a6538399.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
 
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended October 30, 2010

o      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period from ____________ to ____________

Commission File Number: 001-12951
 
THE BUCKLE, INC.
(Exact name of Registrant as specified in its charter)
 
Nebraska
47-0366193
(State or other jurisdiction of
(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

___________________________________________________________

(Former name, former address, and former fiscal year if changed since last report)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ  No o

Indicate by check mark whether the registrant  has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for a shorter period that the registrant was required to submit and post such files). Yes þ  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. (See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act).
 
þ Large accelerated filer; o Accelerated filer; o Non-accelerated filer; o Smaller Reporting Company
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

The number of shares outstanding of the Registrant's Common Stock, as of December 3, 2010, was 46,739,247.
 
 
 

 
 
THE BUCKLE, INC.

FORM 10-Q
INDEX
 
 
   
Pages
 
Part I. Financial Information (unaudited)
     
         
    3  
           
       
 
    16  
           
    25  
           
    25  
           
           
Part II. Other Information
       
           
    26  
           
    26  
           
    26  
           
    26  
           
    26  
           
    26  
           
    26  
           
      27  
 
 
2

 
 
           
             
BALANCE SHEETS
           
(Amounts in Thousands Except Share and Per Share Amounts)
           
(Unaudited)
           
             
             
   
October 30,
   
January 30,
 
ASSETS
 
2010
   
2010
 
             
CURRENT ASSETS:
           
  Cash and cash equivalents
  $ 139,180     $ 135,340  
  Short-term investments
    25,302       22,687  
  Receivables
    4,609       6,911  
  Inventory
    111,235       88,187  
  Prepaid expenses and other assets
    14,202       11,684  
           Total current assets
    294,528       264,809  
                 
PROPERTY AND EQUIPMENT
    341,512       305,974  
  Less accumulated depreciation and amortization
    (170,177 )     (159,392 )
      171,335       146,582  
                 
LONG-TERM INVESTMENTS
    71,212       72,770  
OTHER ASSETS
    6,503       4,742  
                 
    $ 543,578     $ 488,903  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
                 
CURRENT LIABILITIES:
               
  Accounts payable
  $ 35,891     $ 24,364  
  Accrued employee compensation
    26,082       41,463  
  Accrued store operating expenses
    10,326       8,866  
  Gift certificates redeemable
    9,160       13,507  
  Income taxes payable
    4,997       3,830  
           Total current liabilities
    86,456       92,030  
                 
DEFERRED COMPENSATION
    7,439       5,957  
DEFERRED RENT LIABILITY
    37,533       36,657  
           Total liabilities
    131,428       134,644  
                 
COMMITMENTS
               
                 
STOCKHOLDERS’ EQUITY:
               
  Common stock, authorized 100,000,000 shares of $.01 par value; 46,601,528 and 46,381,263
               
     shares issued and outstanding at October 30, 2010 and January 30, 2010, respectively
    466       464  
  Additional paid-in capital
    79,387       78,837  
  Retained earnings
    332,964       275,751  
  Accumulated other comprehensive loss
    (667 )     (793 )
           Total stockholders’ equity
    412,150       354,259  
                 
    $ 543,578     $ 488,903  
                 
See notes to unaudited condensed financial statements.
               
 
 
3

 
 
THE BUCKLE, INC.
                       
                         
STATEMENTS OF INCOME
                       
(Amounts in Thousands Except Per Share Amounts)
                   
(Unaudited)
                       
                         
                         
   
Thirteen Weeks Ended
   
Thirty-nine Weeks Ended
 
   
October 30,
   
October 31,
   
October 30,
   
October 31,
 
   
2010
   
2009
   
2010
   
2009
 
                         
SALES, Net of returns and allowances
  $ 243,346     $ 231,238     $ 646,782     $ 623,841  
                                 
COST OF SALES (Including buying,
                               
  distribution, and occupancy costs)
    137,404       129,121       372,001       352,743  
                                 
           Gross profit
    105,942       102,117       274,781       271,098  
                                 
OPERATING EXPENSES:
                               
  Selling
    44,063       43,017       120,550       118,121  
  General and administrative
    7,530       7,427       21,169       21,452  
      51,593       50,444       141,719       139,573  
                                 
