CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in Thousands Except Share and Per Share Amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares
|
|
Common
Stock
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, January 29, 2017
|
|
48,622,780
|
|
|
$
|
486
|
|
|
$
|
139,398
|
|
|
$
|
290,737
|
|
|
$
|
(82
|
)
|
|
$
|
430,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,285
|
|
|
—
|
|
|
16,285
|
|
Dividends paid on common stock, ($0.25 per share)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,213
|
)
|
|
—
|
|
|
(12,213
|
)
|
Issuance of non-vested stock, net of forfeitures
|
|
225,775
|
|
|
2
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Amortization of non-vested stock grants, net of forfeitures
|
|
—
|
|
|
—
|
|
|
1,646
|
|
|
—
|
|
|
—
|
|
|
1,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, April 29, 2017
|
|
48,848,555
|
|
|
$
|
488
|
|
|
$
|
141,042
|
|
|
$
|
294,809
|
|
|
$
|
(82
|
)
|
|
$
|
436,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, January 31, 2016
|
|
48,428,110
|
|
|
$
|
484
|
|
|
$
|
134,864
|
|
|
$
|
277,626
|
|
|
$
|
(331
|
)
|
|
$
|
412,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23,097
|
|
|
—
|
|
|
23,097
|
|
Dividends paid on common stock, ($0.25 per share)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,156
|
)
|
|
—
|
|
|
(12,156
|
)
|
Issuance of non-vested stock, net of forfeitures
|
|
195,080
|
|
|
2
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Amortization of non-vested stock grants, net of forfeitures
|
|
—
|
|
|
—
|
|
|
1,881
|
|
|
—
|
|
|
—
|
|
|
1,881
|
|
Change in unrealized loss on investments, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
8
|
|
Reclassification adjustment for losses included in net income, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, April 30, 2016
|
|
48,623,190
|
|
|
$
|
486
|
|
|
$
|
136,743
|
|
|
$
|
288,567
|
|
|
$
|
(295
|
)
|
|
$
|
425,501
|
|
See notes to unaudited condensed consolidated financial statements.
THE BUCKLE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
April 29,
2017
|
|
April 30,
2016
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
Net income
|
$
|
16,285
|
|
|
$
|
23,097
|
|
Adjustments to reconcile net income to net cash flows from operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
7,854
|
|
|
7,927
|
|
Amortization of non-vested stock grants, net of forfeitures
|
1,646
|
|
|
1,881
|
|
Deferred income taxes
|
(609
|
)
|
|
(696
|
)
|
Other
|
303
|
|
|
528
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Receivables
|
(189
|
)
|
|
1,075
|
|
Inventory
|
6,333
|
|
|
10,778
|
|
Prepaid expenses and other assets
|
(1,272
|
)
|
|
(10,947
|
)
|
Accounts payable
|
7,127
|
|
|
(1,958
|
)
|
Accrued employee compensation
|
(18,023
|
)
|
|
(23,269
|
)
|
Accrued store operating expenses
|
2,799
|
|
|
5,026
|
|
Gift certificates redeemable
|
(3,927
|
)
|
|
(4,268
|
)
|
Income taxes payable
|
9,612
|
|
|
1,813
|
|
Deferred rent liabilities and deferred compensation
|
267
|
|
|
1,332
|
|
|
|
|
|
Net cash flows from operating activities
|
28,206
|
|
|
12,319
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
Purchases of property and equipment
|
(3,873
|
)
|
|
(7,832
|
)
|
Change in other assets
|
—
|
|
|
(10
|
)
|
Purchases of investments
|
(7,388
|
)
|
|
(2,956
|
)
|
Proceeds from sales/maturities of investments
|
6,600
|
|
|
2,865
|
|
|
|
|
|
Net cash flows from investing activities
|
(4,661
|
)
|
|
(7,933
|
)
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
Payment of dividends
|
(12,213
|
)
|
|
(12,156
|
)
|
|
|
|
|
Net cash flows from financing activities
|
(12,213
|
)
|
|
(12,156
|
)
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
11,332
|
|
|
(7,770
|
)
|
|
|
|
|
CASH AND CASH EQUIVALENTS, Beginning of period
|
196,536
|
|
|
161,185
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, End of period
|
$
|
207,868
|
|
|
$
|
153,415
|
|
See notes to unaudited condensed consolidated financial statements.
THE BUCKLE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN
WEEKS ENDED
APRIL 29, 2017
AND
APRIL 30, 2016
(Dollar Amounts in Thousands Except Share and Per Share Amounts)
(Unaudited)
|
|
1.
|
Management Representation
|
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments necessary for the fair presentation of the results of operations for the interim periods have been included. All such adjustments are of a normal recurring nature. Because of the seasonal nature of the business, results for interim periods are not necessarily indicative of a full year's operations. The accounting policies followed by the Company and additional footnotes are reflected in the consolidated financial statements for the fiscal year ended
January 28, 2017
, included in The Buckle, Inc.'s
2016
Form 10-K. The condensed consolidated balance sheet as of
January 28, 2017
is derived from audited financial statements.
The Company follows generally accepted accounting principles (“GAAP”) established by the Financial Accounting Standards Board (“FASB”). References to GAAP in these notes are to the FASB
Accounting Standards Codification
(“ASC”).
|
|
2.
|
Description of the Business
|
The Company is a retailer of medium to better priced casual apparel, footwear, and accessories for fashion conscious young men and women. The Company operates its business as
one
reportable segment. The Company had
462
stores located in
44
states throughout the United States as of
April 29, 2017
and
468
stores in
44
states as of
April 30, 2016
. During the
thirteen
week period ended
April 29, 2017
, the Company did not open any new stores, but did substantially remodel
2
stores and close
5
stores. During the
thirteen
week period ended
April 30, 2016
, the Company did not open any new stores or close any stores, but did substantially remodel
6
stores.
