Edgar Filing: BUCKLE INC

Unassociated Document

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 August 1, 2009

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 ¨

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 ¨ No ¨

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; ¨ Accelerated filer; ¨ Non-accelerated filer (Do not check if a smaller reporting company); ¨ 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 August 28, 2009, was 46,276,564.

THE BUCKLE, INC.

FORM 10-Q

INDEX

		Pages
Part I. Financial Information (unaudited)

Item 1.	Financial Statements	3

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	30

Part II. Other Information

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3.	Defaults Upon Senior Securities	31

Item 4.	Submission of Matters to a Vote of Security Holders	32

Item 5.	Other Information	32

Item 6.	Exhibits	32

Signatures		33

THE BUCKLE, INC.

BALANCE SHEETS

(Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

	August 1,			January 31,
	2009			2009
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	145,736		$	162,463
Short-term investments		17,288			19,150
Accounts receivable, net of allowance of $28 and $46, respectively		6,719			3,734
Inventory		106,523			83,963
Prepaid expenses and other assets		18,865			17,655
Total current assets		295,131			286,965

PROPERTY AND EQUIPMENT		286,136			264,154
Less accumulated depreciation and amortization		(154,023	)		(147,460	)
		132,113			116,694

LONG-TERM INVESTMENTS		65,448			56,213
OTHER ASSETS		4,650			5,468

	$	497,342		$	465,340

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	42,546		$	22,472
Accrued employee compensation		19,748			40,460
Accrued store operating expenses		8,397			7,701
Gift certificates redeemable		6,986			10,144
Income taxes payable		2,042			8,649
Total current liabilities		79,719			89,426

DEFERRED COMPENSATION		5,761			4,090
DEFERRED RENT LIABILITY		35,886			34,602
Total liabilities		121,366			128,118

COMMITMENTS

STOCKHOLDERS’ EQUITY:
Common stock, authorized 100,000,000 shares of $.01 par value; 46,277,205 and 45,906,265 shares issued and outstanding at August 1, 2009 and January 31, 2009, respectively		463			459
Additional paid-in capital		74,359			68,894
Retained earnings		302,169			268,789
Accumulated other comprehensive loss		(1,015	)		(920	)
Total stockholders’ equity		375,976			337,222

	$	497,342		$	465,340

See notes to unaudited condensed financial statements.

THE BUCKLE, INC.

STATEMENTS OF INCOME

(Amounts in Thousands Except Per Share Amounts)

(Unaudited)

	Thirteen Weeks Ended				Twenty-six Weeks Ended
	August 1,		August 2,		August 1,		August 2,
	2009		2008		2009		2008

SALES, Net of returns and allowances	$	192,906	$	169,765	$	392,603	$	330,065

COST OF SALES (Including buying,
distribution, and occupancy costs)		110,628		99,497		223,622		194,175

Gross profit		82,278		70,268		168,981		135,890

OPERATING EXPENSES:
Selling		37,507		33,480		75,104		65,039
General and administrative		6,647		3,477		14,025		10,172
		44,154		36,957		89,129		75,211

INCOME FROM OPERATIONS		38,124		33,311		79,852		60,679

OTHER INCOME, Net		1,549		2,049		2,459		4,369

INCOME BEFORE INCOME TAXES		39,673		35,360		82,311		65,048

PROVISION FOR INCOME TAXES		14,679		13,084		30,455		24,055

NET INCOME	$	24,994	$	22,276	$	51,856	$	40,993


EARNINGS PER SHARE:
Basic	$	0.55	$	0.49	$	1.14	$	0.91

Diluted	$	0.54	$	0.48	$	1.11	$	0.88

Basic weighted average shares		45,640		45,346		45,585		45,076
Diluted weighted average shares		46,623		46,587		46,572		46,418

See notes to unaudited condensed financial statements.