INCOME FROM OPERATIONS
    54,349       51,673       133,062       131,525  
                                 
OTHER INCOME, Net
    470       1,192       2,869       3,651  
                                 
INCOME BEFORE INCOME TAXES
    54,819       52,865       135,931       135,176  
                                 
PROVISION FOR INCOME TAXES
    20,448       19,560       50,703       50,015  
                                 
NET INCOME
  $ 34,371     $ 33,305     $ 85,228     $ 85,161  
                                 
                                 
EARNINGS PER SHARE:
                               
  Basic
  $ 0.75     $ 0.73     $ 1.85     $ 1.87  
                                 
  Diluted
  $ 0.73     $ 0.71     $ 1.81     $ 1.83  
                                 
Basic weighted average shares
    46,068       45,709       46,095       45,626  
Diluted weighted average shares
    46,916       46,719       46,989       46,621  
                                 
See notes to unaudited condensed financial statements.
                         
 
 
4

 
 
THE BUCKLE, INC.
                                   
                                     
STATEMENTS OF STOCKHOLDERS' EQUITY
                                   
(Dollar Amounts in Thousands Except Share and Per Share Amounts)
                               
(Unaudited)
                                   
                                     
                                     
                           
Accumulated
       
               
Additional
         
Other
       
   
Number
   
Common
   
Paid-in
   
Retained
   
Comprehensive
       
   
of Shares
   
Stock
   
Capital
   
Earnings
   
Loss
   
Total
 
                                     
  FISCAL 2010
                                   
BALANCE, January 31, 2010
    46,381,263     $ 464     $ 78,837     $ 275,751     $ (793 )   $ 354,259  
                                                 
  Net income
    -       -       -       85,228       -       85,228  
  Dividends paid on common stock,
                                               
    ($0.60 per share)
    -       -       -       (28,015 )     -       (28,015 )
  Common stock issued on exercise
                                               
    of stock options
    224,080       2       974       -       -       976  
  Issuance of non-vested stock, net of forfeitures
    242,985       2       (2 )     -       -       -  
  Amortization of non-vested stock grants,
                                               
     net of forfeitures
    -       -       3,207       -       -       3,207  
  Stock option compensation expense
    -       -       48       -       -       48  
  Common stock purchased and retired
    (246,800 )     (2 )     (5,992 )     -       -       (5,994 )
  Income tax benefit related to exercise of
                                               
    stock options
    -       -       2,315       -       -       2,315  
  Unrealized loss on investments, net of tax
    -       -       -       -       126       126  
                                                 
BALANCE, October 30, 2010
    46,601,528     $ 466     $ 79,387     $ 332,964     $ (667 )   $ 412,150  
                                                 
                                                 
  FISCAL 2009
                                               
BALANCE, February 1, 2009
    45,906,265     $ 459     $ 68,894     $ 268,789     $ (920 )   $ 337,222  
                                                 
  Net income
    -       -       -       85,161       -       85,161  
  Dividends paid on common stock,
                                               
    ($2.40 per share)
    -       -       -       (111,065 )     -       (111,065 )
  Common stock issued on exercise
                                               
    of stock options
    191,527       2       1,472       -       -       1,474  
  Issuance of non-vested stock, net of forfeitures
    196,788       2       (2 )     -       -       -  
  Amortization of non-vested stock grants,
                                               
     net of forfeitures
    -       -       3,592       -       -       3,592  
  Stock option compensation expense
    -       -       142       -       -       142  
  Income tax benefit related to exercise
                                               
      of stock options
    -       -       1,871       -       -       1,871  
  Unrealized loss on investments, net of tax
    -       -       -       -       (171 )     (171 )
                                                 
BALANCE, October 31, 2009
    46,294,580     $ 463     $ 75,969     $ 242,885     $ (1,091 )   $ 318,226  
                                                 
See notes to unaudited condensed financial statements.
                       
 
 
5

 
 
THE BUCKLE, INC.
           
             
STATEMENTS OF CASH FLOWS
           
(Dollar Amounts in Thousands)
           
(Unaudited)
           
             
   
Thirty-nine Weeks Ended
 
   
October 30, 2010
   
October 31, 2009
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
  Net income
  $ 85,228     $ 85,161  
  Adjustments to reconcile net income to net cash flows
               
    from operating activities:
               
      Depreciation and amortization
    20,967       17,811  
      Amortization of non-vested stock grants, net of forfeitures
    3,207       3,592  
      Stock option compensation expense
    48       142  
      Realized gain on securities
    -       (1,379 )
      Deferred income taxes
    (1,205 )     (1,385 )
      Other
    360       (90 )
      Changes in operating assets and liabilities:
               