The following is information regarding the Company’s major product lines, stated as a percentage of the Company’s net sales:
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
Merchandise Group
|
April 29,
2017
|
|
April 30,
2016
|
|
|
|
|
Denims
|
42.0
|
%
|
|
43.3
|
%
|
Tops (including sweaters)
|
30.1
|
|
|
28.1
|
|
Sportswear/Fashions
|
9.6
|
|
|
10.0
|
|
Accessories
|
8.3
|
|
|
8.2
|
|
Footwear
|
6.4
|
|
|
6.5
|
|
Casual bottoms
|
1.6
|
|
|
1.7
|
|
Outerwear
|
1.0
|
|
|
0.9
|
|
Other
|
1.0
|
|
|
1.3
|
|
|
100.0
|
%
|
|
100.0
|
%
|
Basic earnings per share data are based on the weighted average outstanding common shares during the period. Diluted earnings per share data are based on the weighted average outstanding common shares and the effect of all dilutive potential common shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
Thirteen Weeks Ended
|
|
April 29, 2017
|
|
April 30, 2016
|
|
Income
|
|
Weighted
Average
Shares
|
|
Per Share
Amount
|
|
Income
|
|
Weighted
Average
Shares
|
|
Per Share
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
$
|
16,285
|
|
|
48,218
|
|
|
$
|
0.34
|
|
|
$
|
23,097
|
|
|
48,107
|
|
|
$
|
0.48
|
|
Effect of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested shares
|
—
|
|
|
126
|
|
|
—
|
|
|
—
|
|
|
96
|
|
|
—
|
|
Diluted EPS
|
$
|
16,285
|
|
|
48,344
|
|
|
$
|
0.34
|
|
|
$
|
23,097
|
|
|
48,203
|
|
|
$
|
0.48
|
|
The following is a summary of investments as of
April 29, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost or
Par Value
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Other-than-
Temporary
Impairment
|
|
Estimated
Fair
Value
|
Available-for-Sale Securities:
|
|
|
|
|
|
|
|
|
|
Auction-rate securities
|
$
|
1,800
|
|
|
$
|
—
|
|
|
$
|
(130
|
)
|
|
$
|
—
|
|
|
$
|
1,670
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal bonds
|
$
|
53,441
|
|
|
$
|
15
|
|
|
$
|
(30
|
)
|
|
$
|
—
|
|
|
$
|
53,426
|
|
|
|
|
|
|
|
|
|
|
|
Trading Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
$
|
13,122
|
|
|
$
|
641
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13,763
|
|
The following is a summary of investments as of
January 28, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost or
Par Value
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Other-than-
Temporary
Impairment
|
|
Estimated
Fair
Value
|
Available-for-Sale Securities:
|
|
|
|
|
|
|
|
|
|
Auction-rate securities
|
$
|
1,800
|
|
|
$
|
—
|
|
|
$
|
(130
|
)
|
|
$
|
—
|
|
|
$
|
1,670
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal bonds
|
$
|
53,324
|
|
|
$
|
26
|
|
|
$
|
(34
|
)
|
|
$
|
—
|
|
|
$
|
53,316
|
|
|
|
|
|
|
|
|
|
|
|
Trading Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
$
|
12,701
|
|
|
$
|
391
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13,092
|
|
The amortized cost and fair value of debt securities by contractual maturity as of
April 29, 2017
is as follows:
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
Fair
Value
|
Held-to-Maturity Securities
|
|
|
|
Less than 1 year
|
$
|
53,389
|
|
|
$
|
53,374
|
|
1 - 5 years
|
52
|
|
|
52
|
|
|
$
|
53,441
|
|
|
$
|
53,426
|
|
As of
April 29, 2017
and
January 28, 2017
,
$1,670
and
$1,670
of available-for-sale securities and
$52
and
$3,330
of held-to-maturity securities are classified in long-term investments. Trading securities are held in a Rabbi Trust, intended to fund the Company’s deferred compensation plan, and are classified in long-term investments.
The Company’s investments in auction-rate securities (“ARS”) are classified as available-for-sale and reported at fair market value. As of both
April 29, 2017
and
January 28, 2017
, the reported investment amount is net of
$130
of temporary impairment to account for the impairment of certain securities from their stated par value. The
$130
temporary impairment is reported, net of tax, as an “accumulated other comprehensive loss” of
$82
in stockholders’ equity as of both
April 29, 2017
and
January 28, 2017
. For the investments considered temporarily impaired, all of which have been in loss positions for over a year, the Company believes that these ARS can be successfully redeemed or liquidated in the future at par value plus accrued interest. The Company believes it has the ability and maintains its intent to hold these investments until such recovery of market value occurs; therefore, the Company believes the current lack of liquidity has created the temporary impairment in valuation. As of
April 29, 2017
and
January 28, 2017
, all of the Company’s investments in ARS were classified in long-term investments.
|
|
5.
|
Fair Value Measurements
|
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories:
|
|
•
|
Level 1 – Quoted market prices in active markets for identical assets or liabilities. Short-term and long-term investments with active markets or known redemption values are reported at fair value utilizing Level 1 inputs.
|
|
|
•
|
Level 2 – Observable market-based inputs (either directly or indirectly) such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or inputs that are corroborated by market data.
|
|
|
•
|
Level 3 – Unobservable inputs that are not corroborated by market data and are projections, estimates, or interpretations that are supported by little or no market activity and are significant to the fair value of the assets.
|
As of
April 29, 2017
and
January 28, 2017
, the Company held certain assets that are required to be measured at fair value on a recurring basis including available-for-sale and trading securities.
