maturity.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements together with the independent auditors' report thereon
of Deloitte & Touche LLP, dated March 5, 2003, appearing on pages 16 through 32
of the Company's 2002 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.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item appears under the captions "Executive
Officers of the Company" appearing on page 10 of this report, and "Election of
Directors" in the Company's Proxy Statement for its 2003 Annual Shareholders'
Meeting and is incorporated by reference.
ITEM 11- EXECUTIVE COMPENSATION
The information required by this item appears under the caption "Executive
Compensation and Other Information" in the Company's Proxy Statement for its
2003 Annual Shareholders' Meeting and is incorporated by reference.
12
<PAGE>
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item appears under the caption "Election of
Directors" in the Company's Proxy Statement for its 2003 Annual Shareholders'
Meeting and is incorporated by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appears under the caption "Compensation
Committee Interlocks and Insider Participation" in the Company's Proxy Statement
for its 2003 Annual Shareholders' Meeting and is incorporated by reference.
ITEM 14 - CONTROLS AND PROCEDURES
Within 90 days prior to the date of this report, the company evaluated, under
the supervision and with the participation of the Company's management,
including the Company's Chief Executive Officer (CEO) and Chief Financial
Officer (CFO), the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon the evaluation, the CEO and CFO concluded that the Company's disclosure
controls and procedures are effective in alerting them, in a timely manner, to
material information relating to the Company required to be included in the
Company's periodic SEC filings.
Additionally, the CEO and CFO determined that there were no significant changes
in the Company's internal controls or in other factors that could significantly
affect the Company's internal controls subsequent to the date of their most
recent evaluation.
PART IV
ITEM 15 - EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(A) (1) FINANCIAL STATEMENTS
The Company's 2002 Annual Report to Shareholders, a copy of which appears as
Exhibit 13 to this Form 10-K Report, contains the following on pages 17 through
32 and are hereby incorporated by reference to this report:
Balance Sheets as of February 1, 2003, and February 2, 2002
Statements of Income for each of the three years in the period
ended February 1, 2003
Statements of Stockholders' Equity for each of the three years
in the period ended February 1, 2003
Statements of Cash Flows for each of the three years in the
period ended February 1, 2003
Notes to Financial Statements for each of the three years in
the period ended February 1, 2003
Independent Auditors' Report
(A) (2) FINANCIAL STATEMENT SCHEDULE
Independent Auditors' Report
Schedule II. Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the required
information is presented in the financial statements or notes thereto. This
schedule is on page 17.
(B) REPORTS ON FORM 8-K
The Company did not file a report on Form 8-K during the quarter ended February
1, 2003.
(C) EXHIBITS
See index to exhibits on pages 18 and 19.
13
<PAGE>
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 21, 2003 By: /s/ DENNIS H. NELSON
------------------------------
Dennis H. Nelson,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities indicated on the 21st day of April, 2003.
<TABLE>
<CAPTION>
<S> <C>
/s/ DANIEL J. HIRSCHFELD
- ------------------------------------ --------------------------------------------
Daniel J. Hirschfeld Bill L. Fairfield
Chairman of the Board and Director Director
/s/ DENNIS H. NELSON
- -------------------------------------------- --------------------------------------------
Dennis H. Nelson Ralph M. Tysdal
President and Chief Executive Officer Director
and Director
/s/ KAREN B. RHOADS
- -------------------------------------------- --------------------------------------------
Karen B. Rhoads Bruce L. Hoberman
Vice President of Finance and Director
Chief Financial Officer and Director
/s/ JAMES E. SHADA
- -------------------------------------------- --------------------------------------------
James E. Shada David A. Roehr
Executive Vice President of Sales Director
/s/ ROBERT E. CAMPBELL /s/ WILLIAM D. ORR
- ------------------------------------ --------------------------------------------
Robert E. Campbell William D. Orr
Director Director
</TABLE>
14
<PAGE>
CERTIFICATIONS
I, Dennis H. Nelson, certify that:
1. I have reviewed this annual report of The Buckle, Inc. on Form 10-K for
the fiscal year ended February 1, 2003;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations, and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures for the
registrant and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board or directors:
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize, and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: April 21, 2003 /s/ DENNIS H. NELSON
--------------------------
Dennis H. Nelson
Chief Executive Officer
15
<PAGE>
CERTIFICATIONS
I, Karen B. Rhoads, certify that:
1. I have reviewed this annual report of The Buckle, Inc. on Form 10-K for
the fiscal year ended February 1, 2003;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations, and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures for the
registrant and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board or directors:
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize, and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: April 21, 2003 /s/ KAREN B. RHOADS
--------------------------
Karen B. Rhoads
Chief Financial Officer
16
<PAGE>
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS
THE BUCKLE, INC.
We have audited the financial statements of The Buckle, Inc., ("the Company") as
of February 1, 2003 and February 2, 2002, and for each of the three years in the
period ended February 1, 2003, and have issued our report thereon dated March 5,
2003; such financial statements and report are included in your 2002 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.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
March 5, 2003
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
Allowance for
Doubtful Accounts
-----------------
<S> <C>
Balance, January 29, 2000 $ 225,000
Amounts charged to costs and expenses 857,968
Write-off of uncollectible accounts (832,968)
-----------
Balance, February 3, 2001 250,000
Amounts charged to costs and expenses 816,276
Write-off of uncollectible accounts (816,276)
-----------
Balance, February 2, 2002 250,000
Amounts charged to costs and expenses 856,309
Write-off of uncollectible accounts (889,309)
-----------
Balance, February 1, 2003 $ 217,000
===========
</TABLE>
17
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS PAGE NUMBER OR INCORPORATION
BY REFERENCE TO
<S> <C> <C>
(3) Articles of Incorporation and By-Laws.
(3.1) Articles of Incorporation Exhibit 3.1 to Form S-1
of The Buckle, Inc. as amended No. 33-46294
(3.1.1) Amendment to the Articles of
Incorporation of The Buckle, Inc.
(3.2) By-Laws of The Buckle, Inc. Exhibit 3.2 to Form S-1
No. 33-46294
(4) Instruments defining the rights of security
holders, including indentures
(4.1) See Exhibits 3.1 and 3.2 for provisions
of the Articles of Incorporation and
By-laws of the Registrant defining rights
of holders of Common Stock of the registrant
(4.2) Form of stock certificate for Common Stock Exhibit 4.1 to Form S-1
No. 33-46294
(9) Not applicable
(10) Material Contracts
(10.1) 1991 Stock Incentive Plan Exhibit 10.1 to Form S-1
No. 33-46294
(10.2) 1991 Non-Qualified Stock Option Plan Exhibit 10.2 to Form S-1
No. 33-46294
(10.3) Non-Qualified Stock Option Plan and Exhibit 10.3 to Form S-1
Agreement With Dennis Nelson No. 33-46294
(10.4) Acknowledgment for Dennis H. Nelson
dated April 15, 2003
(10.6) Acknowledgment for James E. Shada
dated April 15, 2003
(10.7) Acknowledgment for Kari G. Smith
dated April 15, 2003
(10.8) Acknowledgment for Brett P. Milkie
dated April 15, 2003
(10.9) Acknowledgment for Patricia K. Whisler
dated April 15, 2003
(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) Promissory Note dated May 15, 2002
between The Buckle, Inc. and Wells
Fargo Bank Nebraska, N.A. for a
$10.0 million line of credit for issuance
of letters of credit.
(10.12) Promissory note dated May 15, 2002 and
Business Loan agreement dated
May 15, 2002 between The Buckle, Inc.
and Wells Fargo Bank Nebraska, N.A,
regarding $7.5 million operating line of credit.
</TABLE>
18
<PAGE>
<TABLE>
<S> <C> <C>
(10.17) 1993 Director Stock Option Plan Exhibit A to Proxy Statement
for Annual Meeting to be held
May 26, 1993
(10.18) 1993 Executive Stock Option Plan Exhibit B to Proxy Statement
for Annual Meeting to be held
May 26, 1993
(10.19) 1995 Management Incentive Plan Exhibit A to Proxy Statement
for Annual Meeting to be held
June 2, 1995
(10.20) 1995 Executive Stock Option Plan Exhibit B to Proxy Statement
for Annual Meeting to be held
June 2, 1995
(10.21) 1997 Management Incentive Plan Exhibit A to Proxy Statement
for Annual Meeting to be held
June 2, 1997
(10.22) 1998 Management Incentive Plan Exhibit A to Proxy Statement
for Annual Meeting to be held
May 28, 1998
(10.23) 1997 Executive Stock Option Plan Exhibit B to Proxy Statement
for Annual Meeting to be held
May 28, 1998
(10.24) 1998 Restricted Stock Plan Exhibit C to Proxy Statement
for Annual Meeting to be held
May 28, 1998
(10.25) 1999 Management Incentive Plan Exhibit A to Proxy Statement
for Annual Meeting to be held
June 4, 1999
(10.26) 2002 Management Incentive Plan Exhibit A to Proxy Statement
for Annual Meeting to be held
May 30, 2002
(10.27) 2003 Management Incentive Plan Exhibit A to Proxy Statement
for Annual Meeting to be held
May 29, 2003
(12) Not applicable
(13) 2002 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
(99.1) Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(99.2) Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
</TABLE>
19
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>3
<FILENAME>c76285exv10w4.txt
<DESCRIPTION>ACKNOWLEDGMENT FOR DENNIS H. NELSON
<TEXT>
<PAGE>
EXHIBIT 10.4
ACKNOWLEDGMENT
1. Dennis H. Nelson, currently employed by The Buckle, Inc. ("Company")
of Kearney, Nebraska, will be paid an annual salary of $740,000 for so long as
the employee is employed by the Company during the fiscal year ending January
31, 2004.
2. In addition to the salary outlined in paragraph 1, above, a "Cash
Award" for the above fiscal year will be paid to you provided you are employed
by the Company on the last day of such fiscal year. The "Cash Award" will be
paid as part of the Incentive Plan which includes a Bonus Pool as Cash Incentive
for executives. This Bonus Pool will be calculated for the fiscal year based
upon dollars of growth in key performance categories compared to the Base Year
amounts, multiplied by the applicable percentage amounts as outlined in the Plan
and multiplied by the net income factor outlined in the plan (see Exhibit A to
the Company's 2003 Proxy Statement). The applicable percentage amounts per the
2003 Executive Incentive Plan include 8.5% of the increase in Same Store Sales,
5.0% of the increase in Gross Profit and 15.0% of the increase in Pre-bonus Net
Income. The Base Year amounts are determined using the immediately preceding
fiscal year for Same Store Sales and the prior three-year rolling average for
the Gross Profit and Pre-Bonus Net Income. Your percentage of the bonus pool has
been pre-set for fiscal 2003 by the compensation committee of the Board of
Directors.
No payment of a Cash Award for the year may be made until the Company's
key performance categories for the year are certified by the Compensation
Committee. You shall not be entitled to receive payment of a Cash Award unless
you are still in the employ of (and shall not have delivered notice of
resignation to) the Company on the last day of the fiscal year for which the
Cash Award is earned.
The Cash Award will be paid on or before April 15 following the close
of the fiscal year. For calculating this Cash Award, "Pre-Bonus Net Income"
shall be defined as the Company's net income from operations after the deduction
of all expenses, excluding administrative and store manager percentage bonuses
and excluding income taxes, but including draws against such bonuses. Net income
from operations does not include earnings on cash investments. For this purpose,
net income shall be computed by the Company in accordance with the Company's
normal accounting practices, and the Company's calculations will be final and
conclusive.
3. Options to purchase 103,500 shares ("Options") of The Buckle, Inc.
common stock at $16.60 per share were granted to you pursuant to the 1997
Executive Stock Option Plan as of the last day of the fiscal year preceding this
Plan (February 1, 2003). Options granted under the Plan will vest according to
the same terms as the 1997 Management Incentive Plan. Those terms include a
performance feature whereby one-half of the Options granted will vest over three
years if a 10% increase in Pre-Bonus Net Income is achieved, and the second
one-half of the Options granted vest over three years if a 30% increase in
Pre-Bonus Net Income is achieved. If the performance goals are not met the
Options will ultimately vest after nine years and eleven months. This Plan added
an "accelerator" feature for the Options so that vesting may occur sooner than
the three years or nine years and eleven months, when and if the market price of
the Company's stock doubles from the fair market value of the stock at the date
of the grant. All Options will also include a "reload" feature under this Plan.
4. You will be given a vehicle allowance of $17,000 to be paid
quarterly throughout the fiscal year. You are also allowed personal use of a
corporate owned aircraft for up to 30 hours this fiscal year.
5. A credit limit of $3,500 has been established on your The Buckle
charge account, subject to annual change as determined by management. Please
make sure your charge account balance does not exceed this limit. You may have
payments made to your charge account via payroll withholding during the year.
Management is committed to reviewing its policies continually.
Accordingly, the statements outlined above are subject to review and change at
any time, with or without notice.
I understand I have the right to terminate my employment with the
Company at any time, with or without notice, and the Company retains the same
right, with or without cause or notice. I recognize, therefore, that I am an "at
will" employee.
<PAGE>
This acknowledgment supersedes any prior acknowledgment or agreement
with the Company. This acknowledgment does not constitute an agreement of
employment with the Company.
April 14, 2003
The Buckle, Inc.
Acknowledged by: _______________________________
Dennis H. Nelson
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>4
<FILENAME>c76285exv10w6.txt
<DESCRIPTION>ACKNOWLEDGMENT FOR JAMES E. SHADA
<TEXT>
<PAGE>
EXHIBIT 10.6
ACKNOWLEDGMENT
1. James E. Shada, currently employed by The Buckle, Inc. ("Company")
of Kearney, Nebraska, will be paid an annual salary of $415,000 for so long as
the employee is employed by the Company during the fiscal year ending January
31, 2004.
2. In addition to the salary outlined in paragraph 1, above, a "Cash
Award" for the above fiscal year will be paid to you provided you are employed
by the Company on the last day of such fiscal year. The "Cash Award" will be
paid as part of the Incentive Plan which includes a Bonus Pool as Cash Incentive
for executives. This Bonus Pool will be calculated for the fiscal year based
upon dollars of growth in key performance categories compared to the Base Year
amounts, multiplied by the applicable percentage amounts as outlined in the Plan
and multiplied by the net income factor outlined in the plan (see Exhibit A to
the Company's 2003 Proxy Statement). The applicable percentage amounts per the
2003 Executive Incentive Plan include 8.5% of the increase in Same Store Sales,
5.0% of the increase in Gross Profit and 15.0% of the increase in Pre-bonus Net
Income. The Base Year amounts are determined using the immediately preceding
fiscal year for Same Store Sales and the prior three-year rolling average for
the Gross Profit and Pre-Bonus Net Income. Your percentage of the bonus pool has
been pre-set for fiscal 2003 by the compensation committee of the Board of
Directors.
No payment of a Cash Award for the year may be made until the Company's
key performance categories for the year are certified by the Compensation
Committee. You shall not be entitled to receive payment of a Cash Award unless
you are still in the employ of (and shall not have delivered notice of
resignation to) the Company on the last day of the fiscal year for which the
Cash Award is earned.
The Cash Award will be paid on or before April 15 following the close
of the fiscal year. For calculating this Cash Award, "Pre-Bonus Net Income"
shall be defined as the Company's net income from operations after the deduction
of all expenses, excluding administrative and store manager percentage bonuses
and excluding income taxes, but including draws against such bonuses. Net income
from operations does not include earnings on cash investments. For this purpose,
net income shall be computed by the Company in accordance with the Company's
normal accounting practices, and the Company's calculations will be final and
conclusive.
3. Options to purchase 51,750 shares ("Options") of The Buckle, Inc.
common stock at $16.60 per share were granted to you pursuant to the 1997
Executive Stock Option Plan as of the last day of the fiscal year preceding this
Plan (February 1, 2003). Options granted under the Plan will vest according to
the same terms as the 1997 Management Incentive Plan. Those terms include a
performance feature whereby one-half of the Options granted will vest over three
years if a 10% increase in Pre-Bonus Net Income is achieved, and the second
one-half of the Options granted vest over three years if a 30% increase in
Pre-Bonus Net Income is achieved. If the performance goals are not met the
Options will ultimately vest after nine years and eleven months. This Plan added
an "accelerator" feature for the Options so that vesting may occur sooner than
the three years or nine years and eleven months, when and if the market price of
the Company's stock doubles from the fair market value of the stock at the date
of the grant. All Options will also include a "reload" feature under this Plan.
4. You will be given a vehicle allowance of $12,000 to be paid
quarterly throughout the fiscal year. You are also allowed personal use of a
corporate owned aircraft for up to 10 hours this fiscal year.
5. A credit limit of $3,500 has been established on your The Buckle
charge account, subject to annual change as determined by management. Please
make sure your charge account balance does not exceed this limit. You may have
payments made to your charge account via payroll withholding during the year.
Management is committed to reviewing its policies continually.
Accordingly, the statements outlined above are subject to review and change at
any time, with or without notice.
I understand I have the right to terminate my employment with the
Company at any time, with or without notice, and the Company retains the same
right, with or without cause or notice. I recognize, therefore, that I am an "at
will" employee.
<PAGE>
This acknowledgment supersedes any prior acknowledgment or agreement
with the Company. This acknowledgment does not constitute an agreement of
employment with the Company.
April 14, 2003
The Buckle, Inc.
Acknowledged by: _______________________________
James E. Shada
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>5
<FILENAME>c76285exv10w7.txt
<DESCRIPTION>ACKNOWLEDGMENT FOR KARI G. SMITH
<TEXT>
<PAGE>
EXHIBIT 10.7
ACKNOWLEDGMENT
1. Kari G. Smith, currently employed by The Buckle, Inc. ("Company") of
Kearney, Nebraska, will be paid an annual salary of $240,000 for so long as the
employee is employed by the Company during the fiscal year ending January 31,
2004.