        Receivables
    1,092       (1,259 )
        Inventory
    (23,048 )     (34,250 )
        Prepaid expenses and other assets
    (1,929 )     (2,516 )
        Accounts payable
    12,811       12,421  
        Accrued employee compensation
    (15,381 )     (10,318 )
        Accrued store operating expenses
    1,460       2,056  
        Gift certificates redeemable
    (4,347 )     (3,065 )
        Income taxes payable
    2,474       386  
        Long-term liabilities and deferred compensation
    2,358       2,949  
                 
           Net cash flows from operating activities
    84,095       70,256  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
  Purchase of property and equipment
    (47,378 )     (34,630 )
  Proceeds from sale of property and equipment
    14       308  
  Change in other assets
    (1,271 )     28  
  Purchases of investments
    (33,976 )     (43,212 )
  Proceeds from sales/maturities of investments
    33,118       26,510  
                 
           Net cash flows from investing activities
    (49,493 )     (50,996 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
  Proceeds from the exercise of stock options
    976       1,474  
  Excess tax benefit from stock option exercises
    2,271       1,863  
  Purchases of common stock
    (5,994 )     -  
  Payment of dividends
    (28,015 )     (111,065 )
                 
           Net cash flows from financing activities
    (30,762 )     (107,728 )
                 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    3,840       (88,468 )
                 
CASH AND CASH EQUIVALENTS, Beginning of period
    135,340       162,463  
                 
CASH AND CASH EQUIVALENTS, End of period
  $ 139,180     $ 73,995  
                 
See notes to unaudited condensed financial statements.
               
 
 
6

 
 
THE BUCKLE, INC.
NOTES TO FINANCIAL STATEMENTS
THIRTEEN AND THIRTY-NINE WEEKS ENDED OCTOBER 30, 2010 AND OCTOBER 31, 2009
 (Dollar Amounts in Thousands Except Share and Per Share Amounts)
(Unaudited)

1.

The accompanying unaudited 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 financial statements for the fiscal year ended January 30, 2010, included in The Buckle, Inc.'s 2009 Form 10-K.

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”), which was established by FASB as the sole source of authoritative GAAP for financial statements issued for reporting periods ending on or after September 15, 2009.

2.

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 industry segment. The Company had 421 stores located in 41 states throughout the continental United States as of October 30, 2010 and 404 stores in 41 states as of October 31, 2009. During the third quarter of fiscal 2010, the Company opened two new stores and substantially remodeled seven stores. During the third quarter of fiscal 2009, the Company opened four new stores, substantially remodeled four stores, and closed one store.

The following is information regarding the Company’s major product lines, stated as a percentage of the Company’s net sales:
 
   
Percentage of Net Sales
   
Percentage of Net Sales
 
   
Thirteen Weeks Ended
   
Thirty-nine Weeks Ended
 
Merchandise Group
 
Oct. 30, 2010
   
Oct. 31, 2009
   
Oct. 30, 2010
   
Oct. 31, 2009
 
                         
Denims
    48.6 %     46.2 %     44.4 %     41.4 %
Tops (including sweaters)
    32.9       35.2       33.9       36.8  
Accessories
    8.2       7.1       7.8       7.5  
Sportswear/Fashions
    1.4       1.5       6.5       6.7  
Footwear
    5.0       5.2       5.1       5.0  
Outerwear
    3.3       4.3       1.7       2.0  
Casual bottoms
    0.5       0.4       0.5       0.5  
Other
    0.1       0.1       0.1       0.1  
                                 
      100.0 %     100.0 %     100.0 %     100.0 %
 
 
7

 
 
3.

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.
 
   
Thirteen Weeks Ended
   
Thirteen Weeks Ended
 
   
October 30, 2010
   
October 31, 2009
 
         
Weighted
               
Weighted
       
         
Average
   
Per Share
         
Average
   
Per Share
 
   
Income
   
Shares
   
Amount
   
Income
   
Shares
   
Amount
 
                                     
Basic EPS
  $ 34,371       46,068     $ 0.75     $ 33,305       45,709     $ 0.73  
                                                 
Effect of Dilutive Securities:
                                               
    Stock options and
                                               
    non-vested shares
    -       848       (0.02 )     -       1,010       (0.02 )
                                                 
Diluted EPS
  $ 34,371       46,916     $ 0.73     $ 33,305       46,719     $ 0.71  
 