The Company’s financial assets measured at fair value on a recurring basis are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
Quoted Prices in
Active Markets
for Identical
Assets
|
|
Significant
Observable
Inputs
|
|
Significant
Unobservable
Inputs
|
|
|
April 29, 2017
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Total
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
Auction-rate securities
|
$
|
—
|
|
|
$
|
45
|
|
|
$
|
1,625
|
|
|
$
|
1,670
|
|
Trading securities (including mutual funds)
|
13,763
|
|
|
—
|
|
|
—
|
|
|
13,763
|
|
Totals
|
$
|
13,763
|
|
|
$
|
45
|
|
|
$
|
1,625
|
|
|
$
|
15,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
Quoted Prices in
Active Markets
for Identical
Assets
|
|
Significant
Observable
Inputs
|
|
Significant
Unobservable
Inputs
|
|
|
January 28, 2017
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Total
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
Auction-rate securities
|
$
|
—
|
|
|
$
|
45
|
|
|
$
|
1,625
|
|
|
$
|
1,670
|
|
Trading securities (including mutual funds)
|
13,092
|
|
|
—
|
|
|
—
|
|
|
13,092
|
|
Totals
|
$
|
13,092
|
|
|
$
|
45
|
|
|
$
|
1,625
|
|
|
$
|
14,762
|
|
Securities included in Level 1 represent securities which have a known or anticipated upcoming redemption as of the reporting date and those that have publicly traded quoted prices. ARS included in Level 2 represent securities which have not experienced a successful auction subsequent to the end of fiscal 2007. The fair market value for these securities was determined by applying a discount to par value based on auction prices for similar securities and by utilizing a discounted cash flow model, using market-based inputs, to determine fair value. The Company used a discounted cash flow model to value its Level 3 investments, using estimates regarding recovery periods, yield, and liquidity. The assumptions used are subjective based upon management’s judgment and views on current market conditions, and resulted in
$125
of the Company’s recorded temporary impairment as of
April 29, 2017
. The use of different assumptions would result in a different valuation and related temporary impairment charge.
Changes in the fair value of the Company’s financial assets measured at fair value on a recurring basis are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended April 29, 2017
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
|
|
Available-for-Sale Securities
|
|
Trading Securities
|
|
|
|
Auction-rate
Securities
|
|
Mutual
Funds
|
|
Total
|
|
|
|
|
|
|
Balance, beginning of year
|
$
|
1,625
|
|
|
$
|
—
|
|
|
$
|
1,625
|
|
Total gains and losses:
|
|
|
|
|
|
|
|
|
Included in net income
|
—
|
|
|
—
|
|
|
—
|
|
Included in other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
Purchases, Issuances, Sales, and Settlements:
|
|
|
|
|
|
|
|
|
Sales
|
—
|
|
|
—
|
|
|
—
|
|
Balance, end of quarter
|
$
|
1,625
|
|
|
$
|
—
|
|
|
$
|
1,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended April 30, 2016
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
|
|
Available-for-Sale Securities
|
|
Trading Securities
|
|
|
|
Auction-rate
Securities
|
|
Mutual
Funds
|
|
Total
|
|
|
|
|
|
|
Balance, beginning of year
|
$
|
7,265
|
|
|
$
|
—
|
|
|
$
|
7,265
|
|
Total gains and losses:
|
|
|
|
|
|
|
|
|
Included in net income
|
(45
|
)
|
|
—
|
|
|
(45
|
)
|
Included in other comprehensive income
|
58
|
|
|
—
|
|
|
58
|
|
Purchases, Issuances, Sales, and Settlements:
|
|
|
|
|
|
|
|
|
Sales
|
(1,455
|
)
|
|
—
|
|
|
(1,455
|
)
|
Balance, end of quarter
|
$
|
5,823
|
|
|
$
|
—
|
|
|
$
|
5,823
|
|
There were no transfers of securities between Levels 1, 2, or 3 during the
thirteen
week periods ended
April 29, 2017
or
April 30, 2016
. The Company’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period in which the transfer occurred.
The carrying value of cash equivalents approximates fair value due to the low level of risk these assets present and their relatively liquid nature, particularly given their short maturities. The Company also holds certain financial instruments that are not carried at fair value on the condensed consolidated balance sheets, including held-to-maturity securities. Held-to-maturity securities consist primarily of state and municipal bonds. The fair values of these debt securities are based on quoted market prices and yields for the same or similar securities, which the Company determined to be Level 2 inputs. As of
April 29, 2017
, the fair value of held-to-maturity securities was
$53,426
compared to the carrying amount of
$53,441
. As of
January 28, 2017
, the fair value of held-to-maturity securities was
$53,316
compared to the carrying amount of
$53,324
.
