NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN
WEEKS ENDED
MAY 5, 2018
AND
APRIL 29, 2017
(Dollar Amounts in Thousands Except Share and Per Share Amounts)
(Unaudited)
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
February 3, 2018
, included in The Buckle, Inc.'s
2017
Form 10-K. The condensed consolidated balance sheet as of
February 3, 2018
is derived from audited financial statements.
For purposes of this report, unless the context otherwise requires, all references herein to the “Company”, “Buckle”, “we”, “us”, or similar terms refer to The Buckle, Inc. and its subsidiary.
The Company follows generally accepted accounting principles (“GAAP”) established by the Financial Accounting Standards Board (“FASB”). References to GAAP in these notes are to the FASB
Accounting Standards Codification
(“ASC”).
There were no significant changes to our significant accounting policies as disclosed in Note A to the Company's Annual Report on Form 10-K for the fiscal year ended
February 3, 2018
, except as set forth below.
Revenue Recognition -
Retail store sales are recorded, net of expected returns, upon the purchase of merchandise by customers. Online sales are recorded, net of expected returns, when the merchandise is tendered for delivery to the common carrier. Shipping fees charged to customers are included in revenue and shipping costs are included in selling expenses. Merchandise returns are estimated based upon the historical average sales return percentage and recognized at the transaction value. The Company also recognizes a return asset and a corresponding adjustment to cost of sales for the Company's right to recover returned merchandise, which is measured at the estimated carrying value, less any expected recovery costs. The Company recognizes revenue from sales made under its layaway program upon delivery of the merchandise to the customer.
The Company records the sale of gift cards and gift certificates as a current liability and recognizes a sale when a customer redeems the gift card or gift certificate. Gift card and gift certificate breakage is recognized as revenue in proportion to the redemption pattern of customers by applying an estimated breakage rate. The estimated breakage rate is based on historical issuance and redemption patterns and is re-assessed by the Company on a regular basis. The Company recognizes a current liability for the down payment and subsequent installment payments made when merchandise is placed on layaway and recognizes layaways as a sale at the time the customer makes final payment and picks up the merchandise.
Sales tax collected from customers is excluded from revenue and is included as part of "accrued store operating expenses" on the Company's consolidated balance sheets.
The Company's Guest Loyalty program allows participating guests to earn points for every qualifying purchase, which (after achievement of certain point thresholds) are redeemable as a discount off a future purchase. Reported revenue is net of both current period reward redemptions and accruals for estimated future rewards earned under the 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, which is included in "accrued store operating expenses."
Through partnership with Comenity Bank, the Company offers a private label credit card ("PLCC"). Customers with a PLCC are enrolled in our B-Rewards incentive program and earn points for every qualifying purchase made on their card. At the end of each rewards period, customers who have exceeded a minimum point threshold receive a reward to be redeemed on a future purchase. The B-Rewards program also provides other discount and promotional opportunities to cardholders on a routine basis. Reported revenue is net of both current period reward redemptions, current period discounts and promotions, and accruals for estimated future rewards earned under the B-Rewards program. A liability 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, which is included in "gift certificates redeemable" on the Company's consolidated balance sheets.
Recently Issued Accounting Pronouncements
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") Topic 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 preparation for the implementation of the new standard, the Company determined the adoption of Topic 606 would affect the timing of recognition and the income statement classification of gift card and gift certificate breakage, the timing of revenue recognition for sales of merchandise shipped to customers, and the presentation of the allowance for estimated sales returns. The Company adopted Topic 606 on February 4, 2018, using the modified retrospective transition method. Under this transition method, the prior period comparative information has not been adjusted and continues to be reported under Topic 605, with the cumulative effective of adopting the new standard recorded as a
$389
adjustment increasing retained earnings as of February 4, 2018.
The effect of the adoption of ASU 2014-09 on our consolidated balance sheet as of
May 5, 2018
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
As Reported
|
|
Adjustments
|
|
Excluding Topic 606 Adjustments
|
Consolidated Balance Sheet Amounts
|
|
|
|
|
|
|
Inventory
|
|
118,181
|
|
|
1,288
|
|
|
116,893
|
|
Accrued store operating expenses
|
|
19,699
|
|
|
1,592
|
|
|
18,107
|
|
Accounts payable
|
|
25,818
|
|
|
(693
|
)
|
|
26,511
|
|
Retained earnings
|
|
253,036
|
|
|
389
|
|
|
252,647
|
|
The adoption of ASU 2014-09 did not have a material impact on the Company's results of operations for the fiscal quarter ended
May 5, 2018
. The adoption did, however, impact the income statement classification of gift card and gift certificate breakage. For the quarter ended
May 5, 2018
, the Company recognized
$245
of gift card and gift certificate breakage as revenue. For the quarter ended
April 29, 2017
, the Company recognized
$300
of breakage in "other income."