   
Thirty-nine Weeks Ended
   
Thirty-nine Weeks Ended
 
   
October 30, 2010
   
October 31, 2009
 
         
Weighted
               
Weighted
       
         
Average
   
Per Share
         
Average
   
Per Share
 
   
Income
   
Shares
   
Amount
   
Income
   
Shares
   
Amount
 
                                     
Basic EPS
  $ 85,228       46,095     $ 1.85     $ 85,161       45,626     $ 1.87  
                                                 
Effect of Dilutive Securities:
                                               
    Stock options and
                                               
    non-vested shares
    -       894       (0.04 )     -       995       (0.04 )
                                                 
Diluted EPS
  $ 85,228       46,989     $ 1.81     $ 85,161       46,621     $ 1.83  
 
4.

The following is a summary of investments as of October 30, 2010:
 
   
Amortized
   
Gross
   
Gross
   
Other-than-
   
Estimated
 
   
Cost or
   
Unrealized
   
Unrealized
   
Temporary
   
Fair
 
   
Par Value
   
Gains
   
Losses
   
Impairment
   
Value
 
Available-for-Sale Securities:
                             
  Auction-rate securities
  $ 21,775     $ -     $ (1,060 )   $ (725 )   $ 19,990  
  Preferred stock
    2,000       -       -       (1,974 )     26  
    $ 23,775     $ -     $ (1,060 )   $ (2,699 )   $ 20,016  
                                         
Held-to-Maturity Securities:
                                 
  State and municipal bonds
  $ 53,280     $ 614     $ (16 )   $ -     $ 53,878  
  Fixed maturities
    7,581       105       -       -       7,686  
  Certificates of deposit
    700       22       -       -       722  
  U.S. treasuries
    7,498       1       (1 )     -       7,498  
    $ 69,059     $ 742     $ (17 )   $ -     $ 69,784  
                                         
Trading Securities:
                                       
  Mutual funds
  $ 7,347     $ 92     $ -     $ -     $ 7,439  
 
 
8

 
 
The following is a summary of investments as of January 30, 2010:
 
   
Amortized
   
Gross
   
Gross
   
Other-than-
   
Estimated
 
   
Cost or
   
Unrealized
   
Unrealized
   
Temporary
   
Fair
 
   
Par Value
   
Gains
   
Losses
   
Impairment
   
Value
 
Available-for-Sale Securities:
                             
  Auction-rate securities
  $ 24,775     $ -     $ (1,258 )   $ (725 )   $ 22,792  
  Municipal bonds
    8,116       14       (14 )     -       8,116  
  Preferred stock
    2,000       -       -       (1,974 )     26  
    $ 34,891     $ 14     $ (1,272 )   $ (2,699 )   $ 30,934  
                                         
Held-to-Maturity Securities:
                                 
  State and municipal bonds
  $ 47,036     $ 535     $ (10 )   $ -     $ 47,561  
  Fixed maturities
    8,890       92       -       -       8,982  
  Certificates of deposit
    1,640       27       -       -       1,667  
  U.S. treasuries
    1,000       1       -       -       1,001  
    $ 58,566     $ 655     $ (10 )   $ -     $ 59,211  
                                         
Trading Securities:
                                       
  Mutual funds
  $ 6,200     $ -     $ (243 )   $ -     $ 5,957  
 
The auction-rate securities and preferred stock were invested as follows as of October 30, 2010:
 
Nature
 
Underlying Collateral
 
Par Value
 
Municipal revenue bonds
 
98% insured by AAA/AA/A-rated bond insurers at October 30, 2010
  $ 10,425  
Municipal bond funds
 
Fixed income instruments within issuers' money market funds
    8,400  
Student loan bonds
 
Student loans guaranteed by state entities
    2,950  
Preferred stock
 
Underlying investments of closed-end funds
    2,000  
  Total par value
      $ 23,775  
 
As of October 30, 2010, the Company’s auction-rate securities portfolio was 60% AAA/Aaa-rated, 24% AA/Aa-rated, 8% A-rated, and 8% below A-rated.

The amortized cost and fair value of debt securities by contractual maturity as of October 30, 2010 is as follows:
 
   
Amortized
   
Fair
 
   
Cost
   
Value
 
Held-to-maturity securities:
           
Less than 1 year
  $ 25,302     $ 25,363  
1 - 5 years
    42,106       42,609  
5 - 10 years
    883       1,020  
Greater than 10 years
    768       792  
    $ 69,059     $ 69,784  
 
At October 30, 2010 and January 30, 2010, $20,016 and $26,634 of available-for-sale securities and $43,757 and $40,179 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.
 