2. In addition to the salary outlined in paragraph 1, above, a "Cash
Award" for the above fiscal year will be paid to you provided you are employed
by the Company on the last day of such fiscal year. The "Cash Award" will be
paid as part of the Incentive Plan which includes a Bonus Pool as Cash Incentive
for executives. This Bonus Pool will be calculated for the fiscal year based
upon dollars of growth in key performance categories compared to the Base Year
amounts, multiplied by the applicable percentage amounts as outlined in the Plan
and multiplied by the net income factor outlined in the plan (see Exhibit A to
the Company's 2003 Proxy Statement). The applicable percentage amounts per the
2003 Executive Incentive Plan include 8.5% of the increase in Same Store Sales,
5.0% of the increase in Gross Profit and 15.0% of the increase in Pre-bonus Net
Income. The Base Year amounts are determined using the immediately preceding
fiscal year for Same Store Sales and the prior three-year rolling average for
the Gross Profit and Pre-Bonus Net Income. Your percentage of the bonus pool has
been pre-set for fiscal 2003 by the compensation committee of the Board of
Directors.
No payment of a Cash Award for the year may be made until the Company's
key performance categories for the year are certified by the Compensation
Committee. You shall not be entitled to receive payment of a Cash Award unless
you are still in the employ of (and shall not have delivered notice of
resignation to) the Company on the last day of the fiscal year for which the
Cash Award is earned.
The Cash Award will be paid on or before April 15 following the close
of the fiscal year. For calculating this Cash Award, "Pre-Bonus Net Income"
shall be defined as the Company's net income from operations after the deduction
of all expenses, excluding administrative and store manager percentage bonuses
and excluding income taxes, but including draws against such bonuses. Net income
from operations does not include earnings on cash investments. For this purpose,
net income shall be computed by the Company in accordance with the Company's
normal accounting practices, and the Company's calculations will be final and
conclusive.
3. Options to purchase 25,200 shares ("Options") of The Buckle, Inc.
common stock at $16.60 per share were granted to you pursuant to the 1997
Executive Stock Option Plan as of the last day of the fiscal year preceding this
Plan (February 1, 2003). Options granted under the Plan will vest according to
the same terms as the 1997 Management Incentive Plan. Those terms include a
performance feature whereby one-half of the Options granted will vest over three
years if a 10% increase in Pre-Bonus Net Income is achieved, and the second
one-half of the Options granted vest over three years if a 30% increase in
Pre-Bonus Net Income is achieved. If the performance goals are not met the
Options will ultimately vest after nine years and eleven months. This Plan added
an "accelerator" feature for the Options so that vesting may occur sooner than
the three years or nine years and eleven months, when and if the market price of
the Company's stock doubles from the fair market value of the stock at the date
of the grant. All Options will also include a "reload" feature under this Plan.
4. A credit limit of $3,500 has been established on your The Buckle
charge account, subject to annual change as determined by management. Please
make sure your charge account balance does not exceed this limit. You may have
payments made to your charge account via payroll withholding during the year.
Management is committed to reviewing its policies continually.
Accordingly, the statements outlined above are subject to review and change at
any time, with or without notice.
I understand I have the right to terminate my employment with the
Company at any time, with or without notice, and the Company retains the same
right, with or without cause or notice. I recognize, therefore, that I am an "at
will" employee.
This acknowledgment supersedes any prior acknowledgment or agreement
with the Company. This acknowledgment does not constitute an agreement of
employment with the Company.
<PAGE>
April 14, 2003
The Buckle, Inc.
Acknowledged by: _______________________________
Kari G. Smith
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.8
<SEQUENCE>6
<FILENAME>c76285exv10w8.txt
<DESCRIPTION>ACKNOWLEDGMENT FOR BRETT P. MILKIE
<TEXT>
<PAGE>
EXHIBIT 10.8
ACKNOWLEDGMENT
1. Brett P. Milkie, currently employed by The Buckle, Inc. ("Company")
of Kearney, Nebraska, will be paid an annual salary of $240,000 for so long as
the employee is employed by the Company during the fiscal year ending January
31, 2004.
2. In addition to the salary outlined in paragraph 1, above, a "Cash
Award" for the above fiscal year will be paid to you provided you are employed
by the Company on the last day of such fiscal year. The "Cash Award" will be
paid as part of the Incentive Plan which includes a Bonus Pool as Cash Incentive
for executives. This Bonus Pool will be calculated for the fiscal year based
upon dollars of growth in key performance categories compared to the Base Year
amounts, multiplied by the applicable percentage amounts as outlined in the Plan
and multiplied by the net income factor outlined in the plan (see Exhibit A to
the Company's 2003 Proxy Statement). The applicable percentage amounts per the
2003 Executive Incentive Plan include 8.5% of the increase in Same Store Sales,
5.0% of the increase in Gross Profit and 15.0% of the increase in Pre-bonus Net
Income. The Base Year amounts are determined using the immediately preceding
fiscal year for Same Store Sales and the prior three-year rolling average for
the Gross Profit and Pre-Bonus Net Income. Your percentage of the bonus pool has
been pre-set for fiscal 2003 by the compensation committee of the Board of
Directors.
No payment of a Cash Award for the year may be made until the Company's
key performance categories for the year are certified by the Compensation
Committee. You shall not be entitled to receive payment of a Cash Award unless
you are still in the employ of (and shall not have delivered notice of
resignation to) the Company on the last day of the fiscal year for which the
Cash Award is earned.
The Cash Award will be paid on or before April 15 following the close
of the fiscal year. For calculating this Cash Award, "Pre-Bonus Net Income"
shall be defined as the Company's net income from operations after the deduction
of all expenses, excluding administrative and store manager percentage bonuses
and excluding income taxes, but including draws against such bonuses. Net income
from operations does not include earnings on cash investments. For this purpose,
net income shall be computed by the Company in accordance with the Company's
normal accounting practices, and the Company's calculations will be final and
conclusive.
3. Options to purchase 25,200 shares ("Options") of The Buckle, Inc.
common stock at $16.60 per share were granted to you pursuant to the 1997
Executive Stock Option Plan as of the last day of the fiscal year preceding this
Plan (February 1, 2003). Options granted under the Plan will vest according to
the same terms as the 1997 Management Incentive Plan. Those terms include a
performance feature whereby one-half of the Options granted will vest over three
years if a 10% increase in Pre-Bonus Net Income is achieved, and the second
one-half of the Options granted vest over three years if a 30% increase in
Pre-Bonus Net Income is achieved. If the performance goals are not met the
Options will ultimately vest after nine years and eleven months. This Plan added
an "accelerator" feature for the Options so that vesting may occur sooner than
the three years or nine years and eleven months, when and if the market price of
the Company's stock doubles from the fair market value of the stock at the date
of the grant. All Options will also include a "reload" feature under this Plan.
4. A credit limit of $3,500 has been established on your The Buckle
charge account, subject to annual change as determined by management. Please
make sure your charge account balance does not exceed this limit. You may have
payments made to your charge account via payroll withholding during the year.
Management is committed to reviewing its policies continually.
Accordingly, the statements outlined above are subject to review and change at
any time, with or without notice.
I understand I have the right to terminate my employment with the
Company at any time, with or without notice, and the Company retains the same
right, with or without cause or notice. I recognize, therefore, that I am an "at
will" employee.
<PAGE>
This acknowledgment supersedes any prior acknowledgment or agreement
with the Company. This acknowledgment does not constitute an agreement of
employment with the Company.
April 14, 2003
The Buckle, Inc.
Acknowledged by: _______________________________
Brett P. Milkie
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.9
<SEQUENCE>7
<FILENAME>c76285exv10w9.txt
<DESCRIPTION>ACKNOWLEDGMENT FOR PATRICIA K. WHISLER
<TEXT>
<PAGE>
EXHIBIT 10.9
ACKNOWLEDGMENT
1. Patricia K. Whisler, currently employed by The Buckle, Inc.
("Company") of Kearney, Nebraska, will be paid an annual salary of $225,000 for
so long as the employee is employed by the Company during the fiscal year ending
January 31, 2004.
2. In addition to the salary outlined in paragraph 1, above, a "Cash
Award" for the above fiscal year will be paid to you provided you are employed
by the Company on the last day of such fiscal year. The "Cash Award" will be
paid as part of the Incentive Plan which includes a Bonus Pool as Cash Incentive
for executives. This Bonus Pool will be calculated for the fiscal year based
upon dollars of growth in key performance categories compared to the Base Year
amounts, multiplied by the applicable percentage amounts as outlined in the Plan
and multiplied by the net income factor outlined in the plan (see Exhibit A to
the Company's 2003 Proxy Statement). The applicable percentage amounts per the
2003 Executive Incentive Plan include 8.5% of the increase in Same Store Sales,
5.0% of the increase in Gross Profit and 15.0% of the increase in Pre-bonus Net
Income. The Base Year amounts are determined using the immediately preceding
fiscal year for Same Store Sales and the prior three-year rolling average for
the Gross Profit and Pre-Bonus Net Income. Your percentage of the bonus pool has
been pre-set for fiscal 2003 by the compensation committee of the Board of
Directors.
No payment of a Cash Award for the year may be made until the Company's
key performance categories for the year are certified by the Compensation
Committee. You shall not be entitled to receive payment of a Cash Award unless
you are still in the employ of (and shall not have delivered notice of
resignation to) the Company on the last day of the fiscal year for which the
Cash Award is earned.
The Cash Award will be paid on or before April 15 following the close
of the fiscal year. For calculating this Cash Award, "Pre-Bonus Net Income"
shall be defined as the Company's net income from operations after the deduction
of all expenses, excluding administrative and store manager percentage bonuses
and excluding income taxes, but including draws against such bonuses. Net income
from operations does not include earnings on cash investments. For this purpose,
net income shall be computed by the Company in accordance with the Company's
normal accounting practices, and the Company's calculations will be final and
conclusive.
3. Options to purchase 25,200 shares ("Options") of The Buckle, Inc.
common stock at $16.60 per share were granted to you pursuant to the 1997
Executive Stock Option Plan as of the last day of the fiscal year preceding this
Plan (February 1, 2003). Options granted under the Plan will vest according to
the same terms as the 1997 Management Incentive Plan. Those terms include a
performance feature whereby one-half of the Options granted will vest over three
years if a 10% increase in Pre-Bonus Net Income is achieved, and the second
one-half of the Options granted vest over three years if a 30% increase in
Pre-Bonus Net Income is achieved. If the performance goals are not met the
Options will ultimately vest after nine years and eleven months. This Plan added
an "accelerator" feature for the Options so that vesting may occur sooner than
the three years or nine years and eleven months, when and if the market price of
the Company's stock doubles from the fair market value of the stock at the date
of the grant. All Options will also include a "reload" feature under this Plan.
4. A credit limit of $3,500 has been established on your The Buckle
charge account, subject to annual change as determined by management. Please
make sure your charge account balance does not exceed this limit. You may have
payments made to your charge account via payroll withholding during the year.
Management is committed to reviewing its policies continually.
Accordingly, the statements outlined above are subject to review and change at
any time, with or without notice.
I understand I have the right to terminate my employment with the
Company at any time, with or without notice, and the Company retains the same
right, with or without cause or notice. I recognize, therefore, that I am an "at
will" employee.
<PAGE>
This acknowledgment supersedes any prior acknowledgment or agreement
with the Company. This acknowledgment does not constitute an agreement of
employment with the Company.
April 14, 2003
The Buckle, Inc.
Acknowledged by: _______________________________
Patricia K. Whisler
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.11
<SEQUENCE>8
<FILENAME>c76285exv10w11.txt
<DESCRIPTION>PROMISSORY NOTE
<TEXT>
<PAGE>
.
.
.
EXHIBIT 10.11
PROMISSORY NOTE
<TABLE>
<S><C>
PRINCIPAL LOAN DATE MATURITY LOAN NO Call/Coll ACCOUNT OFFICER
$10,000,000.00 05-15-2002 05-31-2003 1196058538 86489
BORROWER: The Buckle, Inc. (TIN: 47-0366193) LENDER: Wells Fargo Bank Nebraska, N. A.
2407 W 24th Street Kearney-Main
Kearney, NE 68845 21 W. 21st Street
Kearney, NE 68847
- ---------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT: $10,000,000.00 INITIAL RATE: 4.750% DATE OF NOTE: May 15, 2002
</TABLE>
PROMISE TO PAY. The Buckle, Inc. ("Borrower") promises to pay to Wells Fargo
Bank Nebraska, National Association ("Lender"), or order, in lawful money of the
United States of America, the principal amount of Ten Million & 00/100 Dollars
($10,000,000.00) or so much as may be outstanding, together with interest on the
unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on May 31, 2003. In addition, Borrower will pay
regular monthly payments of all accrued unpaid interest due as of each payment
date, beginning June 30, 2002, with all subsequent interest payments to be due
on the last day of each month after that. Unless other wise agreed or required
by applicable law, payments will be applied first to accrued unpaid interest,
then to principal, and any remaining amount to any unpaid collection costs and
late charges. The annual interest rate for this Note is computed on a 365/360
basis; that is, by applying the ratio of the annual interest rate over a year of
360 days, multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as Lender may
designate in writing.
VARIABLE INTEREST RATE. The interest rate on the Note is subject to change from
time to time based on changes in an index which is the Prime Rate set from time
to time by Wells Fargo Bank, N.A. ("Wells Fargo") that serves as the basis upon
which effective rates of interest are calculated for those loans making
reference thereto (the "Index"). The Index is not necessarily the lowest rate
charged by Lender on its loans and is set by Lender in its sole discretion. If
the Index becomes unavailable during the term of this loan, Lender my designate
a substitute index after notifying Borrower. Lender will tell Borrower the
current Index rate upon Borrower's request. The interest rate change will not
occur more often than each time the Index changes. Each change in the Prime Rate
of interest hereunder shall become effective on the date each Prime Rate change
is announced within Wells Fargo. Borrower understands that Lender may make loans
based on other rates as well. THE INDEX CURRENTLY IS 4.750% PER ANNUM. THE
INTEREST RATE TO BE APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE
AT A RATE EQUAL TO THE INDEX, RESULTING IN AN INITIAL RATE OF 4.750% PER ANNUM.
NOTICE: Under no circumstances will the interest rate on this Note be more than
the maximum rate allowed by applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest. Rather, early payments will reduce the principal
balance due. Borrower agrees not to send Lender payments marked "paid in full",
"without recourse", or similar language. If Borrower sends such a payment,
Lender may accept it without losing any of Lender's rights under this Note, and
Borrower will remain obligated to pay any further amount owed to Lender. All
written communications concerning disputed amounts, including any check or other
payment instrument that indicates that the payment constitutes "payment in full"
of the amount owed or that is tendered with other conditions or limitations or
as full satisfaction of a disputed amount must be mailed or delivered to:
Minneapolis Loan Ops Center, 730 2nd Ave. South Suite 1000 Minneapolis, MN
55479.
LATE CHARGE: If a payment is 15 days or more late, Borrower will be charged
5.000% OF THE UNPAID PORTION OF THE REGULARLY SCHEDULED PAYMENT OR $15.00,
WHICHEVER IS GREATER.
<PAGE>
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, Lender, at its option, may, if permitted under applicable law,
increase the variable interest rate on this Note to 4.0000 percentage points
over the Index. The interest rate will not exceed the maximum rate permitted by
applicable law.
DEFAULT. Each of the following shall constitute an event of default ("Event
of Default") under this Note:
PAYMENT DEFAULT. Borrower fails to make and payment when due under
this Note.
OTHER DEFAULTS. Borrower fails to comply with or to perform any other
term, obligation, covenant or condition contained in any other
agreement between Lender and Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Borrower or any Grantor defaults
under any loan, extension of credit, security agreement, purchase or
sales agreement, or any other agreement, in favor of any other creditor
or person that may materially affect any of Borrower's property or
Borrower's ability to repay this Note or perform Borrower's obligations
under this Note or nay of the related documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this Note
or the related documents is false or misleading in any material
respect, either now or at the time made or furnished or becomes false
or misleading at any time thereafter.
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the loan. This
includes a garnishment of any of Borrower's accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply
if there is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies
or a surety bond for the creditor or forfeiture proceeding, in an
amount determined by Lender, in its sole discretion, as being an
adequate reserve or bond for the dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any guarantor, endorser, surety, or accommodation party of
any of the indebtedness or any guarantor, endorser, surety, or
accommodation party dies or becomes incompetent, or revokes or disputes
the validity of, or liability under, any guaranty of the indebtedness
evidenced by this Note.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of this Note is impaired.
INSECURITY. Lender in good faith believes itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, and then
Borrower will pay that amount.
ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's attorneys' fees
and Lender's legal expenses, whether or not there is a lawsuit, including
attorneys' fees, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law.
GOVERNING LAW. This Note will by governed by, construed and enforced in
accordance with federal law and the laws of the State of Nebraska. This Note has
been accepted by Lender in the State of Nebraska.
<PAGE>
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
debt against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.
COLLATERAL. This loan in unsecured.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested either orally or in writing by Borrower or by an
authorized person. Lender may, but need not, require that all oral requests be
confirmed in writing. All communications, instructions, or directions by
telephone or otherwise to Lender are to be directed to Lender's office shown
above. Borrower agrees to be liable for all sums either: (A) advanced in
accordance with the instructions of an authorized person or (B) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Note at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (A) Borrower or any guarantor is
in default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with this
Note; (B) Borrower or any guarantor ceases doing business or is insolvent; (C)
any guarantor seeks, claims or otherwise attempts to limit, modify or revoke
such guarantor's guarantee of this Note or any other loan with Lender; (D)
Borrower has applied funds provided pursuant to this Note for purposed other
than those authorized by Lender; or (E) Lender in good faith believes itself
insecure.