THE BUCKLE, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

(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 2009
BALANCE, February 1, 2009		45,906,265	$	459	$	68,894		$	268,789		$	(920	)	$	337,222

Net income		-		-		-			51,856			-			51,856
Dividends paid on common stock, ($0.20 per share)		-		-		-			(18,476	)		-			(18,476	)
Common stock issued on exercise of stock options		173,511		2		1,136			-			-			1,138
Issuance of non-vested stock, net of forfeitures		197,429		2		(2	)		-			-			-
Amortization of non-vested stock grants, net of forfeitures		-		-		2,413			-			-			2,413
Stock option compensation expense		-		-		109			-			-			109
Income tax benefit related to exercise
of stock options		-		-		1,809			-			-			1,809
Unrealized loss on investments, net of tax		-		-		-			-			(95	)		(95	)

BALANCE, August 1, 2009		46,277,205	$	463	$	74,359		$	302,169		$	(1,015	)	$	375,976

FISCAL 2008
BALANCE, February 3, 2008		29,841,668	$	298	$	46,977		$	291,045		$	-		$	338,320

Net income		-		-		-			40,993			-			40,993
Dividends paid on common stock, ($0.1667 per share)		-		-		-			(15,269	)		-			(15,269	)
Common stock issued on exercise of stock options		669,725		8		8,868			-			-			8,876
Issuance of non-vested stock, net of forfeitures		139,950		1		(1	)		-			-			-
Amortization of non-vested stock grants, net of forfeitures		-		-		2,599			-			-			2,599
Stock option compensation expense		-		-		199			-			-			199
Income tax benefit related to exercise of stock options		-		-		7,630			-			-			7,630
Unrealized loss on investments, net of tax		-		-		-			-			(976	)		(976	)

BALANCE, August 2, 2008		30,651,343	$	307	$	66,272		$	316,769		$	(976	)	$	382,372

See notes to unaudited condensed financial statements.

THE BUCKLE, INC.

STATEMENTS OF CASH FLOWS

(Amounts in Thousands)

(Unaudited)

	Twenty-six Weeks Ended
	August 1,			August 2,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	51,856		$	40,993
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation and amortization		11,438			10,383
Amortization of non-vested stock grants, net of forfeitures		2,413			2,599
Stock option compensation expense		109			199
Gain on involuntary conversion of corporate aircraft to monetary asset		-			(2,963	)
Realized gain on securities		(907	)		-
Deferred income taxes		(936	)		-
Other		(113	)		50
Changes in operating assets and liabilities:
Accounts receivable		(511	)		(1,874	)
Inventory		(22,560	)		(25,793	)
Prepaid expenses and other assets		(769	)		(1,196	)
Accounts payable		19,064			23,247
Accrued employee compensation		(20,712	)		(11,335	)
Accrued store operating expenses		696			1,300
Gift certificates redeemable		(3,158	)		(2,697	)
Income taxes payable		(7,753	)		(1,712	)
Changes in long-term liabilities and deferred compensation		2,955			4,326

Net cash flows from operating activities		31,112			35,527

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(26,041	)		(15,044	)
Proceeds from sale of property and equipment		307			11,587
Change in other assets		38			(167	)
Purchases of investments		(22,201	)		(16,581	)
Proceeds from sales/maturities of investments		15,584			104,503

Net cash flows from investing activities		(32,313	)		84,298

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercise of stock options		1,138			8,876
Excess tax benefit from stock option exercises		1,812			6,419
Payment of dividends		(18,476	)		(15,269	)

Net cash flows from financing activities		(15,526	)		26

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(16,727	)		119,851

CASH AND CASH EQUIVALENTS, Beginning of period		162,463			64,293

CASH AND CASH EQUIVALENTS, End of period	$	145,736		$	184,144

See notes to unaudited condensed financial statements.

THE BUCKLE, INC.

NOTES TO FINANCIAL STATEMENTS

THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 1, 2009 AND AUGUST 2, 2008

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

1.	Management Representation

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 31, 2009, included in The Buckle, Inc.'s 2008 Form 10-K.

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 industry segment. The Company had 401 stores located in 41 states throughout the continental United States as of August 1, 2009 and 381 stores in 39 states as of August 2, 2008. During the second quarter of fiscal 2009, the Company opened nine new stores and substantially remodeled seven stores. During the second quarter of fiscal 2008, the Company opened seven new stores and substantially remodeled four stores.