The carrying values of receivables, accounts payable, accrued expenses, and other current liabilities approximates fair value because of their short-term nature. From time to time, the Company measures certain assets at fair value on a non-recurring basis, specifically long-lived assets evaluated for impairment. These are typically store specific assets, which are reviewed for impairment when circumstances indicate impairment may exist due to the questionable recoverability of the carrying values of long-lived assets. If expected future cash flows related to a store’s assets are less than their carrying value, an impairment loss would be recognized for the difference between the carrying value and the estimated fair value of the store's assets. The fair value of the store's assets is estimated utilizing an income-based approach based on the expected cash flows over the remaining life of the store's lease. The amount of impairment related to long-lived assets was immaterial as of both
April 29, 2017
and
January 28, 2017
.
|
|
6.
|
Supplemental Cash Flow Information
|
The Company had non-cash investing activities during the
thirteen
week periods ended
April 29, 2017
and
April 30, 2016
of
($216)
and
($235)
, respectively. The non-cash investing activity relates to the change in the balance of unpaid purchases of property, plant, and equipment included in accounts payable as of the end of the period. The liability for unpaid purchases of property, plant, and equipment included in accounts payable was
$863
and
$647
as of
April 29, 2017
and
January 28, 2017
, respectively. Amounts reported as unpaid purchases are recorded as cash outflows from investing activities for purchases of property, plant, and equipment in the condensed consolidated statement of cash flows in the period they are paid.
Additional cash flow information for the Company includes cash paid for income taxes during the
thirteen
week periods ended
April 29, 2017
and
April 30, 2016
of
$685
and
$12,624
, respectively.
|
|
7.
|
Stock-Based Compensation
|
The Company has several stock option plans which allow for granting of stock options to employees, executives, and directors. The Company has not granted any stock options since fiscal 2008 and there are currently no stock options outstanding. The Company also has a restricted stock plan that allows for the granting of non-vested shares of common stock to employees and executives and a restricted stock plan that allows for the granting of non-vested shares of common stock to non-employee directors. As of
April 29, 2017
,
630,531
shares were available for grant under the Company’s various restricted stock plans, of which
569,407
shares were available for grant to executive officers.
Compensation expense was recognized during fiscal
2017
and fiscal
2016
for equity-based grants, based on the grant date fair value of the awards. The fair value of grants of non-vested common stock awards is the stock price on the date of grant.
Information regarding the impact of compensation expense related to grants of non-vested shares of common stock is as follows:
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
April 29,
2017
|
|
April 30,
2016
|
|
|
|
|
Stock-based compensation expense, before tax
|
$
|
1,646
|
|
|
$
|
1,881
|
|
|
|
|
|
Stock-based compensation expense, after tax
|
$
|
1,037
|
|
|
$
|
1,185
|
|
Non-vested shares of common stock granted during the
thirteen
week periods ended
April 29, 2017
and
April 30, 2016
were granted pursuant to the Company’s 2005 Restricted Stock Plan and the Company’s 2008 Director Restricted Stock Plan. Shares granted under the 2005 Plan are typically "performance based" and vest over a period of
four years
, only upon certification by the Compensation Committee of the Board of Directors that the Company has achieved its pre-established performance targets for the fiscal year. Certain shares granted under the 2005 Plan, however, are "non-performance based" and vest over a period of
four years
without being subject to the achievement of performance targets. Shares granted under the 2008 Director Plan vest
25%
on the date of grant and then in equal portions on each of the first three anniversaries of the date of grant.
A summary of the Company’s stock-based compensation activity related to grants of non-vested shares of common stock for the
thirteen
week period ended
April 29, 2017
is as follows:
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted Average
Grant Date
Fair Value
|
|
|
|
|
Non-Vested - beginning of year
|
445,299
|
|
|
$
|
33.98
|
|
Granted
|
363,450
|
|
|
20.55
|
|
Forfeited
|
(137,675
|
)
|
|
28.45
|
|
Vested
|
(40,980
|
)
|
|
30.92
|
|
Non-Vested - end of quarter
|
630,094
|
|
|
$
|
27.64
|
|
As of
April 29, 2017
, there was
$10,105
of unrecognized compensation expense related to grants of non-vested shares. It is expected that this expense will be recognized over a weighted average period of approximately
2.2 years
. The total fair value of shares vested during the
thirteen
week periods ended
April 29, 2017
and
April 30, 2016
was
$776
and
$1,262
, respectively. During the
thirteen
week period ended
April 29, 2017
,
137,400
shares (representing one-half of the "performance based" shares granted during fiscal
2016
under the 2005 Restricted Stock Plan) were forfeited because the Company did not achieve all of the performance targets established for the fiscal 2016 grants.
|
|
8.
|
Recently Issued Accounting Pronouncements
|
In July 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-11,
Simplifying the Measurement of Inventory
. Under this ASU, inventory will be measured at the “lower of cost and net realizable value” and options that currently exist for “market value” will be eliminated. The ASU defines net realizable value as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.” No other changes were made to the current guidance on inventory measurement. ASU 2015-11 is effective for interim and annual periods beginning after December 15, 2016. The Company adopted the provisions of this ASU in the first quarter of fiscal 2017 and it did not have a material effect on its consolidated results of operations and financial position.
In March 2016, the FASB issued ASU No. 2016-09,
Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
. This standard is intended to simplify several aspects of the accounting for share-based payment award transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, and classifications in the statement of cash flows. ASU 2016-09 is effective for interim and annual periods beginning after December 15, 2016 and early adoption is permitted. The Company adopted the provisions of this ASU in the first quarter of fiscal 2017 and it did not have a material effect on its consolidated results of operations and financial position.