COLLECTION FROM DEPOSIT ACCOUNT. Lender may collect principal, interest, fees,
charges, and other amounts due under this Note by charging Borrower's primary
deposit account as specified in the "Disbursement Request and Authorization"
executed by Borrower in connection with this Note for such amounts as they
become due, or such other deposit account of Borrower as Borrower may otherwise
designate. Should there be insufficient funds in said account to pay such sums
when due, the full unpaid amount of such sums shall be immediately due and
payable by Borrower.
DEFAULT RATE. At Lender's option and without prior notice, upon default or at
any time during the pendency of any event of default under this Note or any
related loan documents, Lender may increase the interest rate applicable to the
Note by four percent (4.0%) (the "Default Rate"), not to exceed the maximum
lawful rate. (If the applicable rate is floating or variable rate, then the
Default Rate will be a varying rate equal to the sum of the normally applicable
Index and spread, plus four percent.) The Default Rate shall remain in effect
until the default has been cured and that fact has been communicated to and
confirmed by Lender. Lender shall give written notice to Borrower of Lender's
imposition of the Default Rate. If the Note is not paid at maturity, Lender may
impose the Default Rate from the maturity date to the date paid in full without
notice. Lender's imposition of the Default Rate shall not constitute an election
of remedies or otherwise limit Lender's rights concerning other paragraph and
any other provision of this Note or any related agreement, the provisions of
this paragraph shall control. If a default rate is prohibited by applicable law,
then the interest rate applicable after default or maturity shall be the
prematurity rate which would be applicable in the absence of any default.
ADDITIONAL SECURITY. Notwithstanding anything to the contrary in this or any
related agreement, to further secure the indebtedness and obligations of the
Note and related loan documents, Borrower pledges and grants to Lender a
contractual right of offset and security interest in Borrower's accounts with
Lender and Borrower's accounts with any Wells Fargo Affiliate, whether checking,
savings, investment, or some other account, including without limitation,
accounts held jointly with others and accounts opened in the future, excluding
however all IRAs, Keogh accounts, and trust accounts to the extent a security
interest would be invalid or prohibited by law. As used herein, "Wells Fargo
Affiliate" means any present or future subsidiary of Wells Fargo & Company, and
any subsidiary thereof, any successors of such financial service companies.
LOAN FEE AUTHORIZATION. Borrower shall pay to Lender any and all fees as
specified in the "Disbursement Request and Authorization" executed by Borrower
in connection with this Note. Such fees are non-refundable and shall be due and
payable in full immediately upon Borrower's execution of this Note.
EXTENSION AND RENEWAL. Lender may, at Lender's discretion, renew or extend this
Note by written notice ("Renewal Notice") to Borrower. Such renewal or extension
shall be effective as of the maturity date of this Note,
<PAGE>
and may be conditioned among other things on modifications of Borrower's
obligations hereunder, including but not limited to a decrease in the amount
available under this Note, an increase in the interest rate applicable to this
Note and/or payment of a fee for such renewal or extension. In addition, Lender
may increase the principal amount available under the Note at any time. Borrower
shall be deemed to have accepted the terms of each Renewal Notice, including any
notice of an increase in availability, if Borrower does not deliver to Lender
written rejection of such renewal or extension within 10 days following the date
of such obligations under this Note, the term, "maturity date" as used in this
Note shall mean the new maturity date set forth in the Renewal Notice. This Note
may be renewed and extended repeatedly in this manner.
CREDIT BUREAU INQUIRIES. The parties hereto, and each individual signing below
in a representative capacity, agree that Lender may obtain business and/or
personal credit reports and tax returns on each of them in their individual
capacities.
APPLICATION OF PAYMENTS. Notwithstanding the application of payment provided in
the Payment section of this Note, unless otherwise agreed, all sums received
from Borrower may be applied to interest, fees, principal, or any other amounts
due to Lender in any order at Lender's sold discretion. If a final payment
amount is set out in the Payment section of this Note, Borrower understands that
it is an estimate, and that the actual final payment amount will depend upon
when payments are received and other factors.
FURTHER ASSURANCES. The parties hereto agree to do all things deemed necessary
by Lender in order to fully document the loan evidenced by this Note and any
related agreements, and will fully cooperate concerning the execution and
delivery of security agreements, stock powers, instructions and/or other
documents pertaining to any collateral intended to secure the Indebtedness. The
undersigned agree to assist in the cure of any defects in the execution,
delivery or substance of this Note and related agreements, and in the creation
and perfection of any liens, security interest or other collateral rights
securing this Note.
CONSENT TO SELL LOAN. The parties hereto agree: (a) Lender may sell or transfer
all or part of this loan to one or more purchasers, whether related or unrelated
to Lender; (b) Lender may provide to any purchaser, or potential purchaser, any
information or knowledge Lender may have about the parties or about and other
matter relating to this loan obligation, and the parties waive any rights to
privacy it may have with respect to such matters; (c) the purchaser of a loan
will be considered its absolute owner and will have all the rights granted under
the loan documents or agreements governing the sale of the loan; and (d) the
purchaser of a loan may enforce its interests irrespective of any claims or
defenses that the parties may have against Lender.
ARBITRATION AGREEMENT. Binding Arbitration. Lender, Borrower, and every other
party to this agreement hereby agree, upon demand by any party to submit any
Dispute to binding arbitration in accordance with the terms of this Arbitration
Program. A "Dispute" shall include any dispute, claim or controversy of any
kind, whether in contract or in tort, legal or equitable, now existing or
hereafter arising, relating in any way to this Agreement or any related
agreement incorporating this Arbitration Program (the "Documents"), or any past,
present, or future loans, transactions, contracts, agreements, relationships,
incidents or injuries of any kind whatsoever relating to or involving Business
Banking, Community Banking, or any successor group or department of Bank.
DISPUTES SUBMITTED TO ARBITRATION ARE NOT RESOLVED IN COURT BY A JUDGE OR JURY.
GOVERNING RULES. Any arbitration proceeding will (I) be governed by the
Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any
conflicting choice of law provision in any of the documents between the parties;
and (ii) be conducted by the American Arbitration Association ("AAA"), or such
other administrator as the parties shall mutually agree upon, in accordance with
the AAA's commercial dispute resolution procedures, unless the claim or
counterclaim is at least $1,000,000.00 exclusive of claimed interest,
arbitration fees and costs in which case the arbitration shall be conducted in
accordance with the AAA's optional procedures for large, complex commercial
disputes (the commercial dispute resolution procedures or the optional
procedures for large, complex commercial disputes to be referred to, as
applicable, as the "Rules"). If there is any inconsistency between the terms
hereof and the Rules, the terms and procedures set forth herein shall control.
Arbitration proceedings hereunder shall be conducted at a location mutually
agreeable to the parties, or if they cannot agree, then at a location selected
by the AAA in the state of the applicable substantive law primarily governing
the Credit. Any party who fails or refuses to submit to arbitration following a
demand by any other party shall bear all costs and expenses incurred by such
other party in compelling arbitration of any Dispute. Arbitration may be
demanded at any time, and may be compelled by summary proceedings in Court. The
institution and maintenance of an action for judicial relief of pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief. The
arbitrator shall
<PAGE>
award all costs and expenses of the arbitration proceeding. Nothing contained
herein shall be deemed to be a waiver by any party that is a bank of the
protections afforded to it under 12 U.S.C. (Degree)91 or any similar applicable
state law.
NO WAIVER OF PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. The arbitration
requirement does not limit the right of any party to (I) foreclose against real
or personal property collateral; (ii) exercise self-help remedies relating to
collateral or proceeds of collateral such as setoff or repossession; or (iii)
obtain provisional or ancillary remedies such as replevin, injunctive relief,
attachment or the appointment of a receiver, before during or after the pendency
of any arbitration proceeding. This exclusion does not constitute a waiver of
the right or obligation of any party to submit any Dispute to arbitration or
reference hereunder, including those arising from the exercise of the actions
detailed in sections (I), (ii), and (iii) of this paragraph.
ARBITRATOR QUALIFICATIONS AND POWERS. Any arbitration proceeding in which the
amount in controversy in $5,000,000.00 or less will be decided by a single
arbitrator selected according to the Rules, and who shall not render an award of
greater than $5,000,000.00. Any Dispute in which the amount in controversy
exceeds $5,000,000.00 shall be decided by majority vote of a panel of three
arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. Every arbitrator must be a
practicing attorney or a retired member of the state or federal judiciary, in
either case with a minimum of ten years experience in the substantive law
applicable to the subject matter of the Dispute. The arbitrator will determine
whether or not an issue is arbitratable and will give effect to the statutes of
limitation in determining any claim. In any arbitration proceeding the
arbitrator will decide (by documents only or with a hearing at the arbitrator's
discretion) any pre-hearing motions which are similar to motions to dismiss for
failure to state a claim or motions for summary adjudication. The arbitrator
shall resolve all Disputes in accordance with the applicable substantive law and
may grant any remedy or relief that a court of such state could order of grant
within the scope hereof and such ancillary relief as is necessary to make
effective any award. The arbitrator shall also have the power to award recovery
of all costs and fees, to impose sanctions and to take such other action as the
arbitrator deems necessary to the same extent a judge could pursuant to the
Federal Rules of Civil Procedure, the applicable State Rules of Civil Procedure,
or other applicable law. Judgment upon the award rendered by the arbitrator may
be entered in any court having jurisdiction.
DISCOVERY. In any arbitration proceeding discovery will be permitted in
accordance with the Rules. All discovery shall be expressly limited to matters
directly relevant to the Dispute being arbitrated and must be completed no later
than 20 days before the hearing date and within 180 days of the filing of the
Dispute with the AAA. Any requests for and extension of the discovery periods,
or any discovery disputes, will be subject to final determination by the
arbitrator upon a showing that the request for discovery is essential for the
party's presentation and that no alternative means for obtaining information is
available.
MISCELLANEOUS. To the maximum extent practicable, the AAA, the arbitrators and
the parties shall take all action required to conclude any arbitration
proceeding within 180 days of the filing of the Dispute with the AAA. The
resolution of any Dispute shall by determined by a separate arbitration
proceeding and such Dispute shall not be consolidated with other disputes or
included in any class proceeding. No arbitrator or other party to an arbitration
proceeding may disclose the existence, content or results thereof, except for
disclosures of information by a party required in the ordinary course of its
business or by applicable law or regulation. If more than one agreement for
arbitration by or between the parties potentially applies to a Dispute, the
arbitration provision most directly related to the documents between the parties
or the subject matter of the Dispute shall control. This arbitration provision
shall survive termination, amendment or expiration of any of the documents or
any relationship between the parties.
FACSIMILE AND COUNTERPART. This document may be signed in any number of separate
copies, each of which shall be effective as an original, but all of which taken
together shall constitute a single document. An electronic transmission or other
facsimile of this document or any related document shall be deemed an original
and shall be admissible as evidence of the document and the signer's execution.
ADVANCES. Notwithstanding anything to the contrary, requests for advances
communicated to any office of Lender by any person believed by Lender in good
faith to be authorized to make the request, whether written, verbal, telephonic,
or electronic, may be acted upon by Lender, and Borrower will be liable for sums
advanced by Lender pursuant to such request. Such requests for advances shall be
deemed authorized by Borrower, and Lender shall not be liable for such advances
made in good faith, and with respect to advances deposited to the credit of any
deposit account of Borrower, such advances, when so deposited, shall be
conclusively presumed to have been made to or for the benefit of Borrower
regardless of the fact that persons other than those authorized to request
advances may have authority to draw against such account. Borrower agrees to
indemnify and hold Lender harmless from and against all
<PAGE>
damages, liabilities, costs and expenses (including attorney's fees) arising out
of any claim by Borrower or any third party against Lender in connection with
Lender's performance of transfers as described above.
LETTERS OF CREDIT AND FOREIGN EXCHANGE. Trade Finance Subfeatures. Borrower
shall have available a Letter of Credit Subfeature and a Foreign Exchange
Subfeature as described in this section, in a total amount not to exceed the
available principal amount of the line of credit evidenced by this Note. 1.
Letter of Credit Subfeature. As a subfeature this Note, Lender may from time to
time issue or cause to be issued by a Wells Fargo Affiliate (such Lender or
Wells Fargo Affiliate being referred to herein as the "Issuer") for your
account, commercial and/or standby letter of credit (each individually, a
"letter of Credit" and collectively "Letter of Credit"); provided however, that
the form and substance of each Letter of Credit shall be the subject to approval
by the Issuer in its sole discretion. Each Letter of Credit shall be issued for
a term designated by Borrower; provided however, that no Letter of Credit shall
have an expiration subsequent to the maturity of the Note. Each Letter of Credit
shall be subject to the terms and conditions of a Letter of Credit Agreement and
related documents, if any, required by Issuer in connection with the issuance of
such Letter of Credit (each individually a "Letter of Credit Agreement" and
collectively, the "Letter of Credit Agreements"). Each draft paid by Issuer
under a Letter of Credit and reimbursed by Lender and shall be paid with an
advance under the Note and shall be repaid by Borrower in accordance with the
terms and conditions of the Note applicable to such advances; provided however,
that is advances under the Note are not available, for any reason whatsoever, at
the time any amount is paid by Lender, then the full amount of such advance
shall be immediately due and payable, together with interest thereon, from the
date such amount is paid by Issuer or Lender to the date such amount is fully
repaid by Borrower, at the rate of interest applicable to advances under the
Note. In such even, Borrower agrees that Issuer or Lender, at Issuer's or
Lender's sold discretion, may debit Borrower's deposit account(s) with Lender or
a Wells Fargo Affiliate for the amount of any such draft. Upon the issuance of
an amendment to a Letter of Credit, upon the reimbursement by Lender of a draft
under any Letter of Credit, and otherwise as agreed by Borrower and Issuer
pursuant to the Letter of Credit Agreements, Borrower shall pay to Issuer or
Lender fees determined in accordance with Issuer's/Lender's standard fees and
charges at such time. 2. Foreign Exchange Subfeature. As a subfeature of this
Note, Lender or a Wells Fargo Affiliate (such Lender of Wells Fargo Affiliate
being referred to herein as the "Exchanger") may make available to Borrower a
foreign exchange facility under which Exchanger, from time to time up to and
including the maturity date of the Note, will enter into foreign exchange
contracts for the account of Borrower for the purchase and/or sale by Borrower
in United States Dollars of the foreign currency or currencies specified in the
foreign exchange agreement establishing the foreign exchange facility. Each
foreign exchange transaction shall be subject to the terms and conditions of the
foreign exchange agreement, the form and substance of which must be acceptable
to the Exchanger in all respects in its sole discretion. 3. Subfeature Limits.
The outstanding amount of all Letters of Credit and foreign exchange contracts,
plus the reserve percentage applicable to foreign exchange contracts, shall be
reserved under the Note and shall not be available for Note advances. The amount
of all outstanding foreign exchange contracts plus a reserve of 20% of said
amount, plus the aggregate principal amount of all outstanding Letters of
Credit, plus the principal amount of any advances outstanding under the Note,
shall not at any time exceed the principal amount of the Note, unless allowed by
Lender at Lender's full discretion. Any excess amount shall be fully due and
payable immediately without notice. As used herein, Wells Fargo Affiliate means
any present or future subsidiary of Wells Fargo & Company, any subsidiary
thereof, and any successors of such financial service companies.
FINANCIAL STATEMENTS. Borrower agrees to provide to Lender, upon request,
financial statements prepared in a manner and form acceptable to Lender, and
copies of such tax returns and other financial information and statements as may
be requested by Lender. Borrower shall also furnish such information regarding
Borrower or the Collateral as may be requested by Lender. Borrower warrants that
all financial statements and information provided to Lender are and will be
accurate, correct and complete.
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, and notice of dishonor. Upon any change in the
terms of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan or release
any party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan
<PAGE>
without the consent of or notice to anyone other than the party with whom the
modification is made. The obligations under this Nore are joint and several.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGRESS TO
THE TERMS OF THIS NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
BORROWER:
THE BUCKLE, INC.
BY: /S/ DENNIS H. NELSON
---------------------------------------------------
DENNIS H. NELSON, PRESIDENT/CEO OF THE BUCKLE, INC.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.12
<SEQUENCE>9
<FILENAME>c76285exv10w12.txt
<DESCRIPTION>PROMISSORY NOTE
<TEXT>
<PAGE>
.
.
.
EXHIBIT 10.12
PROMISSORY NOTE
<TABLE>
<CAPTION>
PRINCIPAL LOAN DATE MATURITY LOAN NO Call/Coll ACCOUNT OFFICER
<S> <C> <C> <C> <C> <C> <C>
$7,500,000.00 05-15-2002 05-31-2003 1196058561 86489
</TABLE>
BORROWER: The Buckle, Inc. (TIN: 47-0366193) LENDER: Wells Fargo Bank
2407 W 24th Street Nebraska, N. A.
Kearney, NE 68845 Kearney-Main
21 W. 21st Street
Kearney, NE 68847
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT: $7,500,000.00 INITIAL RATE: 4.750% DATE OF NOTE: May 15, 2002
PROMISE TO PAY. The Buckle, Inc. ("Borrower") promises to pay to Wells Fargo
Bank Nebraska, National Association ("Lender"), or order, in lawful money of the
United States of America, the principal amount of Seven Million Five Hundred
Thousand & 00/100 Dollars ($7,500,000.00) or so much as may be outstanding,
together with interest on the unpaid outstanding principal balance of each
advance. Interest shall be calculated from the date of each advance until
repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on May 31, 2003. In addition, Borrower will pay
regular monthly payments of all accrued unpaid interest due as of each payment
date, beginning June 30, 2002, with all subsequent interest payments to be due
on the last day of each month after that. Unless other wise agreed or required
by applicable law, payments will be applied first to accrued unpaid interest,
then to principal, and any remaining amount to any unpaid collection costs and
late charges. The annual interest rate for this Note is computed on a 365/360
basis; that is, by applying the ratio of the annual interest rate over a year of
360 days, multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as Lender may
designate in writing.