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						Twenty-six Weeks Ended
Merchandise Group	August 1, 2009			August 2, 2008			August 1, 2009			August 2, 2008

Denims		35.3	%		34.9	%		38.6	%		38.4	%
Tops (including sweaters)		39.0			40.9			37.7			38.5
Sportswear/Fashions		11.1			10.2			9.7			9.3
Accessories		8.3			7.8			7.7			7.5
Footwear		5.0			5.0			5.0			5.0
Casual bottoms		0.6			0.9			0.5			0.9
Outerwear		0.6			0.2			0.7			0.3
Other		0.1			0.1			0.1			0.1

		100.0	%		100.0	%		100.0	%		100.0	%

THE BUCKLE, INC.

NOTES TO FINANCIAL STATEMENTS

THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 1, 2009 AND AUGUST 2, 2008

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

3.	Earnings Per Share

Basic earnings per share data are based on the weighted average outstanding common shares during the period. Diluted earnings per share data are based on the weighted average outstanding common shares and the effect of all dilutive potential common shares, including stock options.

	Thirteen Weeks Ended							Thirteen Weeks Ended
	August 1, 2009							August 2, 2008
			Weighted							Weighted
			Average		Per Share					Average		Per Share
	Income		Shares		Amount			Income		Shares		Amount

Basic EPS	$	24,994		45,640	$	0.55		$	22,276		45,346	$	0.49

Effect of Dilutive Securities:
Stock options and non-vested shares		-		983		(0.01	)		-		1,241		(0.01	)

Diluted EPS	$	24,994		46,623	$	0.54		$	22,276		46,587	$	0.48

	Twenty-six Weeks Ended							Twenty-six Weeks Ended
	August 1, 2009							August 2, 2008
			Weighted							Weighted
			Average		Per Share					Average		Per Share
	Income		Shares		Amount			Income		Shares		Amount

Basic EPS	$	51,856		45,585	$	1.14		$	40,993		45,076	$	0.91

Effect of Dilutive Securities:
Stock options and non-vested shares		-		987		(0.03	)		-		1,342		(0.03	)

Diluted EPS	$	51,856		46,572	$	1.11		$	40,993		46,418	$	0.88

4.	Stock Split

On September 15, 2008, the Company’s Board of Directors approved a 3-for-2 stock split payable in the form of a stock dividend for shareholders of record as of October 15, 2008, with a distribution date of October 30, 2008. All share and per share data (except par value and historical stockholders’ equity data) presented in the financial statements for all periods has been adjusted to reflect the impact of this stock split.

THE BUCKLE, INC.

NOTES TO FINANCIAL STATEMENTS

THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 1, 2009 AND AUGUST 2, 2008

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

5.	Investments

The following is a summary of investments as of August 1, 2009:

	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	$	26,720	$	-	$	(1,611	)	$	-		$	25,109
Preferred stock		4,400		-		-			(3,219	)		1,181
	$	31,120	$	-	$	(1,611	)	$	(3,219	)	$	26,290

Held-to-Maturity Securities:
State and municipal bonds	$	43,215	$	509	$	(66	)	$	-		$	43,658
Fixed maturities		3,000		54		(2	)		-			3,052
Certificates of deposit		3,720		34		-			-			3,754
U.S. treasuries		750		4		(1	)		-			753

	$	50,685	$	601	$	(69	)	$	-		$	51,217

Trading Securities:
Mutual funds	$	6,250	$	-	$	(489	)	$	-		$	5,761

The following is a summary of investments as of January 31, 2009:

	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	$	35,495	$	-	$	(1,460	)	$	(3,757	)	$	30,278
Preferred stock		2,000		-		-			(1,400	)		600
	$	37,495	$	-	$	(1,460	)	$	(5,157	)	$	30,878

Held-to-Maturity Securities:
State and municipal bonds	$	31,965	$	536	$	(90	)	$	-		$	32,411
Fixed maturities		2,500		37		(7	)		-			2,530
Certificates of deposit		2,945		42		-			-			2,987
U.S. treasuries		2,985		19		(9	)		-			2,995

	$	40,395	$	634	$	(106	)	$	-		$	40,923

Trading Securities:
Mutual funds	$	5,165	$	-	$	(1,075	)	$	-		$	4,090

THE BUCKLE, INC.