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers (Topic 606)
, which supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") 605,
Revenue Recognition
. The new revenue recognition standard requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB approved a one-year deferral of the effective date of the new revenue recognition standard. The new standard will become effective for the Company beginning with the first quarter of fiscal 2018 and can be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption. The Company plans to adopt this ASU in the first quarter of fiscal 2018 and is continuing to evaluate the impacts this ASU and related disclosures will have on its consolidated results of operations and financial position, along with the Company's preferred transition method.
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
. This ASU replaces the existing guidance in ASC 840,
Leases
. The new standard establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and requires retrospective application. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated results of operations and financial position, but does expect that it will result in a significant increase in both assets and liabilities related to the Company's leases for retail store locations.
THE BUCKLE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto of the Company included in this Form 10-Q. All references herein to the “Company”, “Buckle”, “we”, “us”, or similar terms refer to The Buckle, Inc. and its subsidiary. The following is management’s discussion and analysis of certain significant factors which have affected the Company’s financial condition and results of operations during the periods included in the accompanying condensed consolidated financial statements.
EXECUTIVE OVERVIEW
Company management considers the following items to be key performance indicators in evaluating Company performance.
Comparable Store Sales
– Stores are deemed to be comparable stores if they were open in the prior year on the first day of the fiscal period being presented. Stores which have been remodeled, expanded, and/or relocated, but would otherwise be included as comparable stores, are not excluded from the comparable store sales calculation. Online sales are included in comparable store sales. Management considers comparable store sales to be an important indicator of current Company performance, helping leverage certain fixed costs when results are positive. Negative comparable store sales results could reduce net sales and have a negative impact on operating leverage, thus reducing net earnings.
Net Merchandise Margins
– Management evaluates the components of merchandise margin including initial markup and the amount of markdowns during a period. Any inability to obtain acceptable levels of initial markups or any significant increase in the Company’s use of markdowns could have an adverse effect on the Company’s gross margin and results of operations.
Operating Margin
– Operating margin is a good indicator for management of the Company’s success. Operating margin can be positively or negatively affected by comparable store sales, merchandise margins, occupancy costs, and the Company’s ability to control operating costs.
Cash Flow and Liquidity (working capital)
– Management reviews current cash and short-term investments along with cash flow from operating, investing, and financing activities to determine the Company’s short-term cash needs for operations and expansion. The Company believes that existing cash, short-term investments, and cash flow from operations will be sufficient to fund current and long-term anticipated capital expenditures and working capital requirements for the next several years.
RESULTS OF OPERATIONS
The following table sets forth certain financial data expressed as a percentage of net sales and the percentage change in the dollar amount of such items compared to the prior period:
|
|
|
|
|
|
|
|
|
|
|
Percentage of Net Sales
|
|
|
|
For Thirteen Weeks Ended
|
|
Percentage
|
|
April 29,
2017
|
|
April 30,
2016
|
|
Increase/(Decrease)
|
|
|
|
|
|
|
Net sales
|
100.0
|
%
|
|
100.0
|
%
|
|
(12.8
|
)%
|
Cost of sales (including buying, distribution, and occupancy costs)
|
61.5
|
%
|
|
61.1
|
%
|
|
(12.3
|
)%
|
Gross profit
|
38.5
|
%
|
|
38.9
|
%
|
|
(13.7
|
)%
|
Selling expenses
|
22.1
|
%
|
|
19.5
|
%
|
|
(1.4
|
)%
|
General and administrative expenses
|
4.6
|
%
|
|
4.4
|
%
|
|
(9.1
|
)%
|
Income from operations
|
11.8
|
%
|
|
15.0
|
%
|
|
(31.3
|
)%
|
Other income, net
|
0.4
|
%
|
|
0.1
|
%
|
|
129.1
|
%
|
Income before income taxes
|
12.2
|
%
|
|
15.1
|
%
|
|
(29.5
|
)%
|
Provision for income taxes
|
4.5
|
%
|
|
5.6
|
%
|
|
(29.5
|
)%
|
Net income
|
7.7
|
%
|
|
9.5
|
%
|
|
(29.5
|
)%
|
Net sales decreased from
$243.5 million
in the
first
quarter of fiscal
2016
to
$212.3 million
in the
first
quarter of fiscal
2017
, a
12.8%
decrease. Comparable store net sales for the thirteen week quarter ended
April 29, 2017
decreased 12.7% from comparable store net sales for the prior year thirteen week period ended
April 30, 2016
. The comparable store sales decline for the quarter was primarily attributable to a 9.3% reduction in the number of transactions at comparable stores during the quarter and a 6.7% reduction in the average retail price per piece of merchandise sold; which were partially offset by a 3.4% increase in the average number of units sold per transaction. Total net sales for the quarter were also impacted by the Company's closing of 6 stores during fiscal
2016
and 5 stores during the first quarter of fiscal
2017
. Online sales for the quarter decreased 7.2% to $21.8 million for the thirteen week period ended
April 29, 2017
compared to $23.5 million for the thirteen week period ended
April 30, 2016
. Average sales per square foot decreased 13.6% from $93.83 for the first quarter of fiscal 2016 to $81.05 for the first quarter of fiscal 2017. Total square footage as of
April 29, 2017
was 2.367 million compared to 2.383 million as of
April 30, 2016
.