VARIABLE INTEREST RATE. The interest rate on the Note is subject to change from
time to time based on changes in an index which is the Prime Rate set from time
to time by Wells Fargo Bank, N.A. ("Wells Fargo") that serves as the basis upon
which effective rates of interest are calculated for those loans making
reference thereto (the "Index"). The Index is not necessarily the lowest rate
charged by Lender on its loans and is set by Lender in its sole discretion. If
the Index becomes unavailable during the term of this loan, Lender my designate
a substitute index after notifying Borrower. Lender will tell Borrower the
current Index rate upon Borrower's request. The interest rate change will not
occur more often than each time the Index changes. Each change in the Prime Rate
of interest hereunder shall become effective on the date each Prime Rate change
is announced within Wells Fargo. Borrower understands that Lender may make loans
based on other rates as well. THE INDEX CURRENTLY IS 4.750% PER ANNUM. THE
INTEREST RATE TO BE APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE
AT A RATE EQUAL TO THE INDEX, RESULTING IN AN INITIAL RATE OF 4.750% PER ANNUM.
NOTICE: Under no circumstances will the interest rate on this Note be more than
the maximum rate allowed by applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest. Rather, early payments will reduce the principal
balance due. Borrower agrees not to send Lender payments marked "paid in full",
"without recourse", or similar language. If Borrower sends such a payment,
Lender may accept it without losing any of Lender's rights under this Note, and
Borrower will remain obligated to pay any further amount owed to Lender. All
written communications concerning disputed amounts, including any check or other
payment instrument that indicates that the payment constitutes "payment in full"
of the amount owed or that is tendered with other conditions or limitations or
as full satisfaction of a disputed amount must be mailed or delivered to:
Minneapolis Loan Ops Center, 730 2nd Ave. South Suite 1000 Minneapolis, MN
55479.
LATE CHARGE: If a payment is 15 days or more late, Borrower will be charged
5.000% OF THE UNPAID PORTION OF THE REGULARLY SCHEDULED PAYMENT OR $15.00,
WHICHEVER IS GREATER.
<PAGE>
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, Lender, at its option, may, if permitted under applicable law,
increase the variable interest rate on this Note to 4.0000 percentage points
over the Index. The interest rate will not exceed the maximum rate permitted by
applicable law.
DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note:
PAYMENT DEFAULT. Borrower fails to make and payment when due under this
Note.
OTHER DEFAULTS. Borrower fails to comply with or to perform any other
term, obligation, covenant or condition contained in any other
agreement between Lender and Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Borrower or any Grantor defaults
under any loan, extension of credit, security agreement, purchase or
sales agreement, or any other agreement, in favor of any other creditor
or person that may materially affect any of Borrower's property or
Borrower's ability to repay this Note or perform Borrower's obligations
under this Note or nay of the related documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this Note
or the related documents is false or misleading in any material
respect, either now or at the time made or furnished or becomes false
or misleading at any time thereafter.
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the loan. This
includes a garnishment of any of Borrower's accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply
if there is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Borrower gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies
or a surety bond for the creditor or forfeiture proceeding, in an
amount determined by Lender, in its sole discretion, as being an
adequate reserve or bond for the dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any guarantor, endorser, surety, or accommodation party of
any of the indebtedness or any guarantor, endorser, surety, or
accommodation party dies or becomes incompetent, or revokes or disputes
the validity of, or liability under, any guaranty of the indebtedness
evidenced by this Note.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of this Note is impaired.
INSECURITY. Lender in good faith believes itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, and then
Borrower will pay that amount.
ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's attorneys' fees
and Lender's legal expenses, whether or not there is a lawsuit, including
attorneys' fees, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law.
GOVERNING LAW. This Note will by governed by, construed and enforced in
accordance with federal law and the laws of the State of Nebraska. This Note has
been accepted by Lender in the State of Nebraska.
<PAGE>
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
debt against any and all such accounts, and, at Lender's option, to
administratively freeze all such accounts to allow Lender to protect Lender's
charge and setoff rights provided in this paragraph.
COLLATERAL. This loan in unsecured.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested either orally or in writing by Borrower or by an
authorized person. Lender may, but need not, require that all oral requests be
confirmed in writing. All communications, instructions, or directions by
telephone or otherwise to Lender are to be directed to Lender's office shown
above. Borrower agrees to be liable for all sums either: (A) advanced in
accordance with the instructions of an authorized person or (B) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Note at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (A) Borrower or any guarantor is
in default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with this
Note; (B) Borrower or any guarantor ceases doing business or is insolvent; (C)
any guarantor seeks, claims or otherwise attempts to limit, modify or revoke
such guarantor's guarantee of this Note or any other loan with Lender; (D)
Borrower has applied funds provided pursuant to this Note for purposed other
than those authorized by Lender; or (E) Lender in good faith believes itself
insecure.
COLLECTION FROM DEPOSIT ACCOUNT. Lender may collect principal, interest, fees,
charges, and other amounts due under this Note by charging Borrower's primary
deposit account as specified in the "Disbursement Request and Authorization"
executed by Borrower in connection with this Note for such amounts as they
become due, or such other deposit account of Borrower as Borrower may otherwise
designate. Should there be insufficient funds in said account to pay such sums
when due, the full unpaid amount of such sums shall be immediately due and
payable by Borrower.
DEFAULT RATE. At Lender's option and without prior notice, upon default or at
any time during the pendency of any event of default under this Note or any
related loan documents, Lender may increase the interest rate applicable to the
Note by four percent (4.0%) (the "Default Rate"), not to exceed the maximum
lawful rate. (If the applicable rate is floating or variable rate, then the
Default Rate will be a varying rate equal to the sum of the normally applicable
Index and spread, plus four percent.) The Default Rate shall remain in effect
until the default has been cured and that fact has been communicated to and
confirmed by Lender. Lender shall give written notice to Borrower of Lender's
imposition of the Default Rate. If the Note is not paid at maturity, Lender may
impose the Default Rate from the maturity date to the date paid in full without
notice. Lender's imposition of the Default Rate shall not constitute an election
of remedies or otherwise limit Lender's rights concerning other paragraph and
any other provision of this Note or any related agreement, the provisions of
this paragraph shall control. If a default rate is prohibited by applicable law,
then the interest rate applicable after default or maturity shall be the
prematurity rate which would be applicable in the absence of any default.
ADDITIONAL SECURITY. Notwithstanding anything to the contrary in this or any
related agreement, to further secure the indebtedness and obligations of the
Note and related loan documents, Borrower pledges and grants to Lender a
contractual right of offset and security interest in Borrower's accounts with
Lender and Borrower's accounts with any Wells Fargo Affiliate, whether checking,
savings, investment, or some other account, including without limitation,
accounts held jointly with others and accounts opened in the future, excluding
however all IRAs, Keogh accounts, and trust accounts to the extent a security
interest would be invalid or prohibited by law. As used herein, "Wells Fargo
Affiliate" means any present or future subsidiary of Wells Fargo & Company, and
any subsidiary thereof, any successors of such financial service companies.
LOAN FEE AUTHORIZATION. Borrower shall pay to Lender any and all fees as
specified in the "Disbursement Request and Authorization" executed by Borrower
in connection with this Note. Such fees are non-refundable and shall be due and
payable in full immediately upon Borrower's execution of this Note.
EXTENSION AND RENEWAL. Lender may, at Lender's discretion, renew or extend this
Note by written notice ("Renewal Notice") to Borrower. Such renewal or extension
shall be effective as of the maturity date of this Note,
<PAGE>
and may be conditioned among other things on modifications of Borrower's
obligations hereunder, including but not limited to a decrease in the amount
available under this Note, an increase in the interest rate applicable to this
Note and/or payment of a fee for such renewal or extension. In addition, Lender
may increase the principal amount available under the Note at any time. Borrower
shall be deemed to have accepted the terms of each Renewal Notice, including any
notice of an increase in availability, if Borrower does not deliver to Lender
written rejection of such renewal or extension within 10 days following the date
of such obligations under this Note, the term, "maturity date" as used in this
Note shall mean the new maturity date set forth in the Renewal Notice. This Note
may be renewed and extended repeatedly in this manner.
CREDIT BUREAU INQUIRIES. The parties hereto, and each individual signing below
in a representative capacity, agree that Lender may obtain business and/or
personal credit reports and tax returns on each of them in their individual
capacities.
APPLICATION OF PAYMENTS. Notwithstanding the application of payment provided in
the Payment section of this Note, unless otherwise agreed, all sums received
from Borrower may be applied to interest, fees, principal, or any other amounts
due to Lender in any order at Lender's sold discretion. If a final payment
amount is set out in the Payment section of this Note, Borrower understands that
it is an estimate, and that the actual final payment amount will depend upon
when payments are received and other factors.
FURTHER ASSURANCES. The parties hereto agree to do all things deemed necessary
by Lender in order to fully document the loan evidenced by this Note and any
related agreements, and will fully cooperate concerning the execution and
delivery of security agreements, stock powers, instructions and/or other
documents pertaining to any collateral intended to secure the Indebtedness. The
undersigned agree to assist in the cure of any defects in the execution,
delivery or substance of this Note and related agreements, and in the creation
and perfection of any liens, security interest or other collateral rights
securing this Note.
CONSENT TO SELL LOAN. The parties hereto agree: (a) Lender may sell or transfer
all or part of this loan to one or more purchasers, whether related or unrelated
to Lender; (b) Lender may provide to any purchaser, or potential purchaser, any
information or knowledge Lender may have about the parties or about and other
matter relating to this loan obligation, and the parties waive any rights to
privacy it may have with respect to such matters; (c) the purchaser of a loan
will be considered its absolute owner and will have all the rights granted under
the loan documents or agreements governing the sale of the loan; and (d) the
purchaser of a loan may enforce its interests irrespective of any claims or
defenses that the parties may have against Lender.
ARBITRATION AGREEMENT. Binding Arbitration. Lender, Borrower, and every other
party to this agreement hereby agree, upon demand by any party to submit any
Dispute to binding arbitration in accordance with the terms of this Arbitration
Program. A "Dispute" shall include any dispute, claim or controversy of any
kind, whether in contract or in tort, legal or equitable, now existing or
hereafter arising, relating in any way to this Agreement or any related
agreement incorporating this Arbitration Program (the "Documents"), or any past,
present, or future loans, transactions, contracts, agreements, relationships,
incidents or injuries of any kind whatsoever relating to or involving Business
Banking, Community Banking, or any successor group or department of Bank.
DISPUTES SUBMITTED TO ARBITRATION ARE NOT RESOLVED IN COURT BY A JUDGE OR JURY.
GOVERNING RULES. Any arbitration proceeding will (I) be governed by the
Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any
conflicting choice of law provision in any of the documents between the parties;
and (ii) be conducted by the American Arbitration Association ("AAA"), or such
other administrator as the parties shall mutually agree upon, in accordance with
the AAA's commercial dispute resolution procedures, unless the claim or
counterclaim is at least $1,000,000.00 exclusive of claimed interest,
arbitration fees and costs in which case the arbitration shall be conducted in
accordance with the AAA's optional procedures for large, complex commercial
disputes (the commercial dispute resolution procedures or the optional
procedures for large, complex commercial disputes to be referred to, as
applicable, as the "Rules"). If there is any inconsistency between the terms
hereof and the Rules, the terms and procedures set forth herein shall control.
Arbitration proceedings hereunder shall be conducted at a location mutually
agreeable to the parties, or if they cannot agree, then at a location selected
by the AAA in the state of the applicable substantive law primarily governing
the Credit. Any party who fails or refuses to submit to arbitration following a
demand by any other party shall bear all costs and expenses incurred by such
other party in compelling arbitration of any Dispute. Arbitration may be
demanded at any time, and may be compelled by summary proceedings in Court. The
institution and maintenance of an action for judicial relief of pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief. The
arbitrator shall
<PAGE>
award all costs and expenses of the arbitration proceeding. Nothing contained
herein shall be deemed to be a waiver by any party that is a bank of the
protections afforded to it under 12 U.S.C. (Degree)91 or any similar applicable
state law.
NO WAIVER OF PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. The arbitration
requirement does not limit the right of any party to (I) foreclose against real
or personal property collateral; (ii) exercise self-help remedies relating to
collateral or proceeds of collateral such as setoff or repossession; or (iii)
obtain provisional or ancillary remedies such as replevin, injunctive relief,
attachment or the appointment of a receiver, before during or after the pendency
of any arbitration proceeding. This exclusion does not constitute a waiver of
the right or obligation of any party to submit any Dispute to arbitration or
reference hereunder, including those arising from the exercise of the actions
detailed in sections (I), (ii), and (iii) of this paragraph.
ARBITRATOR QUALIFICATIONS AND POWERS. Any arbitration proceeding in which the
amount in controversy in $5,000,000.00 or less will be decided by a single
arbitrator selected according to the Rules, and who shall not render an award of
greater than $5,000,000.00. Any Dispute in which the amount in controversy
exceeds $5,000,000.00 shall be decided by majority vote of a panel of three
arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. Every arbitrator must be a
practicing attorney or a retired member of the state or federal judiciary, in
either case with a minimum of ten years experience in the substantive law
applicable to the subject matter of the Dispute. The arbitrator will determine
whether or not an issue is arbitratable and will give effect to the statutes of
limitation in determining any claim. In any arbitration proceeding the
arbitrator will decide (by documents only or with a hearing at the arbitrator's
discretion) any pre-hearing motions which are similar to motions to dismiss for
failure to state a claim or motions for summary adjudication. The arbitrator
shall resolve all Disputes in accordance with the applicable substantive law and
may grant any remedy or relief that a court of such state could order of grant
within the scope hereof and such ancillary relief as is necessary to make
effective any award. The arbitrator shall also have the power to award recovery
of all costs and fees, to impose sanctions and to take such other action as the
arbitrator deems necessary to the same extent a judge could pursuant to the
Federal Rules of Civil Procedure, the applicable State Rules of Civil Procedure,
or other applicable law. Judgment upon the award rendered by the arbitrator may
be entered in any court having jurisdiction.
DISCOVERY. In any arbitration proceeding discovery will be permitted in
accordance with the Rules. All discovery shall be expressly limited to matters
directly relevant to the Dispute being arbitrated and must be completed no later
than 20 days before the hearing date and within 180 days of the filing of the
Dispute with the AAA. Any requests for and extension of the discovery periods,
or any discovery disputes, will be subject to final determination by the
arbitrator upon a showing that the request for discovery is essential for the
party's presentation and that no alternative means for obtaining information is
available.
MISCELLANEOUS. To the maximum extent practicable, the AAA, the arbitrators and
the parties shall take all action required to conclude any arbitration
proceeding within 180 days of the filing of the Dispute with the AAA. The
resolution of any Dispute shall by determined by a separate arbitration
proceeding and such Dispute shall not be consolidated with other disputes or
included in any class proceeding. No arbitrator or other party to an arbitration
proceeding may disclose the existence, content or results thereof, except for
disclosures of information by a party required in the ordinary course of its
business or by applicable law or regulation. If more than one agreement for
arbitration by or between the parties potentially applies to a Dispute, the
arbitration provision most directly related to the documents between the parties
or the subject matter of the Dispute shall control. This arbitration provision
shall survive termination, amendment or expiration of any of the documents or
any relationship between the parties.
FACSIMILE AND COUNTERPART. This document may be signed in any number of separate
copies, each of which shall be effective as an original, but all of which taken
together shall constitute a single document. An electronic transmission or other
facsimile of this document or any related document shall be deemed an original
and shall be admissible as evidence of the document and the signer's execution.
ADVANCES. Notwithstanding anything to the contrary, requests for advances
communicated to any office of Lender by any person believed by Lender in good
faith to be authorized to make the request, whether written, verbal, telephonic,
or electronic, may be acted upon by Lender, and Borrower will be liable for sums
advanced by Lender pursuant to such request. Such requests for advances shall be
deemed authorized by Borrower, and Lender shall not be liable for such advances
made in good faith, and with respect to advances deposited to the credit of any
deposit account of Borrower, such advances, when so deposited, shall be
conclusively presumed to have been made to or for the benefit of Borrower
regardless of the fact that persons other than those authorized to request
advances may have authority to draw against such account. Borrower agrees to
indemnify and hold Lender harmless from and against all
<PAGE>
damages, liabilities, costs and expenses (including attorney's fees) arising out
of any claim by Borrower or any third party against Lender in connection with
Lender's performance of transfers as described above.
LETTERS OF CREDIT AND FOREIGN EXCHANGE. Trade Finance Subfeatures. Borrower
shall have available a Letter of Credit Subfeature and a Foreign Exchange
Subfeature as described in this section, in a total amount not to exceed the
available principal amount of the line of credit evidenced by this Note. 1.