 
9

 

The Company’s investments in auction-rate securities (“ARS”) and preferred securities are classified as available-for-sale and reported at fair market value. As of October 30, 2010, the reported investment amount is net of $1,060 of temporary impairment and $2,699 of other-than-temporary impairment (“OTTI”) to account for the impairment of certain securities from their stated par value. The $1,060 temporary impairment is reported, net of tax, as an “accumulated other comprehensive loss” of $667 in stockholders’ equity as of October 30, 2010. For the investments considered temporarily impaired, the Company believes that these ARS can be successfully redeemed or liquidated through future auctions 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 October 30, 2010, the Company had $21,775 invested in ARS and $2,000 invested in preferred securities, at par value, which are reported at their estimated fair value of $19,990 and $26, respectively. As of January 30, 2010, the Company had $24,775 invested in ARS and $2,000 invested in preferred securities, which were reported at their estimated fair value of $22,792 and $26, respectively. ARS have a long-term stated maturity, but are reset through a “dutch auction” process that occurs every 7 to 49 days, depending on the terms of the individual security. Until February 2008, the ARS market was highly liquid. During February 2008, however, a significant number of auctions related to these securities failed, meaning that there was not enough demand to sell the entire issue at auction. The failed auctions have limited the current liquidity of certain of the Company’s investments in ARS and the Company has reason to believe that certain of the underlying issuers of its ARS are currently at risk. The Company does not, however, anticipate that further auction failures will have a material impact on the Company’s ability to fund its business. During the third quarter of fiscal 2010, the Company was able to successfully liquidate $700 of its investments in ARS at par value. The Company reviews all investments for OTTI at least quarterly or as indicators of impairment exist. Indicators of impairment include the duration and severity of decline in market value. In addition, the Company considers qualitative factors including, but not limited to, the financial condition of the investee, the credit rating of the investee, and the current and expected market and industry conditions in which the investee operates.

As of October 30, 2010, all of the Company’s investments in ARS and preferred securities were classified as long-term investments. As of January 30, 2010, $1,350 of the Company’s investments in ARS and preferred securities was classified in short-term investments and $21,468 was classified in long-term investments.
 
Fair Value Measurements

As defined by FASB ASC 820, Fair Value Measurements and Disclosures, 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. The Company has concluded that certain of its ARS represent Level 3 valuation and should be valued using a discounted cash flow analysis. The assumptions used in preparing the discounted cash flow model include estimates for interest rates, timing and amount of cash flows, and expected holding periods of the ARS.

 
10

 
 
As of October 30, 2010 and January 30, 2010, 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 available-for-sale securities include its investments in ARS, as further described in Note 4. The failed auctions, beginning in February 2008, related to certain of the Company’s investments in ARS have limited the availability of quoted market prices. The Company has determined the fair value of its ARS using Level 1 inputs for known or anticipated subsequent redemptions at par value, Level 2 inputs using observable inputs, and Level 3 using unobservable inputs where the following criteria were considered in estimating fair value:

 
·
Pricing was provided by the custodian of ARS;
 
·
Pricing was provided by a third-party broker for ARS;
 
·
Sales of similar securities;
 
·
Quoted prices for similar securities in active markets;
 
·
Quoted prices for publicly traded preferred securities;
 
·
Quoted prices for similar assets in markets that are not active - including markets where there are few transactions for the asset, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly;
 
·
Pricing was provided by a third-party valuation consultant (using Level 3 inputs).

In addition, the Company considers other factors including, but not limited to, the financial condition of the investee, the credit rating, insurance, guarantees, collateral, cash flows, and the current and expected market and industry conditions in which the investee operates. Management believes it has used information that was reasonably obtainable in order to complete its valuation process and determine if the Company’s investments in ARS had incurred any temporary and/or other-than-temporary impairment as of October 30, 2010 and January 30, 2010.

Future fluctuations in fair value of ARS that the Company judges to be temporary, including any recoveries of previous write-downs, would be recorded as an adjustment to “accumulated other comprehensive loss.”  The value and liquidity of ARS held by the Company may be affected by continued auction-rate failures, the credit quality of each security, the amount and timing of interest payments, the amount and timing of future principal payments, and the probability of full repayment of the principal. Additional indicators of impairment include the duration and severity of the decline in market value. The interest rates on these investments will be determined by the terms of each individual ARS. The material risks associated with the ARS held by the Company include those stated above as well as the current economic environment, downgrading of credit ratings on investments held, and the volatility of the entities backing each of the issues.