The Company's average retail price per piece of merchandise sold decreased $3.39, or 6.7%, during the
first
quarter of fiscal
2017
compared to the
first
quarter of fiscal
2016
. This $3.39 decrease was primarily attributable to the following changes (with their corresponding effect on the overall average price per piece): a 7.3% reduction in average denim price points (-$1.55), a 3.0% reduction in average knit shirt price points (-$0.33), a 9.1% reduction in average footwear price points (-$0.30), a 7.3% reduction in average active apparel price points (-$0.30), a 4.0% reduction in average accessories price points (-$0.16), and a reduction in average price points for certain other merchandise categories (-$0.35); which were further impacted by a shift in the merchandise mix (-$0.40). These changes are primarily a reflection of merchandise shifts in terms of brands and product styles, fabrics, details, and finishes.
Gross profit after buying, distribution, and occupancy expenses decreased from
$94.7 million
in the
first
quarter of fiscal
2016
to
$81.7 million
in the
first
quarter of fiscal
2017
, a
13.7%
decrease. As a percentage of net sales, gross profit declined from
38.9%
in the
first
quarter of fiscal
2016
to
38.5%
in the
first
quarter of fiscal
2017
. The decrease was primarily attributable to deleveraged occupancy, buying, and distribution expenses as a result of the comparable store sales decline (3.10%, as a percentage of net sales), which was partially offset by an increase in merchandise margins (0.70%, as a percentage of net sales). Gross profit also benefited by the elimination of the impact of the Company's old Primo Card loyalty program as it was phased out during fiscal
2016
(2.00%, as a percentage of net sales). The Company continued to support two loyalty programs throughout fiscal 2016, after the launch of the Company's new Guest Loyalty program during the fiscal quarter ended April 30, 2016.
Selling expenses decreased from
$47.6 million
in the
first
quarter of fiscal
2016
to
$46.9 million
in the
first
quarter of fiscal
2017
, a
1.4%
decrease. As a percentage of net sales, selling expenses increased from
19.5%
in the
first
quarter of fiscal
2016
to
22.1%
in the
first
quarter of fiscal
2017
. Increases in store payroll expense (1.40%, as a percentage of net sales), online fulfillment and marketing expenses (0.75%, as a percentage of net sales), health insurance expense (0.35%, as a percentage of net sales), and certain other selling expenses (0.40%, as a percentage of net sales) were partially offset by a reduction in expense related to the incentive bonus accrual (0.30%, as a percentage of net sales).
General and administrative expenses decreased from
$10.7 million
in the
first
quarter of fiscal
2016
to
$9.8 million
in the
first
quarter of fiscal
2017
, a
9.1%
decrease. As a percentage of net sales, general and administrative expenses increased from
4.4%
in the
first
quarter of fiscal
2016
to
4.6%
in the
first
quarter of fiscal
2017
. The increase, as a percentage of net sales, was attributable to deleverage across several general and administrative expense categories as a result of the comparable store sales decline.
As a result of the above changes, the Company's income from operations was
$25.0 million
in the
first
quarter of fiscal
2017
compared to
$36.4 million
in the
first
quarter of fiscal
2016
. Income from operations was
11.8%
of net sales in the
first
quarter of fiscal
2017
compared to
15.0%
of net sales in the
first
quarter of fiscal
2016
.
Other income increased from
$0.4 million
in the
first
quarter of fiscal
2016
to
$0.9 million
in the
first
quarter of fiscal
2017
. The Company's other income is derived primarily from investment income related to the Company's cash and investments.
Income tax expense as a percentage of pre-tax income was 37.3% in both the
first
quarter of fiscal
2017
and the
first
quarter of fiscal
2016
, bringing net income to
$16.3 million
in the
first
quarter of fiscal
2017
compared to
$23.1 million
in the
first
quarter of fiscal
2016
.
LIQUIDITY AND CAPITAL RESOURCES
As of
April 29, 2017
, the Company had working capital of
$299.9 million
, including
$207.9 million
of cash and cash equivalents and
$53.4 million
of short-term investments. The Company's cash receipts are generated from retail sales and from investment income, and the Company's primary ongoing cash requirements are for inventory, payroll, occupancy costs, dividend payments, new store expansion, remodeling, and other capital expenditures. Historically, the Company's primary source of working capital has been cash flow from operations. During the first
quarter
of fiscal
2017
and fiscal
2016
, the Company's cash flow from operations was
$28.2 million
and
$12.3 million
, respectively.
The uses of cash for both
thirteen
week periods primarily include payment of annual bonuses accrued at fiscal year end, changes in inventory and accounts payable for inventory purchases, dividend payments, construction costs for new and remodeled stores, other capital expenditures, and purchases of investment securities.
During the first
quarter
of fiscal
2017
and
2016
, the Company invested $3.5 million and $6.6 million, respectively, in new store construction, store renovation, and store technology upgrades. The Company also spent $0.4 million and $1.2 million in the first
quarter
of fiscal
2017
and
2016
, respectively, in capital expenditures for the corporate headquarters and distribution facility.
During the remainder of fiscal
2017
, the Company anticipates completing approximately 7 additional store construction projects, including approximately 2 new stores and approximately 5 stores to be substantially remodeled and/or relocated. Management estimates that total capital expenditures during fiscal
2017
will be approximately $25.0 to $30.0 million, which primarily includes planned new store and store remodeling projects and technology investments. The Company believes that existing cash and cash equivalents, investments, and cash flow from operations will be sufficient to fund current and long-term anticipated capital expenditures and working capital requirements for the next several years. The Company has a consistent record of generating positive cash flow from operations each year and, as of
April 29, 2017
, had total cash and investments of
$276.7 million
, including
$15.5 million
of long-term investments. The Company does not currently have plans for a merger or acquisition and has fairly consistent plans for new store expansion and remodels. Based upon past results and current plans, management does not anticipate any large swings in the Company's need for cash in the upcoming years.