The Company is a retailer of medium to better priced casual apparel, footwear, and accessories for fashion conscious young men and women. The Company operates its business as
one
reportable segment. The Company sells its merchandise through its retail stores and e-Commerce platform. The Company had
456
stores located in
43
states throughout the United States as of
May 5, 2018
and
462
stores in
44
states as of
April 29, 2017
. During the
thirteen
week period ended
May 5, 2018
, the Company did not open or remodel any stores and closed
1
store. During the
thirteen
week period ended
April 29, 2017
, the Company did not open any new stores, substantially remodeled
2
stores, and closed
5
stores.
For the fiscal quarters ended
May 5, 2018
and
April 29, 2017
, online revenues accounted for
11.3%
and
10.3%
, respectively, of the Company's net sales. No sales to an individual customer or country, other than the United States, accounted for more than 10% of net sales during the first quarter of
2018
or
2017
.
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
|
May 5,
2018
|
|
April 29,
2017
|
|
|
|
|
Denims
|
42.8
|
%
|
|
42.0
|
%
|
Tops (including sweaters)
|
30.3
|
|
|
30.1
|
|
Sportswear/Fashions
|
9.0
|
|
|
9.6
|
|
Accessories
|
8.3
|
|
|
8.3
|
|
Footwear
|
6.6
|
|
|
6.4
|
|
Casual bottoms
|
1.0
|
|
|
1.6
|
|
Outerwear
|
1.0
|
|
|
1.0
|
|
Other
|
1.0
|
|
|
1.0
|
|
|
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
|
|
May 5, 2018
|
|
April 29, 2017
|
|
Net Income
|
|
Weighted
Average
Shares (a)
|
|
Per Share
Amount
|
|
Net Income
|
|
Weighted
Average
Shares (a)
|
|
Per Share
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
$
|
18,338
|
|
|
48,379
|
|
|
$
|
0.38
|
|
|
$
|
16,285
|
|
|
48,218
|
|
|
$
|
0.34
|
|
Effect of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested shares
|
—
|
|
|
171
|
|
|
—
|
|
|
—
|
|
|
126
|
|
|
—
|
|
Diluted EPS
|
$
|
18,338
|
|
|
48,550
|
|
|
$
|
0.38
|
|
|
$
|
16,285
|
|
|
48,344
|
|
|
$
|
0.34
|
|
(a) Shares in thousands.
The following is a summary of investments as of
May 5, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
$
|
1,675
|
|
|
$
|
—
|
|
|
$
|
(120
|
)
|
|
$
|
—
|
|
|
$
|
1,555
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal bonds
|
$
|
55,684
|
|
|
$
|
1
|
|
|
$
|
(106
|
)
|
|
$
|
—
|
|
|
$
|
55,579
|
|
|
|
|
|
|
|
|
|
|
|
Trading Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
$
|
14,125
|
|
|
$
|
1,212
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15,337
|
|
The following is a summary of investments as of
February 3, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
$
|
1,725
|
|
|
$
|
—
|
|
|
$
|
(120
|
)
|
|
$
|
—
|
|
|
$
|
1,605
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal bonds
|
$
|
55,527
|
|
|
$
|
9
|
|
|
$
|
(76
|
)
|
|
$
|
—
|
|
|
$
|
55,460
|
|
|
|
|
|
|
|
|
|
|
|
Trading Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
$
|
13,746
|
|
|
$
|
1,408
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15,154
|
|
The amortized cost and fair value of debt securities by contractual maturity as of
May 5, 2018
is as follows:
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
Fair
Value
|
Held-to-Maturity Securities
|
|
|
|
Less than 1 year
|
$
|
54,700
|
|
|
$
|
54,596
|
|
1 - 5 years
|
984
|
|
|
983
|
|
|
$
|
55,684
|
|
|
$
|
55,579
|
|
As of
May 5, 2018
and
February 3, 2018
,
$1,555
and
$1,605
of available-for-sale securities and
$984
and
$4,694
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
May 5, 2018
and
February 3, 2018
, the reported investment amount is net of
$120
of temporary impairment to account for the impairment of certain securities from their stated par value. The
$120
temporary impairment is reported, net of tax, as an “accumulated other comprehensive loss” of
$89
in stockholders’ equity as of both
May 5, 2018
and
February 3, 2018
. 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
May 5, 2018
and
February 3, 2018
, 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
May 5, 2018
and
February 3, 2018
, 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
|
|
|
May 5, 2018
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Total
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
Auction-rate securities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,555
|
|
|
$
|
1,555
|
|
Trading securities (including mutual funds)
|
15,337
|
|
|
—
|
|
|
—
|
|
|
15,337
|
|
Totals
|
$
|
15,337
|
|
|
$
|
—
|
|
|
$
|
1,555
|
|
|
$
|
16,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
Quoted Prices in
Active Markets
for Identical
Assets
|
|
Significant
Observable
Inputs
|
|
Significant
Unobservable
Inputs
|
|
|
February 3, 2018
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Total
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
Auction-rate securities
|
$
|
—
|
|
|
$
|
50
|
|
|
$
|
1,555
|
|
|
$
|
1,605
|
|
Trading securities (including mutual funds)