The Company’s financial assets measured at fair value on a recurring basis subject to the disclosure requirements of FASB ASC 820 were as follows:
 
   
Fair Value Measurements at Reporting Date Using
 
October 30, 2010
 
Quoted Prices
in Active
Markets for Identical Assets
(Level 1)
   
Significant
Observable
Inputs
(Level 2)
   
Significant
Unobservable
Inputs
(Level 3)
   
Total
 
Available-for-Sale Securities:
                       
   Auction-rate securities
  $ -     $ 11,404     $ 8,586     $ 19,990  
   Preferred stock
    26       -       -       26  
Trading Securities (including mutual funds)
    7,439       -       -       7,439  
Totals
  $ 7,465     $ 11,404     $ 8,586     $ 27,455  
 
 
11

 
 
   
Fair Value Measurements at Reporting Date Using
 
January 30, 2010
 
Quoted Prices
in Active
Markets for Identical Assets
(Level 1)
   
Significant
Observable
Inputs
(Level 2)
   
Significant
Unobservable
Inputs
(Level 3)
   
Total
 
Available-for-Sale Securities:
                       
   Auction-rate securities
  $ 1,261     $ 12,894     $ 8,637     $ 22,792  
   Municipal bonds
    8,116       -       -       8,116  
   Preferred stock
    26       -       -       26  
Trading Securities (including mutual funds)
    5,957       -       -       5,957  
Totals
  $ 15,360     $ 12,894     $ 8,637     $ 36,891  
 
ARS, municipal bonds, and preferred 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 $714 of the Company’s recorded temporary impairment and $725 of the OTTI as of October 30, 2010. 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 as defined in FASB ASC 820 are as follows:
 
   
Thirty-nine Weeks Ended October 30, 2010
 
   
Level 1
   
Level 2
   
Level 3
 
Balance, beginning of year
  $ 15,360     $ 12,894     $ 8,637  
Total gains or losses (realized and unrealized):
                       
   Included in net income
    371       -       -  
   Included in other comprehensive income
    27       99       -  
Purchases, sales, issuances, and settlements (net)
    (8,293 )     (1,589 )     (51 )
Transfers in and/or out
    -       -       -  
Balance, end of quarter
  $ 7,465     $ 11,404     $ 8,586  
 
   
Thirty-nine Weeks Ended October 31, 2009
 
   
Level 1
   
Level 2
   
Level 3
 
Balance, beginning of year
  $ 6,240     $ 21,468     $ 7,260  
Total gains or losses (realized and unrealized):
                       
   Included in net income
    474       -       -  
   Included in other comprehensive income
    20       (191 )     -  
Purchases, sales, issuances, and settlements (net)
    5,654       (5,122 )     (25 )
Transfers in and/or out
    1,300       (1,300 )     -  
Balance, end of quarter
  $ 13,688     $ 14,855     $ 7,235  
 
 
12

 
 
6.

Comprehensive income consists of net income and unrealized gains and losses on available-for-sale securities. Unrealized losses on the Company’s investments in auction-rate securities have been included in accumulated other comprehensive loss and are separately included as a component of stockholders’ equity, net of related income taxes.
 
   
Thirteen Weeks Ended
 
   
October 30, 2010
   
October 31, 2009
 
             
Net income
  $ 34,371     $ 33,305  
Changes in net unrealized losses on investments,
               
  net of taxes of $0 and $44
    -       (76 )
Comprehensive Income
  $ 34,371     $ 33,229  
 
   
Thirty-nine Weeks Ended
 
   
October 30, 2010
   
October 31, 2009
 
             
Net income
  $ 85,228     $ 85,161  
Changes in net unrealized losses on investments,
               
  net of taxes of $(74) and $100
    126       (171 )
Comprehensive Income
  $ 85,354     $ 84,990  
 
7.

The Company had non-cash investing activities during the thirty-nine week periods ended October 30, 2010 and October 31, 2009 of $1,284 and $(1,704), respectively. The non-cash investing activity relates to unpaid purchases of property, plant, and equipment included in accounts payable as of the end of the quarter. Amounts reported as unpaid purchases are recorded as cash outflows from investing activities for purchases of property, plant, and equipment in the statement of cash flows in the period they are paid.