Letter of Credit Subfeature. As a subfeature this Note, Lender may from time to
time issue or cause to be issued by a Wells Fargo Affiliate (such Lender or
Wells Fargo Affiliate being referred to herein as the "Issuer") for your
account, commercial and/or standby letter of credit (each individually, a
"letter of Credit" and collectively "Letter of Credit"); provided however, that
the form and substance of each Letter of Credit shall be the subject to approval
by the Issuer in its sole discretion. Each Letter of Credit shall be issued for
a term designated by Borrower; provided however, that no Letter of Credit shall
have an expiration subsequent to the maturity of the Note. Each Letter of Credit
shall be subject to the terms and conditions of a Letter of Credit Agreement and
related documents, if any, required by Issuer in connection with the issuance of
such Letter of Credit (each individually a "Letter of Credit Agreement" and
collectively, the "Letter of Credit Agreements"). Each draft paid by Issuer
under a Letter of Credit and reimbursed by Lender and shall be paid with an
advance under the Note and shall be repaid by Borrower in accordance with the
terms and conditions of the Note applicable to such advances; provided however,
that is advances under the Note are not available, for any reason whatsoever, at
the time any amount is paid by Lender, then the full amount of such advance
shall be immediately due and payable, together with interest thereon, from the
date such amount is paid by Issuer or Lender to the date such amount is fully
repaid by Borrower, at the rate of interest applicable to advances under the
Note. In such even, Borrower agrees that Issuer or Lender, at Issuer's or
Lender's sold discretion, may debit Borrower's deposit account(s) with Lender or
a Wells Fargo Affiliate for the amount of any such draft. Upon the issuance of
an amendment to a Letter of Credit, upon the reimbursement by Lender of a draft
under any Letter of Credit, and otherwise as agreed by Borrower and Issuer
pursuant to the Letter of Credit Agreements, Borrower shall pay to Issuer or
Lender fees determined in accordance with Issuer's/Lender's standard fees and
charges at such time. 2. Foreign Exchange Subfeature. As a subfeature of this
Note, Lender or a Wells Fargo Affiliate (such Lender of Wells Fargo Affiliate
being referred to herein as the "Exchanger") may make available to Borrower a
foreign exchange facility under which Exchanger, from time to time up to and
including the maturity date of the Note, will enter into foreign exchange
contracts for the account of Borrower for the purchase and/or sale by Borrower
in United States Dollars of the foreign currency or currencies specified in the
foreign exchange agreement establishing the foreign exchange facility. Each
foreign exchange transaction shall be subject to the terms and conditions of the
foreign exchange agreement, the form and substance of which must be acceptable
to the Exchanger in all respects in its sole discretion. 3. Subfeature Limits.
The outstanding amount of all Letters of Credit and foreign exchange contracts,
plus the reserve percentage applicable to foreign exchange contracts, shall be
reserved under the Note and shall not be available for Note advances. The amount
of all outstanding foreign exchange contracts plus a reserve of 20% of said
amount, plus the aggregate principal amount of all outstanding Letters of
Credit, plus the principal amount of any advances outstanding under the Note,
shall not at any time exceed the principal amount of the Note, unless allowed by
Lender at Lender's full discretion. Any excess amount shall be fully due and
payable immediately without notice. As used herein, Wells Fargo Affiliate means
any present or future subsidiary of Wells Fargo & Company, any subsidiary
thereof, and any successors of such financial service companies.
FINANCIAL STATEMENTS. Borrower agrees to provide to Lender, upon request,
financial statements prepared in a manner and form acceptable to Lender, and
copies of such tax returns and other financial information and statements as may
be requested by Lender. Borrower shall also furnish such information regarding
Borrower or the Collateral as may be requested by Lender. Borrower warrants that
all financial statements and information provided to Lender are and will be
accurate, correct and complete.
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, and notice of dishonor. Upon any change in the
terms of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan or release
any party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan
<PAGE>
without the consent of or notice to anyone other than the party with whom the
modification is made. The obligations under this Nore are joint and several.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGRESS TO
THE TERMS OF THIS NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
BORROWER:
THE BUCKLE, INC.
BY:__________________________________________
DENNIS H. NELSON, PRESIDENT/CEO OF THE BUCKLE, INC.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>10
<FILENAME>c76285exv13.txt
<DESCRIPTION>2002 ANNUAL REPORT TO STOCKHOLDERS
<TEXT>
<PAGE>
[THE BUCKLE INC. LOGO]
[GRAPHIC]
BUCKLE >> ANNUAL REPORT >> 2002
<PAGE>
>> STOCK PRICES BY QUARTER >
The Company's common stock trades on the New York Stock Exchange under the
symbol BKE. The Company did not pay any cash dividends in fiscal 2002, 2001 or
2000, and has no current plans for cash dividend payments.
The number of record holders of the Company's common stock as of March 24, 2003
was 404. Based upon information from the principal market makers, the Company
believes there are more than 3,000 beneficial owners. The last reported sales
price of the Company's common stock on March 24, 2003 was $18.00.
The following table lists the Company's quarterly market range for fiscal years
2002, 2001 and 2000.
<TABLE>
<CAPTION>
2002 2001 2000
- ------------------------------------------------------------------------------------
QUARTER HIGH LOW HIGH LOW HIGH LOW
<S> <C> <C> <C> <C> <C> <C>
First 24.90 20.05 21.55 16.89 17.19 12.38
Second 25.46 20.40 20.59 17.30 14.44 10.81
Third 22.30 15.72 20.48 14.59 16.38 11.19
Fourth 20.35 16.46 22.50 17.41 21.13 15.00
- ------------------------------------------------------------------------------------
</TABLE>
> CORPORATE INFORMATION
Date Founded
1948
Number of Employees
5,800
Stock Transfer Agent & Registrar
UMB Bank, n.a.
P.O. Box 419226
Kansas City, Missouri 64141-6226
(816) 860-7000
Stock Exchange Listing
New York Stock Exchange
Trading Symbol: BKE
Independent Public Accountants
Deloitte & Touche, LLP
Omaha, Nebraska
Annual Meeting
The Annual Meeting of Shareholders is scheduled for 10:00 a.m. Thursday, May 29,
2003, at the Holiday Inn Kearney, Nebraska
Form 10-K
A copy of the 10-K is available to shareholders without charge upon written
request to:
Karen B. Rhoads, Vice President of Finance
The Buckle, Inc.
P.O. Box 1480
Kearney, Nebraska 68848-1480
Trademarks
BUCKLE, THE BUCKLE, BKLE, RECLAIM and BKE are trademarks of The Buckle, Inc.,
which is registered in the United States.
> BOARD OF DIRECTORS
Daniel J. Hirschfeld
Chairman of the Board
Dennis H. Nelson
President & Chief Executive
Officer
Karen B. Rhoads
Vice President of Finance,
Treasurer & Chief
Financial Officer
Ralph M. Tysdal
Owner of McDonald's
restaurant franchises
Bill L. Fairfield
Chairman, DreamField
Capital Ventures
William D. Orr
Robert E. Campbell
President, Miller & Paine
Director of Development,
Madonna Foundation
Bruce L. Hoberman
Chief Executive Officer,
Proxibid, Inc.
David A. Roehr
President, Cabela's, Inc.
James E. Shada
Executive Vice President
of Sales
> EXECUTIVE OFFICERS
Dennis H. Nelson
President & Chief Executive
Officer
Karen B. Rhoads
Vice President of Finance,
Treasurer & Chief
Financial Officer
James E. Shada
Executive Vice President
of Sales
Kari G. Smith
Vice President of Sales
Kyle L. Hanson
Corporate Secretary & General
Counsel
Brett P. Milkie
Vice President of Leasing
Patricia K. Whisler
Vice President of Women's
Merchandising
<PAGE>
> > FINANCIAL HIGHLIGHTS >
(dollar amounts in thousands, except per share and selected operating data)
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 2, FEBRUARY 3,
2003 2002 2001
===========================================================================================================
<S> <C> <C> <C>
INCOME STATEMENT DATA
Net sales $401,060 $387,638 $393,247
Income before income taxes 50,492 52,088 54,961
Income taxes 18,428 19,226 20,164
Net income before cumulative effect
of change in accounting $ 32,064 $ 32,862 $ 34,797
Diluted income per share $ 1.47 $ 1.52 $ 1.61
Net income as a percentage of net sales 8.0% 8.5% 8.8%
BALANCE SHEET DATA
Working capital $143,952 $145,312 $115,148
Total assets $299,800 $264,657 $230,533
Long term debt -- -- --
Stockholders' equity $264,672 $233,702 $194,066
SELECTED OPERATING DATA
Number of stores open at year end 304 295 274
Average sales per square foot $ 274 $ 279 $ 309
Average sales per store (000's) $ 1,334 $ 1,352 $ 1,482
Comparable store sales change -0.5% -6.2% -6.0%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
[MAP]
* CORPORATE HEADQUARTERS
o NEVADA WILL BE ADDED AS A NEW STATE IN 2003
310 STORES IN 37 STATES, AS OF MAY 1, 2003
BUCKLE >> 1
<PAGE>
[THE BUCKLE, INC. LOGO] FOCUSED > SHAREHOLDER LETTER
>> SUCCESS > LEADERSHIP > VISION
> During fiscal 2002, the Buckle's sales grew to a new record high of $401.1
MILLION, up 3.5% from fiscal 2001. Our net income for fiscal 2002 was $32.1
MILLION, $1.47 per share on a diluted basis. These results were down $0.8
million or 2.4% compared to fiscal 2001. Our average store's sales were $1.3
MILLION and our sales per square foot were $274. In the challenging fiscal 2002
retail environment, we achieved a net income to sales percentage of 8%, compared
to 8.5% in the prior year. The Buckle's balance sheet is strong, with working
capital of $144 MILLION and stockholders' equity at $264.7 MILLION.
MORE BUCKLE 2002 HIGHLIGHTS:
> Opened 11 new stores and remodeled eight. Closed two
stores after holiday to end the year with 304 stores in 37
states
> Unveiled our new store design and corporate logo. Finished fiscal 2002 with
15 stores showcasing the new look - eight new stores and seven remodeled
stores
> Grew denim sales by 18%, accounting for nearly 33% of
fiscal 2002 net sales
> Repurchased 119,125 shares of Buckle stock at an average
price of $16.64
> Increased cash and investments to $162 million as of
February 1, 2003
> Launched a new website and continued to market our stores and brand image,
while enhancing the online shopping experience.
We remain focused on our MISSION STATEMENT: TO CREATE THE MOST ENJOYABLE
SHOPPING EXPERIENCE POSSIBLE FOR OUR GUESTS. We accomplish this by positioning
the Buckle as a unique specialty retailer, with an emphasis on quality
merchandise and outstanding customer service.
Expertise is one of our many strengths. Our top five merchandisers have a
combined 110 years of Buckle experience. This knowledge, partnered with strong
vendor relationships, provides a great advantage to our buying team. We work
closely with key vendors for the best merchandise and develop exclusive product
with our branded and private label resources. The availability of exclusive
merchandise makes the Buckle a fun and unique place to shop. Currently some of
our top vendors include LUCKY BRAND DUNGAREES, SILVER, FOSSIL, DR. MARTENS,
ECKO, MAVI, BILLABONG and QUIKSILVER/ROXY.
Many talented teammates add value to the Buckle shopping experience. Through
focused efforts by our sales management team, we have developed an outstanding
reputation for service. This year, our two Vice Presidents of Sales will
celebrate their 25th anniversaries with the Buckle. Our 15 district managers
deliver 248 years of combined experience, while 61 area managers share more than
600 years of knowledge with their teams and store managers. We recognize
accomplishments by promoting from within. This provides Buckle leaders with a
solid foundation of the company philosophy and gives them the tools to educate
and nurture their teams, assuring each guest is provided excellent customer
service.
2 << BUCKLE
<PAGE>
To continue developing the best talent, we're excited to expand our recruitment
efforts on college campuses during fiscal 2003. As we educate students about
opportunities at the Buckle, we can inspire them to join our team through either
the Management Development or Internship Programs.
The Buckle's real estate is well positioned. Expansion plans for fiscal 2003
include 15 OPENINGS, adding Nevada as a new state and completing 15 REMODELS.
Our growth strategy capitalizes on opportunities available in targeted markets,
allowing us to secure great locations within the best malls. With our new design
and corporate logo, we have improved our positioning as a retail destination.
Guests' and developers' response to the new look has been outstanding. Our store
design incorporates inviting merchandise displays and fixtures to help create an
even more enjoyable shopping atmosphere. Some of the fixture innovations were
rolled out to all existing stores during fiscal 2002.
I want to take this opportunity to say "Thanks" to all those who contribute to
the Buckle's accomplishments - to our loyal guests, teammates, vendors and
shareholders. As we move forward, the shared enthusiasm, expertise and
experience provide key ingredients for continued growth and success.
/s/ DENNIS H. NELSON
DENNIS H. NELSON
President & Chief Executive Officer
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
$337,916 $375,526 $393,247 $387,638 $401,060
- -------- -------- -------- -------- --------
- ------------------------------------------------------
1998 1999 2000 2001 2002
- ------------------------------------------------------
NET SALES
(dollar amounts in thousands)
<CAPTION>
<S> <C> <C> <C> <C>
$34,029 $37,386 $34,527 $32,862 $32,064
- -------- -------- -------- -------- --------
- ------------------------------------------------------
1998 1999 2000 2001 2002
- ------------------------------------------------------
NET INCOME
(dollar amounts in thousands)
</TABLE>
BUCKLE >> 3
<PAGE>
[THE BUCKLE, INC. LOGO] HEARD > CONSISTENT MESSAGE
"WE WORK DAILY TO DEVELOP RELATIONSHIPS WITH
OUR GUESTS BY LISTENING TO THEIR WANTS AND
NEEDS. THEN WE CAN EFFECTIVELY SERVE THEM -
CREATING GUESTS FOR LIFE."
> JIM KOLBO, DISTRICT MANAGER
>> GUESTS > TEAM > SERVICE
> Listening is fundamental to understanding our guests' needs. By offering
personal customer assistance, we recognize the opportunity to hear and learn
each guest's desires and encourage open communication. This creates a store
environment where great ideas translate into unparalleled service.
[LINE GRAPH]
<TABLE>
<CAPTION>
BUCKLE CARD SALES
(dollar amounts in thousands)
<S> <C>
2000 $18,498
2001 $23,650
2002 $26,194
</TABLE>
> Our leaders provide teammates with the ongoing education and guidance
necessary to successfully deliver our message through their sales presentations.
At the Buckle, the art of salesmanship requires knowing the product as well as
developing an understanding of our guests to provide them the right looks and
fits.
[BUCKLE CREDIT CARD PICTURE] < BUCKLE CREDIT CARD
GIFT CARD
> Our guests appreciate the Buckle's commitment to deliver the best merchandise
selection accompanied by exceptional service. We offer a private label credit
card, electronic gift cards and free gift-wrapping. Buckle.com provides another
layer of service with helpful features such as search tools, a denim guide and a
style center.
WWW.BUCKLE.COM > [BUCKLE WEBSITE PHOTO]
4 << BUCKLE
<PAGE>
[PHOTO] [PHOTO]
[PHOTO]
[PHOTO] [PHOTO]
[PHOTO] [PHOTO]
BUCKLE >> 5
<PAGE>
[PHOTO] [PHOTO] [PHOTO]
[PHOTO] [PHOTO]
[PHOTO]
6 << BUCKLE
<PAGE>
[LOGO] ORIGINAL > EXCLUSIVE STYLE
"FASHION TRENDS ARE CYCLICAL, BUT OUR APPROACH TO
THEM IS CONSTANT. WE HAVE ALWAYS LOOKED TO THE SMALL
DETAILS THAT MAKE OUR PRODUCTS UNIQUE."
> PAT WHISLER, VICE PRESIDENT OF WOMEN'S MERCHANDISING
>> MERCHANDISE > DENIM > VENDORS
================================================================================
> Our merchandise speaks to each guest's sense of style, while presenting a
distinctive combination of selection and quality. Across all categories -
from apparel and footwear to outerwear and accessories - the Buckle
develops its product mix by taking a lifestyle approach to fashion.
[LINE GRAPH]
DENIM SALES
(dollar amounts in thousands)
2000 $104,445
2001 $111,733
2002 $131,504
================================================================================
> Denim remains the cornerstone of our merchandising strategy. We pay close
attention to every detail, knowing the fabric, fit and finish contribute to
the value of the completed product. This is why our guests continue to
choose the Buckle year after year as their favorite store for jeans.
SELECT BRANDS > [PHOTO]
> Through solid vendor partnerships, forged over time, we have the ability
to strengthen our branded and private label offerings. Exclusive
merchandise, developed through our team's collaboration with vendors,
establishes the Buckle as a unique place to shop. As a result, our guests
trust us for fashion that expresses their individuality.
[PHOTO] < PRIVATE LABEL
================================================================================
BUCKLE >> 7
<PAGE>
[LOGO] SCENE > BRAND IMAGE
"THE BUCKLE TEAM IS RESPONSIVE AND CREATIVE. WHEN WE
BEGAN TO SEE OUR NEW BRAND IMAGE TAKE SHAPE, WE
QUICKLY FOUND ADDITIONAL WAYS TO BUILD ON ITS IMPACT."
> LORI KOEPPE, DIRECTOR OF FACILITIES
>> IDENTITY > STORE DESIGN > GROWTH
================================================================================
> Our fresh new look and brand image help convey all aspects of the Buckle
message. The design theme integrates a cohesive corporate vision through
the various graphic elements, including a signature red and B icon
incorporated into the new logo.
[LINE GRAPH]
STORES OPEN AT YEAR END
2000 274
2001 295
2002 304
================================================================================
> The Buckle's identity is carried through and advances the new store
design at every level. While the retail look allows merchandising
flexibility, it remains timeless and memorable. Accompanying items - bags,
gift cards and marketing materials - extend the reach of the Buckle
personality into the community.
BRAND IDENTITY> [PHOTO]
> As we continue to develop and promote our brand image, the Buckle is well
positioned for the future. When we combine the strong visual presence of
our stores and website with the ongoing commitment to quality and service,
we reinforce and expand our relationships.