NOTES TO FINANCIAL STATEMENTS

THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 1, 2009 AND AUGUST 2, 2008

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

The auction-rate securities were invested as follows as of August 1, 2009:

Nature	Underlying Collateral	Par Value
Municipal revenue bonds	83% insured by AAA/AA/A-rated bond insurers at Aug. 1, 2009	$	13,345
Municipal bond funds	Fixed income instruments within issuers' money market funds		9,625
Student loan bonds	Student loans guaranteed by state entities		3,750
Total par value		$	26,720

As of August 1, 2009, the Company’s auction-rate securities portfolio was 58% AAA/Aaa-rated, 33% AA/Aa-rated, and 9% A-rated.

The amortized cost and fair value of held-to-maturity securities by contractual maturity as of August 1, 2009 is as follows:

	Amortized		Fair
Fiscal Periods	Cost		Value

Twelve months ending July 31, 2010	$	15,643	$	15,730
Twelve months ending July 30, 2011		12,299		12,438
Twelve months ending July 28, 2012		11,624		11,703
Twelve months ending August 3, 2013		4,158		4,254
Twelve months ending August 2, 2014		850		847
Thereafter		6,111		6,245
	$	50,685	$	51,217

At August 1, 2009 and January 31, 2009, held-to-maturity investments of $35,042 and $22,795 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 August 1, 2009, the reported investment amount is net of $1,611 of temporary impairment and $3,219 of other-than-temporary impairment (“OTTI”). These amounts have been recorded to account for the impairment of certain securities from their stated par value. The $1,611 temporary impairment is reported, net of tax, as an “accumulated other comprehensive loss” of $1,015 in stockholders’ equity as of August 1, 2009. The Company reported the $3,219 OTTI ($2,028 net of tax) as part of the total of $5,157 OTTI ($3,249 net of tax) reported as a loss in the statement of income during both the third and fourth quarters of the fiscal year ended January 31, 2009.

The OTTI is related to investments in auction-rate preferred securities (“ARPS”) that have all been converted to perpetual preferred stock as a result of the September 2008 bankruptcy of Lehman Brothers (the broker and auction agent for all of the ARPS purchased by the Company). The converted shares are valued at the quoted price of the securities as of August 1, 2009. All of these issues of preferred stock are publicly traded and have experienced significant declines in value. The Company recorded a charge for OTTI during fiscal 2008 based on the closing price of the preferred securities as of January 31, 2009. 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.

THE BUCKLE, INC.

NOTES TO FINANCIAL STATEMENTS

THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 1, 2009 AND AUGUST 2, 2008

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

As of August 1, 2009, the Company had $26,720 invested in ARS and $4,400 invested in preferred securities, at par value, which are reported at their estimated fair value of $25,109 and $1,181, respectively. As of January 31, 2009, the Company had $35,495 invested in ARS and $2,000 invested in preferred securities, which are reported at their estimated fair value of $30,278 and $600, 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. The Company liquidated $1,650 of its investments in ARS at par value and $3,000 of its investments in preferred securities at par value during the first half of fiscal 2009. These investments were valued at $1,062 and were liquidated for $1,969 in proceeds.

As of August 1, 2009, $1,645 of the Company’s investment in ARS and preferred securities was classified in short-term investments and $24,645 was classified in long-term investments. As of January 31, 2009, $1,550 of the Company’s investment in ARS and preferred securities was classified in short-term investments and $29,328 was classified in long-term investments.