Additional cash flow information for the Company includes cash paid for income taxes during the thirty-nine week periods ended October 30, 2010 and October 31, 2009 of $47,163 and $49,153, respectively.

8.

The Company has several stock option plans which allow for granting of stock options to employees, executives, and directors. The options are in the form of non-qualified stock options and are granted with an exercise price equal to the market value of the Company’s common stock on the date of grant. The options generally expire ten years from the date of grant. The Company also has a restricted stock plan that allows for the granting of non-vested shares of common stock to employees and executives and a restricted stock plan that allows for the granting of non-vested shares of common stock to non-employee directors.

As of October 30, 2010, 641,748 shares were available for grant under the various stock option plans, of which 452,111 were available for grant to executive officers. Also as of October 30, 2010, 399,763 shares were available for grant under the Company’s 2005 Restricted Stock Plan (all of which were available for grant to executive officers) and 65,624 shares were available for grant under the Company’s 2008 Director Restricted Stock Plan.

The Company accounts for stock-based compensation in accordance with FASB ASC 718, Compensation-Stock Compensation. Compensation expense was recognized during fiscal 2010 and fiscal 2009 for new awards, based on the grant date fair value, as well as for the portion of awards granted in fiscal years prior to FASB ASC 718 adoption that was not vested as of the beginning of fiscal 2006. The fair value of stock options is determined using the Black-Scholes option pricing model, while the fair value of grants of non-vested common stock awards is the stock price on the date of grant.
 
 
13

 
 
Information regarding the impact of stock-based compensation expense is as follows:
 
   
Thirteen Weeks Ended
 
   
October 30, 2010
   
October 31, 2009
 
Stock-based compensation expense, before tax:
           
     Stock options
  $ 16     $ 33  
     Non-vested shares of common stock
    1,039       1,179  
Total stock-based compensation expense, before tax
  $ 1,055     $ 1,212  
Total stock-based compensation expense, after tax
  $ 665     $ 764  
 
   
Thirty-nine Weeks Ended
 
   
October 30, 2010
   
October 31, 2009
 
Stock-based compensation expense, before tax:
           
     Stock options
  $ 48     $ 142  
     Non-vested shares of common stock
    3,207       3,592  
Total stock-based compensation expense, before tax
  $ 3,255     $ 3,734  
Total stock-based compensation expense, after tax
  $ 2,051     $ 2,352  
 
FASB ASC 718 requires the benefits of tax deductions in excess of the compensation cost recognized for stock options exercised during the period to be classified as financing cash inflows. This amount is shown as “excess tax benefit from stock option exercises” on the statements of cash flows. For the thirty-nine week periods ended October 30, 2010 and October 31, 2009, the excess tax benefit realized from exercised stock options was $2,271 and $1,863, respectively.

No stock options were granted during fiscal 2010 or fiscal 2009. On September 21, 2009, the Board of Directors authorized a $1.80 per share special one-time cash dividend to be paid on October 27, 2009 to shareholders of record at the close of business on October 15, 2009. To preserve the intrinsic value for option holders, the Board also approved, pursuant to the terms of the Company’s various stock option plans, a proportional adjustment to both the exercise price and the number of shares covered by each award for all outstanding stock options. This adjustment did not result in any incremental compensation expense.

A summary of the Company’s stock-based compensation activity related to stock options for the thirty-nine week period ended October 30, 2010 is as follows:
 
   
Shares
   
Weighted
Average
Exercise
Price
   
Weighted
Average
Remaining
Contractual
Life
 
Aggregate
Intrinsic
Value
 
Outstanding - beginning of year
    1,352,111     $ 5.02                
Granted
    -       -                
Expired/forfeited
    -       -                
Exercised
    (224,080 )     4.36                
Outstanding - end of quarter
    1,128,031     $ 5.15       2.65  
years
  $ 27,005  
Exercisable - end of quarter
    1,121,260     $ 5.03       2.62  
years
  $ 26,972  
 
The total intrinsic value of options exercised during the thirty-nine week periods ended October 30, 2010 and October 31, 2009 was $6,400 and $5,286, respectively. As of October 30, 2010, there was $16 of unrecognized compensation expense related to non-vested stock options. It is expected that this expense will be recognized over a weighted average period of approximately 0.25 years.
 
 
14

 
 
Non-vested shares of common stock granted during the thirty-nine week periods ended October 30, 2010 and October 31, 2009 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 typically 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. Shares granted under the 2008 Director Plan vest 25% on the date of grant and then in equal portions on each of the first three anniversaries of the date of grant.