Future conditions, however, may reduce the availability of funds based upon factors such as a decrease in demand for the Company's product, change in product mix, competitive factors, and general economic conditions as well as other risks and uncertainties which would reduce the Company's sales, net profitability, and cash flows. Also, the Company's acceleration in store openings and/or remodels or the Company entering into a merger, acquisition, or other financial related transaction could reduce the amount of cash available for further capital expenditures and working capital requirements.
The Company has available an unsecured line of credit of $25.0 million with Wells Fargo Bank, N.A. for operating needs and letters of credit. The line of credit agreement has an expiration date of July 31, 2017 and provides that $10.0 million of the $25.0 million line is available for letters of credit. Borrowings under the line of credit provide for interest to be paid at a rate based on LIBOR. The Company has, from time to time, borrowed against these lines of credit. There were no bank borrowings during the first
quarter
of fiscal
2017
or
2016
. The Company had no bank borrowings as of
April 29, 2017
and was in compliance with the terms and conditions of the line of credit agreement.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon The Buckle, Inc.’s condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires that management make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the financial statement date, and the reported amounts of sales and expenses during the reporting period. The Company regularly evaluates its estimates, including those related to inventory, investments, incentive bonuses, and income taxes. Management bases its estimates on past experience and on various other factors that are thought to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes that the estimates and judgments used in preparing these consolidated financial statements were the most appropriate at that time. Presented below are those critical accounting policies that management believes require subjective and/or complex judgments that could potentially affect reported results of operations. The critical accounting policies and estimates utilized by the Company in the preparation of its condensed consolidated financial statements for the period ended
April 29, 2017
have not changed materially from those utilized for the fiscal year ended
January 28, 2017
, included in The Buckle Inc.’s
2016
Annual Report on Form 10-K.
|
|
1.
|
Revenue Recognition
.
Retail store sales are recorded upon the purchase of merchandise by customers. Online sales are recorded when merchandise is delivered to the customer, with the time of delivery being based on estimated shipping time from the Company’s distribution center to the customer. Shipping fees charged to customers are included in revenue and shipping costs are included in selling expenses. The Company recognizes revenue from sales made under its layaway program upon delivery of the merchandise to the customer. Revenue is not recorded when gift cards and gift certificates are sold, but rather when a card or certificate is redeemed for merchandise. A current liability for unredeemed gift cards and certificates is recorded at the time the card or certificate is purchased. The liability recorded for unredeemed gift certificates and gift cards was
$17.3 million
and
$21.2 million
as of
April 29, 2017
and
January 28, 2017
, respectively. The amounts of the gift certificate and gift card liabilities are determined using the outstanding balances from the prior three and four years of issuance, respectively. The Company records breakage as other income when the probability of redemption is remote, based on historical issuance and redemption patterns.
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The Company establishes a liability for estimated merchandise returns based upon the historical average sales return percentage. Customer returns could potentially exceed the historical average, thus reducing future net sales results and potentially reducing future net earnings. The accrued liability for reserve for sales returns was
$0.9 million
as of
April 29, 2017
and
$0.7 million
as of
January 28, 2017
. Sales tax collected from customers is excluded from revenue and is included as part of “accrued store operating expenses” on the Company's condensed consolidated balance sheets.
In fiscal 2016, the Company launched a new Guest Loyalty program that allows participating guests to earn points for every qualifying purchase, which (after achievement of certain point thresholds) are redeemable as a discount off a future purchase. Reported revenue is net of both reward redemptions and accruals for estimated future rewards earned under the Guest Loyalty program. A liability has been recorded for future rewards based on the Company's estimate of how many earned points will turn into rewards and ultimately be redeemed prior to expiration. As of
April 29, 2017
and
January 28, 2017
, $
9.7 million
and
$8.9 million
, respectively, was included in "accrued store operating expenses" as a liability for estimated future rewards.
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2.
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Inventory
. Inventory is valued at the lower of cost or net realizable value. Cost is determined using an average cost method that approximates the first-in, first-out (FIFO) method. Management makes adjustments to inventory and cost of goods sold, based upon estimates, to account for merchandise obsolescence and markdowns that could affect net realizable value, based on assumptions using calculations applied to current inventory levels within each different markdown level. Management also reviews the levels of inventory in each markdown group and the overall aging of the inventory versus the estimated future demand for such product and the current market conditions. Such judgments could vary significantly from actual results, either favorably or unfavorably, due to fluctuations in future economic conditions, industry trends, consumer demand, and the competitive retail environment. Such changes in market conditions could negatively impact the sale of markdown inventory, causing further markdowns or inventory obsolescence, resulting in increased cost of goods sold from write-offs and reducing the Company’s net earnings. The adjustment to inventory for markdowns and/or obsolescence was
$12.3 million
as of
April 29, 2017
and
$11.4 million
as of
January 28, 2017
. The Company is not aware of any events, conditions, or changes in demand or price that would indicate that its inventory valuation may not be materially accurate at this time.
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3.
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Income Taxes
. The Company records a deferred tax asset and liability for expected future tax consequences resulting from temporary differences between financial reporting and tax bases of assets and liabilities. The Company considers future taxable income and ongoing tax planning in assessing the value of its deferred tax assets. If the Company determines that it is more than likely that these assets will not be realized, the Company would reduce the value of these assets to their expected realizable value, thereby decreasing net income. Estimating the value of these assets is based upon the Company’s judgment. If the Company subsequently determined that the deferred tax assets, which had been written down, would be realized in the future, such value would be increased. Adjustment would be made to increase net income in the period such determination was made.