[PHOTO] < INNOVATIVE FIXTURES
================================================================================
8 << BUCKLE
<PAGE>
[GRAPHIC]
BUCKLE >> 9
<PAGE>
>> SELECTED FINANCIAL DATA >
(Dollar Amounts in Thousands Except Share and Per Share Amounts)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------------------------------------------
FEBRUARY 1, FEBRUARY 2, FEBRUARY 3, JANUARY 29, JANUARY 30,
2003 2002 2001 (a) 2000 1999
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales $401,060 $387,638 $393,247 $375,526 $337,916
Cost of sales (including
buying, distribution and
occupancy costs) 269,533 259,645 262,146 243,517 216,668
---------------------------------------------------------------------
Gross profit 131,527 127,993 131,101 132,009 121,248
Selling expenses 74,754 69,786 69,635 64,876 59,557
General and
administrative expenses 10,979 10,939 10,365 11,004 10,073
---------------------------------------------------------------------
Income from operations 45,794 47,268 51,101 56,129 51,618
Other income, net 4,698 4,820 3,860 3,367 2,534
---------------------------------------------------------------------
Income before income taxes
and cumulative effect of
change in accounting 50,492 52,088 54,961 59,496 54,152
Provision for income taxes 18,428 19,226 20,164 22,110 20,123
---------------------------------------------------------------------
Income before cumulative effect
of change in accounting 32,064 32,862 34,797 37,386 34,029
Cumulative effect of change in
accounting, net of taxes - - (270)(b) - -
---------------------------------------------------------------------
Net income $ 32,064 $ 32,862 $ 34,527 $ 37,386 $ 34,029
=====================================================================
Basic income per share $ 1.52 $ 1.59 $ 1.68 $ 1.72 $ 1.55
=====================================================================
Diluted income per share $ 1.47 $ 1.52 $ 1.61 $ 1.64 $ 1.47
=====================================================================
SELECTED OPERATING DATA
Stores open at end of period 304 295 274 248 222
Average sales per square
foot, (gross sq. ft.) $ 274 $ 279 $ 309 $ 334 $ 344
Average sales per store (000's) $ 1,334 $ 1,352 $ 1,482 $ 1,581 $ 1,603
Comparable store sales change -0.5% -6.2% -6.0% 0.9% 15.4%
BALANCE SHEET DATA
Working capital $143,952 $145,312 $115,148 $ 86,040 $ 93,523
Long-term investments $ 54,548 $ 32,556 $ 20,688 $ 21,542 $ 10,512
Total assets $299,800 $264,657 $230,533 $198,546 $186,113
Long-term debt - - - - -
Stockholders' equity $264,672 $233,702 $194,066 $163,260 $146,130
</TABLE>
(a) consists of 53 weeks
(b) In Fiscal 2000, the Company changed its method of revenue recognition for
layaway sales in accordance with the guidance and interpretations provided
by the SEC's SAB No. 101-Revenue Recognition.
See notes to financial statements.
10 << BUCKLE
<PAGE>
>> MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS>
>> RESULTS OF OPERATIONS
The following table sets forth certain financial data expressed as a percentage
of net sales and the percentage change in the dollar amount of such items
compared to the prior period.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES PERCENTAGE INCREASE
FOR FISCAL YEARS ENDED (DECREASE)
- ----------------------------------------------------------------------------------------------------------------
FEBRUARY 1, FEBRUARY 2, FEBRUARY 3, FISCAL YEAR
2003 2002 2001 2001 TO 2002 2000 TO 2001
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales 100.0% 100.0% 100.0% 3.5% -1.4%
Cost of sales (including
buying, distribution and
occupancy costs) 67.2% 67.0% 66.7% 3.8% -1.0%
----------------------------------------------------------------------------------
Gross profit 32.8% 33.0% 33.3% 2.8% -2.4%
Selling expenses 18.7% 18.0% 17.7% 7.1% 0.2%
General and
administrative expenses 2.7% 2.8% 2.6% 0.4% 5.5%
----------------------------------------------------------------------------------
Income from operations 11.4% 12.2% 13.0% -3.1% -7.5%
Other income 1.2% 1.2% 1.0% -2.5% 24.8%
----------------------------------------------------------------------------------
Income before
income taxes 12.6% 13.4% 14.0% -3.1% -5.2%
Provision for income taxes 4.6% 4.9% 5.1% -4.2% -4.7%
----------------------------------------------------------------------------------
Net income 8.0% 8.5% 8.8% -2.4% -4.8%
==================================================================================
</TABLE>
> FISCAL 2002 COMPARED TO FISCAL 2001
Net sales increased from $387.6 million in fiscal 2001 to $401.1 million in
fiscal 2002, a 3.5% increase. Comparable store sales decreased by $2.0 million,
or 0.5% for the 52 weeks ended February 1, 2003 compared to the same 52-week
period in the prior year. The Company had 1.9% sales growth in fiscal 2002 that
was attributable to the inclusion of a full year of operating results in fiscal
2002 for stores opened in fiscal 2001 and 2.1% from the opening of 11 new stores
in fiscal 2002.
The Company's average retail price per piece of merchandise decreased $0.30 per
piece in fiscal 2002 compared to fiscal 2001, primarily due to lower price
points in footwear, as well as from a decline in footwear sales as a percentage
of net sales. Average sales per square foot decreased 1.8% from $279 to $274.
Gross profit after buying, distribution and occupancy costs increased $3.5
million in fiscal 2002 to $131.5 million, a 2.8% increase. As a percentage of
net sales, gross profit decreased from 33.0% in fiscal 2001 to 32.8% in fiscal
2002. The decrease was primarily attributable to higher occupancy costs
partially offset by an improvement in the actual merchandise margins. Gross
margin was also impacted by the decrease in merchandise shrinkage which fell to
0.6% in fiscal 2002 compared to 0.7% in fiscal 2001.
Selling expenses increased from $69.8 million for fiscal 2001 to $74.8 million
for fiscal 2002, a 7.1% increase. Selling expenses as a percent of net sales
increased to 18.7% for fiscal 2002 from 18.0% for fiscal 2001. The increase was
primarily attributable to higher sales salaries, higher advertising expenses and
higher travel expenses as a percentage of net sales partially due to a decline
in leverage provided by comparable store sales.
BUCKLE >> 11
<PAGE>
>> MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS >
General and administrative expenses increased from $10.9 million in fiscal 2001
to $11.0 million in fiscal 2002, a 0.4% increase. As a percentage of net sales,
general and administrative expense decreased to 2.7% for fiscal 2002 from 2.8%
for fiscal 2001. Decreases in general and administrative expenses, as a
percentage of net sales, resulted primarily from a gain on sales of assets plus
slight decreases in bonus expense and general supplies expense.
As a result of the above changes, the Company's income from operations decreased
$1.5 million to $45.8 million for fiscal 2002, a 3.1% decrease compared to
fiscal 2001. Income from operations was 11.4% as a percentage of net sales in
fiscal 2002 compared to 12.2% in fiscal 2001.
Other income for fiscal 2002 decreased 2.5% from fiscal 2001 to $4.7 million.
The decrease is primarily due to a decrease in income received from state tax
incentive programs, partially offset by an increase in interest income compared
to fiscal 2001.
Income tax expense as a percentage of pre-tax income was 36.5% in fiscal 2002
compared to 36.9% in fiscal 2001, bringing net income to $32.1 million for
fiscal 2002 versus $32.9 million for fiscal 2001, a decrease of 2.4%.
> FISCAL 2001 COMPARED TO FISCAL 2000
Based upon the retail calendar, fiscal 2001 was a 52-week year compared to 53
weeks in fiscal 2000. Net sales decreased from $393.2 million in fiscal 2000 to
$387.6 million in fiscal 2001, a 1.4% decrease. Comparable store sales
decreased by $22.4 million, or 6.2% for the 52 weeks ended February 2, 2002
compared to the same 52-week period in the prior year. The Company had 1.6%
sales growth in fiscal 2001 that was attributable to the inclusion of a full
year of operating results in fiscal 2001 for stores opened in fiscal 2000 and
4.5% from the opening of 24 new stores in fiscal 2001. The remaining 1.3% of the
sales decrease came from $5.0 million in sales during the extra week of fiscal
2000.
The Company's average retail price per piece of merchandise decreased $2.11 per
piece in fiscal 2001 compared to fiscal 2000, primarily due to lower price
points in nearly every category, as well as from a decline in footwear sales as
a percentage of net sales. Average sales per square foot decreased 9.7% from
$309 to $279.
Gross profit after buying, distribution and occupancy costs decreased $3.1
million in fiscal 2001 to $128.0 million, a 2.4% decrease. As a percentage of
net sales, gross profit decreased from 33.3% in fiscal 2000 to 33.0% in fiscal
2001. The decrease was primarily attributable to higher occupancy costs
partially offset by an improvement in the actual merchandise margins. Gross
margin was also impacted by the increase in merchandise shrinkage which rose to
0.7% in fiscal 2001 compared to 0.6% in fiscal 2000.
Selling expenses increased from $69.6 million for fiscal 2000 to $69.8 million
for fiscal 2001, a 0.2% increase. Selling expenses as a percent of net sales
increased to 18.0% for fiscal 2001 from 17.7% for fiscal 2000. The increase was
primarily attributable to higher sales salaries and higher travel expenses as a
percentage of net sales due to a decline in leverage provided by comparable
store sales.
General and administrative expenses increased from $10.4 million in fiscal 2000
to $10.9 million in fiscal 2001, a 5.5% increase. As a percentage of net sales,
general and administrative expense increased to 2.8% for fiscal 2001 from 2.6%
for fiscal 2000. Increases in general and administrative expenses, as a
percentage of net sales, resulted primarily from higher payroll and travel
expenses due to a decline in leverage provided by comparable store sales.
12 << BUCKLE
<PAGE>
As a result of the above changes, the Company's income from operations decreased
$3.8 million to $47.3 million for fiscal 2001, a 7.5% decrease compared to
fiscal 2000. Income from operations was 12.2% as a percentage of net sales in
fiscal 2001 compared to 13.0% in fiscal 2000.
Other income for fiscal 2001 increased 24.8% from fiscal 2000 to $4.8 million.
The increase is primarily due to additional interest income as well as income
received from state tax incentive programs compared to fiscal 2000.
Income tax expense as a percentage of pre-tax income was 36.9% in fiscal 2001
compared to 36.7% in fiscal 2000, bringing net income to $32.9 million for
fiscal 2001 versus $34.5 million for fiscal 2000, a decrease of 4.8%.
> LIQUIDITY AND CAPITAL RESOURCES
The Company's primary ongoing cash requirements are for inventory, payroll, new
store expansion, and remodeling. Historically, the Company's primary source of
working capital has been cash flow from operations. During fiscal 2002, 2001,
and 2000 the Company's cash flow from operations was $42.8 million, $43.4
million, and $47.2 million, respectively. During fiscal 2002, 2001 and 2000, the
Company also used cash for repurchasing shares of the Company's common stock. In
fiscal 2002, the Company purchased 119,125 shares at a cost of $2.0 million. In
fiscal 2001, the Company purchased 79,200 shares at a cost of $1.3 million and
559,200 shares in fiscal 2000 at a cost of $7.3 million. The Company has
available an unsecured line of credit of $7.5 million and a $10.0 million line
of credit for foreign and domestic letters of credit, with Wells Fargo Bank
Nebraska, N.A. Borrowings under the lending arrangements provide for interest to
be paid at a rate equal to the prime rate as set by the Wells Fargo Bank, N.A.
index on the date of the borrowings. As of February 1, 2003, the Company's
working capital was $144.0 million, including $93.0 million of cash and cash
equivalents.
The Company has, from time to time, borrowed against these lines of credit
during periods of peak inventory build-up. There were immaterial borrowings
during fiscal 2002, 2001 and fiscal 2000. The Company had no bank borrowings as
of February 1, 2003.
During fiscal 2002, 2001, and 2000, the Company invested $12.9 million, $10.3
million, and $13.4 million, respectively, in new store construction, store
renovation and upgrading store technology, net of any construction allowances
received from landlords. The Company also spent $0.6 million, $0.4 million, and
$1.3 million, in fiscal 2002, 2001, and 2000, respectively, in capital
expenditures for the corporate headquarters and distribution facility. In the
third quarter of fiscal 2002, the Company purchased a used Citation X aircraft
and sold its Citation III aircraft at an additional cost of $9.1 million, net of
$3 million in proceeds from the sale of the Citation III.
During fiscal 2003, the Company anticipates completing approximately 30 store
construction projects, including approximately 15 new stores and approximately
15 stores to be remodeled and/or relocated. As of March 2003, leases for nine
new stores have been signed, and leases for six additional locations are under
negotiation; however, exact new store openings, remodels and relocations may
vary from those anticipated. The average cost of opening a new store during
fiscal 2003 was approximately $710,000, including construction costs of
approximately $540,000 and inventory costs of approximately $170,000, net of
payables. Management estimates that total capital expenditures during fiscal
2003 will be approximately $19.6 million, before landlord allowances, estimated
to be $2.8 million. The Company believes that existing cash and cash flow from
operations will be sufficient to fund current and long-term anticipated capital
expenditures and working capital requirements for the next several years.
However, future conditions may reduce the availability of funds based upon
factors such as a decrease in demand for the Company's product, change in
product mix, competitive factors and general economic conditions as well as
other risks and uncertainties.
BUCKLE >> 13
<PAGE>
>> MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS>
> CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's Discussion and Analysis of Financial Condition and Results of
Operations are based upon The Buckle, Inc.'s financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
that management make estimates and judgments that affect the reported amounts of
assets and liabilities, and disclosure of contingent assets and liabilities, at
the financial statement date, and the reported amounts of sales and expenses
during the reporting period. The Company regularly evaluates its estimates,
including those related to merchandise returns, inventory, bad debts, health
care costs and income taxes. Management bases its estimates on past experience
and on various other factors that are thought to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The Company's certain critical accounting policies
are listed below.
1. Merchandise Returns. The Company establishes a liability for estimated
merchandise returns at the end of the period. Customer returns could
potentially exceed those reserved for, reducing future net sales results.
2. Inventory. Inventory is valued at the lower of cost or market. Cost is
determined using the average cost method and management makes estimates to
reserve for obsolescence and markdowns that could effect market value,
based on assumptions regarding future demand and market conditions. Such
judgments may have a material impact on current and future operating
results and financial position.
3. Bad Debts. The Company books an allowance for doubtful accounts based upon
historical data and current trends. Management believes the reserve is
adequate; however, customers' ability to pay could deteriorate causing
actual losses to exceed those anticipated in the allowance.
4. Health Care Costs. The Company is self-funded for health and dental claims
up to $80,000 per individual per plan year. This plan covers eligible
employees and management makes estimates at period end to record a reserve
for future claims. The number and amount of claims submitted could vary
from the amounts reserved, affecting current and future net earnings
results.
5. Income Taxes. The Company records a deferred tax asset for future tax
benefits for the difference between book and tax revenue and expense
recognition. If the Company is unable to realize all or part of its
deferred tax asset in the future, an adjustment would be charged to income
in the period such determination was made.
> CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
As referenced in the tables below, the Company has contractual obligations and
commercial commitments that may affect the financial condition of the Company.
Based on management's review of the terms and conditions of its contractual
obligations and commercial commitments, there is no known trend, demand,
commitment, event or uncertainty that is reasonably likely to occur which would
have a material effect on the Company's financial condition or results of
operations or cash flows. In addition, the commercial obligations and
commitments made by the Company are customary transactions, which are similar to
those of other comparable retail companies.
14 << BUCKLE
<PAGE>
The following tables identify the material obligations and commitments as of
February 1, 2003:
<TABLE>
<CAPTION>
PAYMENTS DUE BY PERIOD
- ---------------------------------------------------------------------------------------------------------------
Contractual obligations Total Less than 1-3 years 4-5 years After 5 years
(dollar amounts in thousands) 1 year
<S> <C> <C> <C> <C> <C>
Long term debt $ - $ - $ - $ - $ -
Operating leases $ 189,634 $ 28,158 $ 51,562 $ 45,375 $ 64,539
----------------------------------------------------------------------------
Total contractual obligations $ 189,634 $ 28,158 $ 51,562 $ 45,375 $ 64,539
============================================================================
<CAPTION>
AMOUNTS OF COMMITMENT EXPIRATION PER PERIOD
- ---------------------------------------------------------------------------------------------------------------
Other Commercial Commitments Total Amounts Less than 1-3 years 4-5 years After 5 years
(dollar amounts in thousands) Committed 1 year
<S> <C> <C> <C> <C> <C>
Lines of Credit $ 7,500 $ 7,500 $ - $ - $ -
Letters of Credit $ 10,000 $ 10,000 $ - $ - $ -
----------------------------------------------------------------------------
Total commercial commitments $ 17,500 $ 17,500 $ - $ - $ -
============================================================================
</TABLE>
> SEASONALITY AND INFLATION
The Company's business is seasonal, with the holiday season (from approximately
November 15 to December 30) and the back-to-school season (from approximately
July 15 to September 1) historically contributing the greatest volume of net
sales. For fiscal years 2002, 2001, and 2000, the Christmas and back-to-school
seasons accounted for an average of approximately 40% of the Company's fiscal
year net sales. Although the operations of the Company are influenced by general
economic conditions, the Company does not believe that inflation has had a
material effect on the results of operations during the past three fiscal years.
Quarterly results may vary depending on the timing and amount of sales and costs
associated with the opening of new stores and the remodeling of existing stores.
> FORWARD LOOKING STATEMENTS
Information in this report, other than historical information, may be considered
to be forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "1995 Act"). Such statements are made in good
faith by the Company pursuant to the safe-harbor provisions of the 1995 Act. In
connection with these safe-harbor provisions, this management's discussion and
analysis contains certain forward-looking statements, which reflect management's
current views and estimates of future economic conditions, company performance
and financial results. The statements are based on many assumptions and factors
that could cause future results to differ materially. Such factors include, but
are not limited to, changes in product mix, changes in fashion trends,
competitive factors and general economic conditions, economic conditions in the
retail apparel industry, and other risks and uncertainties inherent in the
Company's business and the retail industry in general. Any changes in these
factors could result in significantly different results for the Company. The
Company further cautions that the forward-looking information contained herein
is not exhaustive or exclusive. The Company does not undertake to update any
forward-looking statements, which may be made from time to time by or on behalf
of the Company.