A summary of the Company’s stock-based compensation activity related to grants of non-vested shares of common stock for the thirty-nine week period ended October 30, 2010 is as follows:
 
   
Shares
   
Weighted Average
Grant Date
Fair Value
 
             
Non-Vested - beginning of year
    405,345     $ 23.29  
Granted
    243,900       28.53  
Forfeited
    (915 )     24.83  
Vested
    (51,516 )     21.75  
Non-Vested - end of quarter
    596,814     $ 25.56  
 
As of October 30, 2010, there was $4,301 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 1.8 years. The total fair value of shares vested during the thirty-nine week periods ended October 30, 2010 and October 31, 2009 was $1,871 and $1,393, respectively.

9.

In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. ASU 2010-06 revises two disclosure requirements concerning fair value measurements and clarifies two others. It requires separate presentation of significant transfers into and out of Levels 1 and 2 of the fair value hierarchy and disclosure of the reasons for such transfers. It will also require the presentation of purchases, sales, issuances, and settlements within Level 3 on a gross basis rather than a net basis. The amendments also clarify that disclosures should be disaggregated by class of asset or liability and that disclosures about inputs and valuation techniques should be provided for both recurring and non-recurring fair value measurements. The new disclosures about fair value measurements are presented in Note 5 to these financial statements, except for the requirement concerning gross presentation of Level 3 activity, which is effective for fiscal years beginning after December 15, 2010. The adoption of ASU No. 2010-06 had no effect on the Company’s financial position or results of operations.

10.

On November 18, 2010, subsequent to the end of the quarter, the Company issued a press release announcing that at a meeting of the Board of Directors, held on November 17, 2010, the Board authorized a $2.50 per share special one-time cash dividend to be paid to shareholders of record at the close of business on December 3, 2010, with a payment date of December 21, 2010.
 
 
15

 
 
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 Financial Statements and notes thereto of the Company included in this Form 10-Q. 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 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 excluded from 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.

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.
 
 
16

 
 
RESULTS OF OPERATIONS

The table below sets forth the percentage relationships of sales and various expense categories in the Statements of Income for the thirteen and thirty-nine week periods ended October 30, 2010 and October 31, 2009:
 
   
Percentage of Net Sales
   
Percentage
   
Percentage of Net Sales
   
Percentage
 
   
Thirteen Weeks Ended
   
Increase/
   
Thirty-nine Weeks Ended
   
Increase/
 
   
Oct. 30, 2010
   
Oct. 31, 2009
   
(Decrease)
   
Oct. 30, 2010
   
Oct. 31, 2009
   
(Decrease)
 
                                     
Net sales
    100.0 %     100.0 %     5.2 %     100.0 %     100.0 %     3.7 %
Cost of sales (including buying,
                                               
  distribution, and occupancy costs)
    56.5 %     55.8 %     6.4 %     57.5 %     56.6 %     5.5 %
Gross profit
    43.5 %     44.2 %     3.7 %     42.5 %     43.4 %     1.4 %
Selling expenses
    18.1 %     18.6 %     2.4 %     18.6 %     18.9 %     2.1 %
General and administrative expenses
    3.1 %     3.2 %     1.4 %     3.3 %     3.4 %     -1.3 %
Income from operations
    22.3 %     22.4 %     5.2 %     20.6 %     21.1 %     1.2 %
Other income, net
    0.2 %     0.5 %     -60.6 %     0.4 %     0.6 %     -21.4 %
Income before income taxes
    22.5 %     22.9 %     3.7 %     21.0 %     21.7 %     0.6 %
Provision for income taxes
    8.4 %     8.5 %     4.5 %     7.8 %     8.0 %     1.4 %
Net income
    14.1 %     14.4 %     3.2 %     13.2 %     13.7 %     0.1 %
 
Net sales increased from $231.2 million in the third quarter of fiscal 2009 to $243.3 million in the third quarter of fiscal 2010, a 5.2% increase. Comparable store sales increased by $1.1 million, or 0.5%, for the thirteen week period ended October 30, 2010 compared to the same period in the prior year. The comparable store sales increase was primarily due to a 2.3% increase in the average retail price per piece of merchandise sold during the period and a 1.4% increase in the average number of units sold per transaction, partially offset by a 3.2% decrease in the number of transactions at comparable stores during the period. Sales growth for the thirteen w