6.	Fair Value Measurements

Effective February 3, 2008, the Company adopted the provisions of FASB Statement No. 157 (“SFAS 157”), Fair Value Measurements. This standard defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of SFAS 157 apply to all financial instruments that are being measured and reported on a fair value basis. In addition, in February 2008, FASB issued FASB Staff Position (“FSP”) FAS 157-2, Effective Date of FASB Statement No. 157. This FSP, which was adopted in the quarter ended May 2, 2009, delayed the effective date of SFAS 157 to fiscal years beginning after November 15, 2008 for all non-financial assets and liabilities. The adoption of SFAS 157 did not have any impact on the Company’s financial position or results of operations.

As defined by SFAS 157, 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.

THE BUCKLE, INC.

NOTES TO FINANCIAL STATEMENTS

THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 1, 2009 AND AUGUST 2, 2008

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

As of August 1, 2009 and January 31, 2009, 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 5. 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 inputs 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-part 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 August 1, 2009 and January 31, 2009.

As a result of the decline in fair value for certain of the Company’s investments in ARS, the Company has reported its investments net of $1,611 of temporary impairment and $3,219 of OTTI as of August 1, 2009. The Company has reported the $1,611 of temporary impairment, net of tax, as a $1,015 reduction to stockholders’ equity in “accumulated other comprehensive loss” as of August 1, 2009. Any future fluctuation in fair value related to these securities 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 Company reported the $3,219 OTTI ($2,028 net of tax) as part of the total of $5,157 OTTI ($3,249 net of tax) reported as a loss in the statement of income during both the third and fourth quarters of the fiscal year ended January 31, 2009. The Company reviews all investments for OTTI at least quarterly or as indicators of impairment exist. 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. In addition, the Company considers other 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.

THE BUCKLE, INC.

NOTES TO FINANCIAL STATEMENTS

THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 1, 2009 AND AUGUST 2, 2008

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

The Company’s financial assets measured at fair value on a recurring basis subject to the disclosure requirements of SFAS 157 as of August 1, 2009 were as follows:

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in
	Active Markets		Significant		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
ASSETS:
Available-for-sale securities (including
auction-rate securities and preferred stock)	$	2,824	$	16,231	$	7,235	$	26,290
Trading securities (including mutual funds)		5,761		-		-		5,761
Total	$	8,585	$	16,231	$	7,235	$	32,051

ARS and preferred securities included in Level 1 represent securities which have a known or anticipated upcoming redemption as of August 1, 2009 and those that have publicly traded quoted prices. ARS included in Level 2 represent securities which have not experienced a successful auction subsequent to February 2, 2008. 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 $690 of the Company’s recorded temporary impairment. 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 using significant unobservable inputs (Level 3), as defined in SFAS 157, are as follows for the 26-week year-to-date period ended August 1, 2009:

	Available-for-Sale
	Securities
	(Level 3)

Balance as of February 1, 2009	$	7,260
Total gains or losses (realized and unrealized):
Included in net income		-
Included in other comprehensive income		-
Purchases, sales, issuances, and settlements (net)		(25	)
Transfers in and/or out of Level 3		-
Balance as of August 1, 2009	$	7,235

THE BUCKLE, INC.

NOTES TO FINANCIAL STATEMENTS

THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 1, 2009 AND AUGUST 2, 2008

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

7.	Comprehensive Income

Comprehensive income consists of net income and unrealized gains and losses on available-for-sale securities. Unrealized losses on the Company’s investments 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
	August 1, 2009			August 2, 2008

Net income	$	24,994		$	22,276
Changes in net unrealized losses on investments, net of taxes of $45 and $169		(77	)		(288	)
Comprehensive Income	$	24,917		$	21,988

	Twenty-six Weeks Ended
	August 1, 2009			August 2, 2008

Net income	$	51,856		$	40,993
Changes in net unrealized losses on investments, net of taxes of $56 and $573		(95	)		(976	)
Comprehensive Income	$	51,761		$	40,017

8.	Supplemental Cash Flow Information

The Company had non-cash investing activities during the twenty-six week periods ended August 1, 2009 and August 2, 2008 of $(1,010) and $184, 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 twenty-six week periods ended August 1, 2009 and August 2, 2008 of $37,282 and $18,944, respectively.