BUCKLE >> 15
<PAGE>
>> BALANCE SHEETS >
(Dollar Amounts in Thousands Except Share and Per Share Amounts)
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 2,
ASSETS 2003 2002
----------- -----------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 92,976 $ 101,915
Investments (Note B):
Held-to-maturity 15,450 8,769
Available-for-sale -- 951
Accounts receivable, net of allowance of $217 and $250, respectively 1,390 2,021
Inventory 60,041 54,297
Prepaid expenses and other assets (Note E) 8,277 7,357
----------- -----------
Total current assets 178,134 175,310
----------- -----------
PROPERTY AND EQUIPMENT (Note C): 130,013 111,443
Less accumulated depreciation and amortization (65,407) (57,151)
----------- -----------
64,606 54,292
----------- -----------
LONG-TERM INVESTMENTS (Note B) 54,548 32,556
OTHER ASSETS (Notes E and F) 2,512 2,499
----------- -----------
$ 299,800 $ 264,657
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 13,318 $ 11,133
Accrued employee compensation 10,556 10,755
Accrued store operating expenses 4,487 4,231
Gift certificates redeemable 2,855 2,482
Income taxes payable 2,966 1,397
----------- -----------
Total current liabilities 34,182 29,998
DEFERRED COMPENSATION (Note H) 946 957
----------- -----------
Total liabilities 35,128 30,955
----------- -----------
COMMITMENTS (Notes D and G)
STOCKHOLDERS' EQUITY (Note I):
Common stock, authorized 100,000,000 shares of $.01 par value; issued and
outstanding; 21,045,404 and 21,115,538 shares, respectively 210 211
Additional paid-in capital 18,089 19,320
Retained earnings 246,373 214,309
Unearned compensation - restricted stock -- (126)
Accumulated other comprehensive income (loss) -- (12)
----------- -----------
Total stockholders' equity 264,672 233,702
----------- -----------
$ 299,800 $ 264,657
=========== ===========
</TABLE>
See notes to financial statements.
16 << BUCKLE
<PAGE>
>> STATEMENTS OF INCOME >
(Dollar Amounts in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------------------
FEBRUARY 1, FEBRUARY 2, FEBRUARY 3,
2003 2002 2001
----------------------------------------------
<S> <C> <C> <C>
SALES, Net of returns and allowances of
$31,826, $28,278 and $28,203, respectively $ 401,060 $ 387,638 $ 393,247
COST OF SALES (Including buying, distribution
and occupancy costs) 269,533 259,645 262,146
----------------------------------------------
Gross profit 131,527 127,993 131,101
----------------------------------------------
OPERATING EXPENSES:
Selling 74,754 69,786 69,635
General and administrative 10,979 10,939 10,365
----------------------------------------------
85,733 80,725 80,000
----------------------------------------------
INCOME FROM OPERATIONS 45,794 47,268 51,101
OTHER INCOME, Net 4,698 4,820 3,860
----------------------------------------------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING 50,492 52,088 54,961
PROVISION FOR INCOME TAXES (Note E) 18,428 19,226 20,164
----------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING 32,064 32,862 34,797
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING,
Net of taxes (Note A) -- -- (270)
----------------------------------------------
NET INCOME $ 32,064 $ 32,862 $ 34,527
==============================================
BASIC INCOME PER SHARE (Note J):
Income before cumulative effect of change in accounting $ 1.52 $ 1.59 $ 1.69
Cumulative effect of change in accounting, net of taxes -- -- (0.01)
----------------------------------------------
Net income $ 1.52 $ 1.59 $ 1.68
==============================================
DILUTED INCOME PER SHARE (Note J):
Income before cumulative effect of change in accounting $ 1.47 $ 1.52 $ 1.63
Cumulative effect of change in accounting, net of taxes -- -- (0.02)
----------------------------------------------
Net income $ 1.47 $ 1.52 $ 1.61
==============================================
</TABLE>
See notes to financial statements.
BUCKLE >> 17
<PAGE>
>> STATEMENTS OF STOCKHOLDERS' EQUITY >
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
ADDITIONAL COMPREHENSIVE
COMMON PAID-IN RETAINED UNEARNED INCOME COMPREHENSIVE
STOCK CAPITAL EARNINGS COMPENSATION (LOSS) TOTAL INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 30, 2000 $ 207 $ 17,131 $ 146,920 $ (791) $ (207) $ 163,260
Comprehensive income:
Net income -- -- 34,527 -- -- 34,527 $ 34,527
Unrealized gain on available-for-sale
securities, net of taxes of $142 -- -- -- -- 236 236 236
----------
Total comprehensive income $ 34,763
==========
Common stock (197,036 shares)
issued on exercise of stock options 2 1,485 -- -- -- 1,487
Restricted stock issuance
(14,792 shares) 1 255 -- -- -- 256
Amortization of restricted stock
issuance -- -- -- 171 -- 171
Common stock (559,200 shares)
purchased and retired (6) (7,299) -- -- -- (7,305)
Tax benefit related to exercise of
employee stock options -- 1,434 -- -- -- 1,434
---------------------------------------------------------------------------------------
BALANCE, February 3, 2001 $ 204 $ 13,006 $ 181,447 $ (620) $ 29 $ 194,066
Comprehensive income:
Net income -- -- 32,862 -- -- 32,862 $ 32,862
Unrealized loss on available-for-sale
securities, net of taxes of $24 -- -- -- -- (41) (41) (41)
----------
Total comprehensive income $ 32,821
==========
Common stock (869,272 shares)
issued on exercise of stock options 9 3,900 -- -- -- 3,909
Amortization of restricted stock
issuance -- -- -- 126 -- 126
Forfeited restricted stock
(53,191 shares) (1) (1,113) -- 368 -- (746)
Common stock (79,200 shares)
purchased and retired (1) (1,280) -- -- -- (1,281)
Tax benefit related to exercise of
employee stock options -- 4,807 -- -- -- 4,807
---------------------------------------------------------------------------------------
BALANCE, February 2, 2002 211 19,320 214,309 (126) (12) 233,702
Comprehensive income:
Net income -- -- 32,064 -- -- 32,064 $ 32,064
Reclassification adjustment for losses
included in net income, net of
taxes of $7 -- -- -- -- 12 12 12
----------
Total comprehensive income $ 32,076
==========
Common stock (48,991 shares)
issued on exercise of stock options -- 574 -- -- -- 574
Amortization of restricted stock
issuance -- -- -- 126 -- 126
Common stock (119,125 shares)
purchased and retired (1) (1,987) -- -- -- (1,988)
Tax benefit related to exercise of
employee stock options -- 182 -- -- -- 182
---------------------------------------------------------------------------------------
BALANCE, February 1, 2003 $ 210 $ 18,089 $ 246,373 $ -- $ -- $ 264,672
=======================================================================================
</TABLE>
See notes to financial statements.
18 << BUCKLE
<PAGE>
>> STATEMENTS OF CASH FLOWS >
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
- ---------------------------------------------------------------------------------------------------------------------
FEBRUARY 1, FEBRUARY 2, FEBRUARY 3,
2003 2002 2001
------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 32,064 $ 32,862 $ 34,527
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation 12,323 12,007 11,696
Amortization of unearned compensation - restricted stock 126 126 171
Forfeiture of restricted stock -- (746) --
Deferred taxes (319) (307) (296)
(Gain) loss on disposal of assets (53) 512 455
Cumulative effect of change in accounting, net of taxes -- -- 270
Changes in operating assets and liabilities:
Accounts receivable 631 47 (238)
Inventory (5,744) 95 1,693
Prepaid expenses (370) (459) (3,029)
Accounts payable 2,185 (2,570) (2,470)
Accrued employee compensation (199) (998) 337
Accrued store operating expenses 256 159 581
Gift certificates redeemable 373 283 274
Deferred compensation (11) 107 408
Income taxes payable 1,569 2,314 2,822
------------------------------------------------
Net cash flows from operating activities 42,831 43,432 47,201
------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (25,633) (10,734) (14,690)
Proceeds from sale of property and equipment 3,049 4 25
Increase in other assets (40) (431) (261)
Purchase of investments (50,157) (21,973) (19,551)
Proceeds from sales and maturities of investments 22,425 19,834 25,044
------------------------------------------------
Net cash flows from investing activities (50,356) (13,300) (9,433)
------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercise of stock options 574 3,909 1,487
Purchases of common stock (1,988) (1,281) (7,305)
------------------------------------------------
Net cash flows from financing activities (1,414) 2,628 (5,818)
------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (8,939) 32,760 31,950
CASH AND CASH EQUIVALENTS, Beginning of year 101,915 69,155 37,205
------------------------------------------------
CASH AND CASH EQUIVALENTS, End of year $ 92,976 $ 101,915 $ 69,155
================================================
</TABLE>
See notes to financial statements.
BUCKLE >> 19
<PAGE>
> > NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS ENDED FEBRUARY 1, 2003, FEBRUARY 2, 2002 AND FEBRUARY 3, 2001 >
(Dollar Amounts are in Thousands Except Share and Per Share Amounts)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR >> The Buckle, Inc. (the Company) has its fiscal year end on the
Saturday nearest January 31. All references in these financial statements to
fiscal years are to the calendar year in which the fiscal year begins. Fiscal
2000 represents the 53-week period ended February 3, 2001 and fiscal 2002 and
2001 represent the 52-week periods ended February 1, 2003 and February 2, 2002,
respectively.
NATURE OF OPERATIONS >> The Company is a retailer of medium to better priced
casual apparel, footwear and accessories for fashion conscious young men and
women operating 304 stores located in 37 states throughout the central,
northwestern and southern regions of the United States, as of February 1, 2003.
During fiscal 2002, the Company opened eleven new stores, substantially
renovated eight stores, and closed two stores. During fiscal 2001, the Company
opened twenty-four new stores, substantially renovated eight stores and closed
three stores. During fiscal 2000, the Company opened twenty-eight new stores,
substantially renovated eleven stores, and closed two stores.
REVENUE RECOGNITION >> The Company operates on a cash and carry basis, so
revenue is recognized at the time of sale. Merchandise returns are estimated and
accrued at the end of the period.
INVESTMENTS >> The Company accounts for investments in accordance with Statement
of Financial Accounting Standards Board (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Held-to-maturity securities are
carried at amortized cost. Available-for-sale securities are reported at fair
value, with unrealized gains and losses excluded from earnings and reported as a
separate component of stockholders' equity (net of the effect of income taxes)
until they are sold. Trading securities are reported at fair value, with
unrealized gains and losses included in earnings.
INVENTORIES >> Inventories are stated at the lower of cost or market. Cost is
determined on the average cost method.
DEPRECIATION AND AMORTIZATION >> Property and equipment are stated on the basis
of historical cost. Depreciation is provided using a combination of accelerated
and straight-line methods based upon the estimated useful lives of the assets.
The majority of the property and equipment have useful lives of five to ten
years with the exception of buildings, which have estimated useful lives of 31.5
to 39 years.
CASH EQUIVALENTS >> For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments with an original maturity of three
months or less when purchased to be cash equivalents.
PRE-OPENING EXPENSES >> Costs related to opening new stores are expensed as
incurred.
ADVERTISING COSTS >> Advertising costs are expensed as incurred and amounted to
$4,404, $3,706 and $3,985 for fiscal years 2002, 2001 and 2000, respectively.
STOCK-BASED COMPENSATION >> The Company has several stock-based employee
compensation plans, which are described more fully in Note I. The Company
accounts for those plans under the recognition and measurement principles of APB
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. Compensation cost related to stock-based compensation was $126,
$126 and $171 for the fiscal years ended 2002, 2001 and 2000, respectively. The
following table
20 << BUCKLE
<PAGE>
illustrates the effect on net income and earnings per share if the Company had
applied the fair value recognition provisions of FASB Statement No. 123,
Accounting for Stock-Based Compensation, to stock-based employee compensation.
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------
2002 2001 2000
----------------------------------------
<S> <C> <C> <C>
Net income, as reported $ 32,064 $ 32,862 $ 34,527
Add: Stock-based employee compensation expense
included in reported net income, net of related tax effects 80 80 109
Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects (4,117) (3,706) (3,995)
----------------------------------------
Pro forma net income $ 28,027 $ 29,236 $ 30,641
========================================
Earnings per share:
Basic - as reported $ 1.52 $ 1.59 $ 1.68
========================================
Basic - pro forma $ 1.33 $ 1.41 $ 1.49
========================================
Diluted - as reported $ 1.47 $ 1.52 $ 1.61
========================================
Diluted - pro forma $ 1.28 $ 1.35 $ 1.43
========================================
</TABLE>
FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATIONS >> Financial instruments,
which potentially subject the Company to concentrations of credit risk, are
primarily cash, investments and accounts receivable. The Company places its
investments primarily in tax-free municipal bonds or U.S. Treasury securities
with short-term maturities, and limits the amount of credit exposure to any one
entity. Concentrations of credit risk with respect to accounts receivable are
limited due to the nature of the Company's receivables; which include employee
receivables, which can be offset against future compensation. The Company's
financial instruments have a fair value approximating the carrying value.
EARNINGS PER SHARE >> Basic earnings per share data are based on the weighted
average outstanding common shares during the period. Diluted earnings per share
data are based on the weighted average outstanding common shares and the effect
of all dilutive potential common shares, including stock options.
USE OF ESTIMATES >> The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from these estimates.
COMPREHENSIVE INCOME >> Comprehensive income consists of net income and
unrealized gains and losses on available-for-sale securities. Unrealized gains
and losses on the Company's available-for-sale securities are included in
accumulated other comprehensive income (loss) and are separately included as a
component of stockholders' equity, net of related income taxes.
BUCKLE >> 21
<PAGE>
>> NOTES TO FINANCIAL STATEMENTS >
(Dollar Amounts are in Thousands Except Share and Per Share Amounts)
ACCOUNTING PRONOUNCEMENTS >> In June 2001, the Financial Accounting Standards
Board ("FASB") approved the issuance of SFAS No. 141, Business Combinations, and
SFAS No. 142, Goodwill and Other Intangible Assets. These standards establish
accounting and reporting for business combinations. SFAS No. 141 requires all
business combinations entered into subsequent to June 30, 2001 to be accounted
for using the purchase method of accounting. SFAS No. 142 provides that goodwill
and other intangible assets with indefinite lives will not be amortized, but
will be tested for impairment on an annual basis. SFAS No. 142 is effective for
the Company beginning February 3, 2002. The adoption of SFAS No.'s 141 and 142
did not have a significant impact on the financial position, results of
operations, or cash flows for the Company.
In June 2001, the FASB approved the issuance of SFAS No. 143, Accounting for
Asset Retirement Obligations. This Statement addresses financial accounting and
reporting obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS No. 143 is effective for
the Company beginning February 2, 2003. The adoption of SFAS No. 143 will not
have a significant impact on the financial position, results of operations, or
cash flows of the Company.
In August 2001, the FASB approved the issuance of SFAS No. 144, Accounting for
the Impairment and Disposal of Long-Lived Assets. This Statement replaces SFAS
No. 121, Accounting for Impairment or Disposal of Long-Lived Assets, and
replaces the provisions of APB Opinion No. 30, Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business for the
disposal of segments of a business. The Statement develops one accounting model
for long-lived assets to be disposed of by sale and broadens the reporting of
discontinued operations. SFAS No. 144 is effective for the Company beginning
February 3, 2002. The adoption of SFAS No. 144 did not have a significant impact
on the financial position, results of operations, or cash flows of the Company.
In April 2002, the FASB approved the issuance of SFAS No. 145, Rescission of
FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections, which is effective for financial statements issued on or
after May 15, 2002. This statement rescinds SFAS No. 4, Reporting Gains and
Losses from Extinguishment of Debt, and an amendment of that statement, SFAS No.
64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This
statement also rescinds SFAS No. 44, Accounting for Intangible Assets of Motor
Carriers. This statement amends SFAS No. 13, Accounting for Leases, to eliminate
an inconsistency between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. This statement also
amends other existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under changed
conditions. The adoption of SFAS No. 145 did not have a significant effect on
the Company's financial position, results of operations or cash flows.
The FASB approved the issuance of SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities in June 2002. This statement addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring). The
provisions of this statement are effective for exit or disposal activities that
are initiated after December 31, 2002. The adoption of SFAS No. 146 did not have
a significant effect on the Company's financial position, results of operations
or cash flows.
SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure,
an amendment of FASB Statement No. 123, was issued in December 2002. This
Statement amends FASB Statement No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure requirements of
Statement No. 123 to require prominent
22 << BUCKLE
<PAGE>
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. As the Company follows Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees, the
disclosure-only provisions of the Statement apply to the Company.
FASB Interpretation No. (FIN) 45, Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others, was issued in November 2002. The initial recognition and measurement
provisions should be applied only on a prospective basis to guarantees issued or
modified after December 31, 2002. FIN No. 45 clarifies the requirements for a
guarantor to recognize a liability for a guarantee at inception of the
guarantee. It specifies guarantor's financial statement disclosures for its
obligations under guarantees. Management believes the adoption of the
interpretation did not have a significant effect on the Company's financial
position, results of operations or cash flows of the Company.