|
15,154
|
|
|
—
|
|
|
—
|
|
|
15,154
|
|
Totals
|
$
|
15,154
|
|
|
$
|
50
|
|
|
$
|
1,555
|
|
|
$
|
16,759
|
|
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
$120
of the Company’s recorded temporary impairment as of
May 5, 2018
. 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 May 5, 2018
|
|
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
|
$
|
1,555
|
|
|
$
|
—
|
|
|
$
|
1,555
|
|
Total gains and losses:
|
|
|
|
|
|
|
|
|
Included in net income
|
—
|
|
|
—
|
|
|
—
|
|
Included in other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
Purchases, Issuances, Sales, and Settlements:
|
|
|
|
|
|
|
|
|
Sales
|
—
|
|
|
—
|
|
|
—
|
|
Balance, end of quarter
|
$
|
1,555
|
|
|
$
|
—
|
|
|
$
|
1,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
There were no transfers of securities between Levels 1, 2, or 3 during the
thirteen
week periods ended
May 5, 2018
or
April 29, 2017
. 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
May 5, 2018
, the fair value of held-to-maturity securities was
$55,579
compared to the carrying amount of
$55,684
. As of
February 3, 2018
, the fair value of held-to-maturity securities was
$55,460
compared to the carrying amount of
$55,527
.
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
May 5, 2018
and
February 3, 2018
.
|
|
6.
|
Supplemental Cash Flow Information
|
The Company had non-cash investing activities during the
thirteen
week periods ended
May 5, 2018
and
April 29, 2017
of
($71)
and
($216)
, 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
$442
and
$371
as of
May 5, 2018
and
February 3, 2018
, 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
May 5, 2018
and
April 29, 2017
of
$319
and
$685
, 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
May 5, 2018
,
434,191
shares were available for grant under the Company’s various restricted stock plans, of which
388,817
shares were available for grant to executive officers.
Compensation expense was recognized during fiscal
2018
and fiscal
2017
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
|
|
May 5,
2018
|
|
April 29,
2017
|
|
|
|
|
Stock-based compensation expense, before tax
|
$
|
1,484
|
|
|
$
|
1,646
|
|
|
|
|
|
Stock-based compensation expense, after tax
|
$
|
1,100
|
|
|
$
|
1,037
|
|
Non-vested shares of common stock granted during the
thirteen
week periods ended
May 5, 2018
and
April 29, 2017
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
May 5, 2018
is as follows:
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted Average
Grant Date
Fair Value
|
|
|
|
|
Non-Vested - beginning of year
|
470,022
|
|
|
$
|
24.63
|
|
Granted
|
374,050
|
|
|
19.60
|
|
Forfeited
|
(145,325
|
)
|
|
20.55
|
|
Vested
|
(33,006
|
)
|
|
20.44
|
|
Non-Vested - end of quarter
|
665,741
|
|
|
$
|
22.91
|
|
As of
May 5, 2018
, there was
$9,056
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
May 5, 2018
and
April 29, 2017
was
$698
and
$776
, respectively. During the
thirteen
week period ended
May 5, 2018
,
145,325
shares (representing one-half of the "performance based" shares granted during fiscal 2017 under the 2005 Restricted Stock Plan) were forfeited because the Company did not achieve all of the performance targets established for the fiscal 2017 grants.
|
|
8.
|
Recently Issued Accounting Pronouncements
|
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.
|
|
9.
|
Commitments and Contingencies
|
Data Security Incident
On June 16, 2017, the Company announced that it had become aware that it was a victim of a data security incident in which a criminal entity accessed certain guest credit card information following purchases at some of the Company's retail stores between October 28, 2016 and April 14, 2017. The Company immediately launched a thorough investigation and engaged leading third-party forensic experts to review its systems and secure the affected part of its network. Through that investigation, the Company learned that its store payment data systems were infected with a form of malicious code, which was quickly removed. The Company has taken actions that it believes have contained the issue and has implemented additional security enhancements, and will continue to work vigilantly to pursue this matter to resolution. Based on the forensic investigation, the Company believes that no social security numbers, email addresses, or physical addresses were obtained by those criminally responsible. There is also no evidence that the buckle.com website or buckle.com guests were impacted.
Buckle self-reported the issue to the payment card brands and cooperated fully with the card brands, their forensic experts, and law enforcement during the investigation. At this time, it is not possible to reasonably estimate the amount of any potential assessments, fines, penalties, or other liabilities in connection with this incident.
THE BUCKLE, INC.