9.	Stock-Based Compensation

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 August 1, 2009, 642,195 shares were available for grant under the various stock option plans, of which 452,502 were available for grant to executive officers. Also as of August 1, 2009, 207,511 shares were available for grant under the various restricted stock plans, of which 128,387 were available for grant to executive officers.

THE BUCKLE, INC.

NOTES TO FINANCIAL STATEMENTS

THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 1, 2009 AND AUGUST 2, 2008

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

The Company accounts for stock-based compensation in accordance with FASB Statement No. 123 (revised 2004) (“SFAS 123(R)”), Share-Based Payment. Compensation expense was recognized during the first two quarters of fiscal 2009 and fiscal 2008 for new awards, based on the grant date fair value, as well as for the portion of awards granted in fiscal years prior to SFAS 123(R) 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.

Information regarding the impact of stock-based compensation expense is as follows:

	Thirteen Weeks Ended				Twenty-six Weeks Ended
	August 1, 2009		August 2, 2008		August 1, 2009		August 2, 2008
Stock-based compensation expense, before tax:
Stock options	$	69	$	57	$	109	$	199
Non-vested shares of common stock		1,188		1,299		2,413		2,599

Total stock-based compensation expense, before tax	$	1,257	$	1,356	$	2,522	$	2,798

Total stock-based compensation expense, after tax	$	792	$	854	$	1,589	$	1,763

SFAS 123(R) 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 twenty-six week periods ended August 1, 2009 and August 2, 2008, the excess tax benefit realized from exercised stock options was $1,812 and $6,419, respectively.

No stock options were granted during the first half of fiscal 2009. Stock options granted during the first half of fiscal 2008 were granted under the Company’s 1993 Director Stock Option Plan. Grants were made with an exercise price equal to the market value of the Company’s common stock on the date of grant and a contractual term of ten years. Options granted under the 1993 Director Stock Option Plan typically vest over a period of three years.

The weighted average grant date fair value of options granted during the twenty-week period ended August 2, 2008 was $8.40. The fair value of options granted was estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions:

	Twenty-six Weeks Ended
	August 2, 2008

Risk-free interest rate (1)		3.10	%
Dividend yield (2)		2.40	%
Expected volatility (3)		33.00	%
Expected lives - years (4)		7.0

(1)

Based on the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected lives of stock options

(2)

Based on expected dividend yield as of the date of grant.

(3)

Based on historical volatility of the Company’s common stock over a period consistent with the expected lives of stock options.

(4)

Based on historical and expected exercise behavior.

THE BUCKLE, INC.

NOTES TO FINANCIAL STATEMENTS

THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 1, 2009 AND AUGUST 2, 2008

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

On September 15, 2008, the Board of Directors authorized another $3.00 per share ($2.00 per share after 3-for-2 stock split) special one-time cash dividend to be paid on October 27, 2008 to shareholders of record at the close of business on October 15, 2008. 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 twenty-six week period ended August 1, 2009 is as follows:

						Weighted
				Weighted		Average
				Average		Remaining	Aggregate
				Exercise		Contractual	Intrinsic
	Shares			Price		Life	Value

Outstanding - beginning of year		1,635,163		$	6.91
Granted		-			n/a
Expired/forfeited		(5,069	)		24.21
Exercised		(173,511	)		6.56

Outstanding - end of quarter		1,456,583		$	6.90	3.76 years	$	35,020

Exercisable - end of quarter		1,436,303		$	6.65	3.70 years	$	34,884

The total intrinsic value of options exercised during the twenty-six week periods ended August 1, 2009 and August 2, 2008 was $5,026 and $21,764, respectively. As of August 1, 2009, there was $130 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 1.2 years.

Non-vested shares of common stock granted during the twenty-six week period ended August 2, 2008 were granted pursuant to the Company’s 2005 Restricted Stock Plan. Non-vested shares granted during the twenty-six week period ended August 1, 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.

THE BUCKLE, INC.