FASB Interpretation No. 46, Consolidation of Variable Interest Entities - (an
Interpretation of ARB No. 51), was issued in January 2003. FIN No. 46 applies
immediately to variable interest entities created after January 31, 2003, and is
effective in the first fiscal year beginning after June 15, 2003, to variable
interest entities in which an enterprise holds a variable interest that it
acquired before February 1, 2003. The FIN requires an enterprise to consolidate
a variable interest entity if that enterprise has a variable interest (or
combination of variable interests) that will absorb a majority of the entity's
expected losses if they occur, receive a majority of the entity's expected
residual returns if they occur or both. Management believes the adoption of the
interpretation will not have a significant effect on the Company's financial
position, results of operations or cash flows of the Company.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING >> On January 30, 2000, the Company
changed its revenue recognition policy related to layaway sales in accordance
with the guidance and interpretations provided by the SEC's Staff Accounting
Bulletin (SAB) No. 101, Revenue Recognition. This SAB affected the Company's
recognition of layaway sales, which requires recognition of revenue from sales
made under its layaway program upon delivery of the merchandise to the customer.
In the first quarter of fiscal 2000, the Company recorded a $270 cumulative
effect adjustment for the change in this accounting principle in accordance with
APB Opinion No. 20, Accounting Changes.
RECLASSIFICATION >> Certain reclassifications have been made to 2001 balances to
conform to the 2002 presentation.
BUCKLE >>23
<PAGE>
>> NOTES TO FINANCIAL STATEMENTS >
(Dollar Amounts are in Thousands Except Share and Per Share Amounts)
B. INVESTMENTS
The following is a summary of investments as of February 1, 2003:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Held-to-Maturity Securities:
State and municipal bonds $ 64,499 $ 1,145 $ (291) $ 65,353
U.S. corporate bonds 2,353 -- (19) 2,334
U.S. treasuries 2,200 5 -- 2,205
----------------------------------------------------------------------------
$ 69,052 $ 1,150 $ (310) $ 69,892
============================================================================
Trading Securities:
Mutual funds $ 1,397 $ -- $ (451) $ 946
============================================================================
</TABLE>
The following is a summary of investments as of February 2, 2002:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available-for-Sale Securities:
U.S. corporate securities $ 970 $ 11 $ (30) $ 951
============================================================================
Held-to-Maturity Securities:
State and municipal bonds $ 37,823 $ 572 $ (125) $ 38,270
U.S. corporate bonds 248 -- (3) 245
U.S. treasuries 2,297 2 (25) 2,274
----------------------------------------------------------------------------
$ 40,368 $ 574 $ (153) $ 40,789
============================================================================
Trading Securities:
Mutual funds $ 1,190 $ -- $ (233) $ 957
============================================================================
</TABLE>
Trading securities have been classified in long-term investments. These trading
securities are held in a Rabbi Trust and are intended to fund the Company's
deferred compensation plan (See Note H).
24 << BUCKLE
<PAGE>
The amortized cost and fair value of debt securities by contractual maturity at
February 1, 2003 is as follows:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
-------------------------
<S> <C> <C>
2003 $15,450 $15,400
2004 16,911 17,069
2005 14,216 14,461
2006 10,080 10,340
2007 3,206 3,262
Thereafter 9,189 9,360
-------------------------
$69,052 $69,892
=========================
</TABLE>
At February 1, 2003 and February 2, 2002, held to maturity investments of
$53,602 and $31,599 are classified in long-term investments.
C. PROPERTY AND EQUIPMENT
A summary of the cost of property and equipment follows:
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 2,
2003 2002
------------------------
<S> <C> <C>
Land $ 917 $ 917
Building and improvements 8,449 8,436
Office equipment 3,373 2,969
Transportation equipment 15,629 7,758
Leasehold improvements 41,325 39,060
Furniture and fixtures 52,596 47,269
Shipping/receiving equipment 4,218 4,191
Screenprinting equipment 102 102
Construction-in-progress 3,404 741
----------------------
$130,013 $111,443
======================
</TABLE>
D. FINANCING ARRANGEMENTS
The Company has available an unsecured line of credit of $7.5 million and a $10
million letter of credit facility. Borrowings under the line of credit and
letter of credit provide for interest to be paid at a rate equal to the prime
rate as set by the Wells Fargo Bank, N.A. index on the date of the borrowings.
There were no bank borrowings at February 1, 2003 and February 2, 2002. There
were immaterial bank borrowings during fiscal 2002, 2001 and 2000. The Company
had outstanding letters of credit totaling $1,650 and $621 at February 1, 2003
and February 2, 2002, respectively.
BUCKLE >> 25
<PAGE>
>> NOTES TO FINANCIAL STATEMENTS >
(Dollar Amounts are in Thousands Except Share and Per Share Amounts)
E. INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------------
2002 2001 2000
--------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 15,857 $ 16,214 $ 17,454
State 2,890 3,319 3,006
Deferred (319) (307) (296)
--------------------------------------
Total $ 18,428 $ 19,226 $ 20,164
======================================
</TABLE>
Total tax expense for the year varies from the amount which would be provided by
applying the statutory income tax rate to earnings before income taxes. The
primary reasons for this difference (expressed as a percent of pre-tax income)
are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
---------------------------------
2002 2001 2000
---------------------------------
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 35.0%
State income tax effect 3.9 4.3 3.9
Tax exempt interest income (2.6) (2.5) (1.8)
Expenses not deductible 0.2 0.1 0.1
Benefits of state tax credits -- -- (0.5)
---------------------------------
Effective tax rate 36.5% 36.9% 36.7%
=================================
</TABLE>
Deferred tax assets are comprised of the following:
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 2,
2003 2002
-------------------------
<S> <C> <C>
Deferred tax assets:
Inventory $1,351 $ 927
Stock-based compensation 666 974
Accrued compensation 574 468
Accrued store operating costs 455 320
Property and equipment 299 357
Unrealized loss on trading securities 169 88
Gift certificates redeemable 99 133
Allowance for doubtful accounts 81 94
Unrealized loss on available-for-sale securities -- 7
----------------------
$3,694 $3,368
======================
</TABLE>
26 << BUCKLE
<PAGE>
At February 1, 2003 and February 2, 2002, respectively, the net current deferred
tax assets of $2,512 and $2,144 are classified in prepaid expenses and other
assets and the net non-current deferred tax assets of $1,182 and $1,224 are
classified in other assets.
Cash paid for income taxes was $17,662, $17,449 and $17,187 in fiscal years
2002, 2001 and 2000, respectively.
F. RELATED PARTY TRANSACTIONS
Included in other assets is a note receivable of $825 and $795 at February 1,
2003 and February 2, 2002, respectively, from a life insurance trust fund
controlled by the Company's Chairman. The note is secured by a life insurance
policy on the Chairman.
G. LEASE COMMITMENTS
The Company conducts its operations in leased facilities under numerous
noncancellable operating leases expiring at various dates through 2014. Most of
the Company's stores have lease terms of approximately ten years and generally
do not contain renewal options. Operating lease base rental expense for fiscal
2002, 2001 and 2000 was $27,611, $25,650 and $22,326, respectively. Most of the
rental payments are based on a minimum annual rental plus a percentage of sales
in excess of a specified amount. Percentage rents for fiscal 2002, 2001 and 2000
were $656, $821 and $1,268, respectively. Total future minimum rental
commitments under these operating leases are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
- -----------------------------------------------------
<S> <C>
2003 $ 28,158
2004 26,486
2005 25,076
2006 23,153
2007 22,222
Thereafter 64,539
--------
Total minimum payments required $189,634
========
</TABLE>
H. EMPLOYEE BENEFITS
The Company has a 401(k) profit sharing plan covering all eligible employees who
desire to participate. Contributions to the plan are based upon the amount of
the employees' deferrals and the employer's matching formula. The Company may
contribute to the plan at its discretion. The total expense under the profit
sharing plan was $600, $561 and $550 for fiscal years 2002, 2001 and 2000,
respectively.
The Buckle, Inc. Deferred Compensation Plan covers the Company's executive
officers. The plan is funded by participant contributions and a specified annual
Company matching contribution not to exceed 6% of the participant's
compensation. The Company's contributions were $66, $65 and $110 for fiscal
years 2002, 2001 and 2000, respectively.
BUCKLE >> 27
<PAGE>
>> NOTES TO FINANCIAL STATEMENTS >
(Dollar Amounts are in Thousands Except Share and Per Share Amounts)
I. STOCK-BASED COMPENSATION
The Company has several stock option plans that provide for granting of options
to purchase common stock to designated employees, officers and directors. The
options may be in the form of incentive stock options or nonqualified stock
options, and are granted at fair market value on the date of grant. The options
generally expire ten years from the date of grant. At February 1, 2003, 749,675
shares of common stock were available for grant under the various option plans
of which 500,000 shares were available to executive officers of the Company.
The Company granted 75,000 shares of restricted common stock in December 1997
with an aggregate market value of $1,550 at fiscal 1997 year end. Unearned
compensation equivalent to the market value of the shares at the date of grant
was charged to stockholders' equity. Such unearned compensation was amortized
into compensation expense over a five year period. The shares fully vested in
December 2002. Due to officers terminating their employment with the Company in
2001 prior to the vesting of the restricted common stock awarded pursuant to
this plan, unearned compensation was reduced $368 and compensation expense was
reduced $325 in fiscal 2001 for previously amortized compensation expense.
Pursuant to the 1998 Management Incentive Plan, compensation expense of $256
associated with the fiscal 1999 bonus was recorded as accrued employee
compensation at January 29, 2000. During fiscal year 2000, the Company granted
14,792 shares of restricted common stock related to this amount upon approval of
the Board of Directors. There was no stock compensation expense for the years
ended February 1, 2003 or February 2, 2002 related to this plan. Due to officers
terminating their employment with the Company in 2001, which was prior to the
full vesting of the restricted common stock awarded pursuant to this plan,
compensation expense was reduced $421 in fiscal 2001 for previously recognized
compensation expense.
The weighted average fair value of options granted during the year under the
SFAS No. 123 methodology was $15.68, $13.76 and $12.39 per option for fiscal
2002, 2001 and 2000, respectively. The fair value of options granted under the
Plans was estimated at the date of grant using a binomial option pricing model
with the following assumptions:
<TABLE>
<CAPTION>
2002 2001 2000
-------------------------------------------
<S> <C> <C> <C>
Risk-free interest rate 4.50% 5.00% 6.00%
Dividend yield 0.00% 0.00% 0.00%
Expected volatility 62.0% 54.0% 60.0%
Expected life (years) 7.0 years 7.0 years 6.0 years
</TABLE>
28 << BUCKLE
<PAGE>
A summary of the Company's stock-based compensation activity related to stock
options for the last three fiscal years is as follows:
<TABLE>
<CAPTION>
2002 2001 2000
------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
NUMBER PRICE NUMBER PRICE NUMBER PRICE
<S> <C> <C> <C> <C> <C> <C>
Outstanding - beginning
of year 3,407,135 $15.29 4,421,641 $13.54 4,163,380 $13.01
Granted 546,870 20.62 447,040 19.73 500,375 16.00
Expired/terminated (37,637) 22.41 (592,274) 21.36 (45,078) 23.94
Exercised (48,991) 11.72 (869,272) 4.50 (197,036) 7.55
-----------------------------------------------------------------
Outstanding - end of year 3,867,377 $16.10 3,407,135 $15.29 4,421,641 $13.54
=================================================================
</TABLE>
There were 2,371,042; 2,011,127 and 2,765,205 options exercisable at February 1,
2003, February 2, 2002 and February 3, 2001, respectively.
The following table summarizes information about stock options outstanding as of
February 1, 2003:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------------------------------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
<S> <C> <C> <C> <C> <C> <C>
$ 4.167 $ 4.750 230,450 2.00 years $ 4.59 230,450 $ 4.59
4.958 5.583 216,375 1.00 5.42 216,375 5.42
6.000 6.667 286,700 2.81 6.32 286,700 6.32
8.500 9.292 738,601 4.00 9.14 738,601 9.14
11.500 17.010 388,724 7.16 16.42 44,790 16.65
17.188 23.250 1,614,157 5.67 21.03 761,456 21.37
26.750 34.083 392,370 5.81 28.39 92,670 33.69
-------------------------------------------------------------------
3,867,377 4.82 $ 16.10 2,371,042 $ 13.05
===================================================================
</TABLE>
J. EARNINGS PER SHARE
The following table provides a reconciliation between basic and diluted earnings
per share (amounts in thousands except per share amounts):
BUCKLE >> 29
<PAGE>
>> NOTES TO FINANCIAL STATEMENTS >
(Dollar Amounts are in Thousands Except Share and Per Share Amounts)
<TABLE>
<CAPTION>
2002 2001 2000
------------------------------ ----------------------------- -------------------------------
WEIGHTED PER WEIGHTED PER WEIGHTED PER
AVERAGE SHARE AVERAGE SHARE AVERAGE SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT INCOME SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BASIC EPS
Net income $ 32,064 21,119 $ 1.52 $ 32,862 20,733 $ 1.59 $ 34,527 20,540 $ 1.68
EFFECT OF DILUTIVE
SECURITIES
Stock Options - 693 (0.05) - 853 (0.07) - 851 (0.07)
-------- ------ ------ -------- ------ ------ -------- ------ ------
DILUTED EPS $ 32,064 21,812 $ 1.47 $ 32,862 21,586 $ 1.52 $ 34,527 21,391 $ 1.61
======== ====== ====== ======== ====== ====== ======== ====== ======
</TABLE>
Options to purchase 1,122,094; 1,403,250 and 1,982,233 shares of common stock in
fiscal 2002, 2001 and 2000, respectively, are not included in the computation of
diluted earnings per share because the options would be considered
anti-dilutive.
K. SEGMENT INFORMATION
The Company is a retailer of medium to better priced casual apparel, footwear
and accessories. The Company operates 304 stores located in 37 states throughout
the central, northwestern and southern regions of the United States at February
1, 2003. The Company operates their business as one reportable industry segment.
The following is information regarding the Company's major product lines and are
stated as a percentage of the Company's net sales:
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
FISCAL YEAR
MERCHANDISE GROUP 2002 2001 2000
<S> <C> <C> <C>
Denims 32.8% 28.8% 26.6%
Slacks/Casual Bottoms 3.7 5.0 5.4
Tops (including sweaters) 32.0 33.5 32.2
Sportswear/Fashion Clothes 4.8 5.7 6.5
Outerwear 3.7 2.9 3.3
Accessories 11.3 11.0 9.1
Footwear 11.4 11.8 14.4
Little Guys/Gals 0.1 1.0 2.2
Other 0.2 0.3 0.3
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
30 << BUCKLE
<PAGE>
L. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial information for fiscal 2002 and 2001 are as
follows:
<TABLE>
<CAPTION>
QUARTER
--------------------------------------------
FISCAL 2002 FIRST SECOND THIRD FOURTH
<S> <C> <C> <C> <C>
Net sales $ 79,855 $ 83,516 $114,436 $123,253
Gross profit $ 23,116 $ 23,810 $ 40,238 $ 44,363
Net income $ 4,298 $ 4,069 $ 11,264 $ 12,433
Basic income per share $ 0.20 $ 0.19 $ 0.53 $ 0.59
Diluted income per share $ 0.20 $ 0.19 $ 0.52 $ 0.57
</TABLE>
<TABLE>
<CAPTION>
QUARTER
--------------------------------------------
FISCAL 2001 FIRST SECOND THIRD FOURTH
<S> <C> <C> <C> <C>
Net sales $ 76,439 $ 78,596 $111,142 $121,461
Gross profit $ 22,853 $ 22,185 $ 38,730 $ 44,225
Net income $ 4,239 $ 3,909 $ 11,021 $ 13,693
Basic income per share $ 0.21 $ 0.19 $ 0.53 $ 0.65
Diluted income per share $ 0.20 $ 0.18 $ 0.51 $ 0.63
</TABLE>
Basic and diluted shares outstanding are computed independently for each of the
quarters presented and, therefore, may not sum to the totals for the year.
BUCKLE >> 31
<PAGE>
>>INDEPENDENT AUDITOR'S REPORT >
To the Board of Directors and Stockholders of
The Buckle, Inc.
Kearney, Nebraska
We have audited the accompanying balance sheets of The Buckle, Inc. (the
Company), as of February 1, 2003 and February 2, 2002, and the related
statements of income, stockholders' equity and cash flows for each of the three
fiscal years in the period ended February 1, 2003. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of The Buckle, Inc. as of February 1, 2003 and
February 2, 2002, and the results of its operations and its cash flows for each
of the three fiscal years in the period ended February 1, 2003, in conformity
with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
March 5, 2003
32 << BUCKLE
<PAGE>
[BUCKLE ANNUAL REPORT COVER]
<PAGE>
[BACK COVER]
>> CORPORATE OFFICE > 2407 WEST 24TH STREET
Kearney, NE 68845 > 308.236.8491 > www.buckle.com
[BUCKLE LOGO]
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>11
<FILENAME>c76285exv23.txt
<DESCRIPTION>CONSENT OF DELOITTE & TOUCHE LLP
<TEXT>
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-48402, 33-70633, 33-70641 and 33-70643 of The Buckle, Inc. on Form S-8 of our
report dated March 5, 2003, appearing in and incorporated by reference in the
Annual Report on Form 10-K of The Buckle, Inc. for the year ended February 1,
2003.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
April 18, 2003
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>12
<FILENAME>c76285exv99w1.txt
<DESCRIPTION>CERTIFICATION
<TEXT>
<PAGE>
EXHIBIT 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of The Buckle, Inc. (the
"Company") on Form 10-K for the period ended February 1, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Dennis
H. Nelson, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ DENNIS H. NELSON
-----------------------------
Dennis H. Nelson
Chief Executive Officer
April 21, 2003
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>13
<FILENAME>c76285exv99w2.txt
<DESCRIPTION>CERTIFICATION
<TEXT>
<PAGE>
EXHIBIT 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of The Buckle, Inc. (the
"Company") on Form 10-K for the period ended February 1, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Karen
B. Rhoads, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ KAREN B. RHOADS
------------------------
Karen B. Rhoads
Chief Financial Officer
April 21, 2003
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----