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4.
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Operating Leases
. The Company leases retail stores under operating leases. Most lease agreements contain tenant improvement allowances, rent holidays, rent escalation clauses, and/or contingent rent provisions. For purposes of recognizing lease incentives and minimum rental expense on a straight-line basis over the terms of the leases, the Company uses the date of initial possession to begin amortization, which is generally when the Company enters the space and begins to make improvements in preparation of intended use. For tenant improvement allowances and rent holidays, the Company records a deferred rent liability on the condensed consolidated balance sheets and amortizes the deferred rent over the terms of the leases as reductions to rent expense on the condensed consolidated statements of income.
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For scheduled rent escalation clauses during the lease terms or for rental payments commencing at a date other than the date of initial occupancy, the Company records minimum rental expense on a straight-line basis over the terms of the leases on the condensed consolidated statements of income. Certain leases provide for contingent rents, which are determined as a percentage of gross sales in excess of specified levels. The Company records a contingent rent liability on the condensed consolidated balance sheets and the corresponding rent expense when specified levels have been achieved or are reasonably probable to be achieved.
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5.
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Investments
. Investments classified as short-term investments include securities with a maturity of greater than three months and less than one year. Available-for-sale securities are reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders’ equity (net of the effect of income taxes), using the specific identification method, until they are sold. Held-to-maturity securities are reported at amortized cost. Trading securities are reported at fair value, with unrealized gains and losses included in earnings, using the specific identification method.
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OFF-BALANCE SHEET ARRANGEMENTS, CONTRACTUAL OBLIGATIONS, AND COMMERCIAL COMMITMENTS
As referenced in the table below, the Company has contractual obligations and commercial commitments that may affect the financial condition of the Company. Based on management’s review of the terms and conditions of its contractual obligations and commercial commitments, there is no known trend, demand, commitment, event, or uncertainty that is reasonably likely to occur which would have a material effect on the Company’s financial condition, results of operations, or cash flows.
In addition, the commercial obligations and commitments made by the Company are customary transactions which the Company believes to be similar to those of other comparable retail companies. The operating lease obligations shown in the table below represent future cash payments to landlords required to fulfill the Company’s minimum rent requirements. Such amounts are actual cash requirements by year and are not reported net of any tenant improvement allowances received from landlords.
The following table identifies the material obligations and commitments as of
April 29, 2017
:
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Payments Due by Period
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Contractual obligations (dollar amounts in thousands):
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Total
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Less than 1
year
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1-3 years
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4-5 years
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After 5
years
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Purchase obligations
|
$
|
15,264
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$
|
4,965
|
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$
|
5,232
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$
|
3,725
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$
|
1,342
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Deferred compensation
|
13,763
|
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—
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—
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—
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13,763
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Operating leases
|
340,279
|
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66,758
|
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111,401
|
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76,531
|
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85,589
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Total contractual obligations
|
$
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369,306
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$
|
71,723
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$
|
116,633
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$
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80,256
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$
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100,694
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The Company has available an unsecured line of credit of $25.0 million, which is excluded from the preceding table. The line of credit agreement has an expiration date of July 31, 2017 and provides that $10.0 million of the $25.0 million line is available for letters of credit. Certain merchandise purchase orders require that the Company open letters of credit. When the Company takes possession of the merchandise, it releases payment on the letters of credit. The amounts of outstanding letters of credit reported reflect the open letters of credit on merchandise ordered, but not yet received or funded. The Company believes it has sufficient credit available to open letters of credit for merchandise purchases. There were no bank borrowings during the first
quarter
of fiscal
2017
or the first
quarter
of fiscal
2016
. The Company had outstanding letters of credit totaling
$3.8 million
and
$1.8 million
as of
April 29, 2017
and
January 28, 2017
, respectively. The Company has no other off-balance sheet arrangements.
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
2016
,
2015
, and
2014
, the holiday and back-to-school seasons accounted for approximately 35% of the Company's fiscal year net sales. Although the operations of the Company are influenced by general economic conditions, the Company does not believe that inflation has had a material effect on the results of operations during the
thirteen
week periods ended
April 29, 2017
and
April 30, 2016
. Quarterly results may vary significantly depending on a variety of factors including the timing and amount of sales and costs associated with the opening of new stores, the timing and level of markdowns, the timing of store closings, the remodeling of existing stores, competitive factors, and general economic conditions.
FORWARD LOOKING STATEMENTS
Information in this report, other than historical information, may be considered to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “1995 Act”). Such statements are made in good faith by the Company pursuant to the safe-harbor provisions of the 1995 Act. In connection with these safe-harbor provisions, this management’s discussion and analysis contains certain forward-looking statements, which reflect management’s current views and estimates of future economic conditions, Company performance, and financial results. The statements are based on many assumptions and factors that could cause future results to differ materially. Such factors include, but are not limited to, changes in product mix, changes in fashion trends, competitive factors, and general economic conditions, economic conditions in the retail apparel industry, as well as other risks and uncertainties inherent in the Company’s business and the retail industry in general. Any changes in these factors could result in significantly different results for the Company. The Company further cautions that the forward-looking information contained herein is not exhaustive or exclusive. The Company does not undertake to update any forward-looking statements, which may be made from time to time by or on behalf of the Company.