NOTES TO FINANCIAL STATEMENTS

THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 1, 2009 AND AUGUST 2, 2008

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

A summary of the Company’s stock-based compensation activity related to grants of non-vested shares of common stock for the twenty-six week period ended August 1, 2009 is as follows:

				Weighted Average
				Grant Date
	Shares			Fair Value

Non-Vested - beginning of year		423,171		$	23.84
Granted		243,800			21.20
Forfeited		(46,371	)		22.63
Vested		(45,506	)		27.54

Non-Vested - end of quarter		575,094		$	22.53

As of August 1, 2009, there was $6,407 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 2.0 years. The total fair value of shares vested during the twenty-six week periods ended August 1, 2009 and August 2, 2008 was $1,393 and $1,341, respectively.

10.	Insurance Proceeds

During the second quarter of fiscal 2008, one of the Company’s corporate aircrafts was destroyed in a tornado. The Company received $11,500 of insurance proceeds, which is included in proceeds from sale of property and equipment in the statements of cash flows. During the second quarter, Company recorded a $2,963 gain from the involuntary conversion of the aircraft, which is included in general and administrative expenses. During the third quarter of fiscal 2008 the Company purchased a replacement aircraft at a cost of $14,304.

11.	Recently Issued Accounting Pronouncements

Effective February 3, 2008, the Company adopted the provisions of FASB Statement No. 157 (“SFAS 157”), Fair Value Measurements. This standard defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of SFAS 157 apply to all financial instruments that are being measured and reported on a fair value basis. In addition, in February 2008, FASB issued FASB Staff Position (“FSP”) FAS 157-2, Effective Date of FASB Statement No. 157. This FSP delayed the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for all non-financial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. The adoption of SFAS 157 during fiscal 2008 for all financial instruments and the adoption during fiscal 2009 for all non-financial assets and liabilities did not have any impact on the Company’s financial position or results of operations.

Effective February 3, 2008, the Company adopted the provisions of FASB Statement No. 159 (“SFAS 159”), The Fair Value Option for Financial Assets and Financial Liabilities. This standard provides an option for companies to report selected financial assets and liabilities at fair value. Although the Company adopted the provisions of SFAS 159 effective with the beginning of the Company’s 2008 fiscal year, it did not elect the fair value option for any financial instruments or other items held by the Company. Therefore, the adoption of SFAS 159 did not have any impact on the Company’s financial position or results of operations.

THE BUCKLE, INC.

NOTES TO FINANCIAL STATEMENTS

THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 1, 2009 AND AUGUST 2, 2008

(Dollar Amounts in Thousands Except Share and Per Share Amounts)

(Unaudited)

In May 2009, FASB issued FASB Statement No. 165 (“SFAS 165”), Subsequent Events. This statement requires management to evaluate subsequent events through the date the financial statements are issued, or are available to be issued, and requires companies to disclose the date through which such subsequent events have been evaluated. SFAS 165 is effective for financial statements issued for interim or annual reporting periods ending after June 15, 2009, therefore the Company adopted the provisions of SFAS 165 effective May 3, 2009. The adoption of SFAS 165 did not have any impact on the Company’s financial position or results of operations.

In June 2009, FASB issues FASB Statement No. 168 (“SFAS 168”), The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162. The codification will become the source of Generally Accepted Accounting Principles (“GAAP”) recognized by FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of SFAS 168, the codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the codification will become non-authoritative. SFAS 168 is effective for financial statements issued for interim or annual reporting periods ending after September 15, 2009. The Company does not anticipate that the adoption of SFAS 168 will have any impact on the Company’s financial position or results of operations.

12.	Subsequent Events

In accordance with the provisions of SFAS 165, the Company has evaluated subsequent events through September 10, 2009. All subsequent events requiring recognition as of August 1, 2009 or disclosure in this Form 10-Q have been incorporated into the financial statements contained herein.

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.

THE BUCKLE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 twenty-six week periods ended August 1, 2009 and August 2, 2008:

	Percentage of Net Sales						Percentage			Percentage of Net Sales						Percentage
	Thirteen Weeks Ended						Increase/			Twenty-six Weeks Ended						Increase/
	Aug.1, 2009			Aug.2, 2008			(Decrease)			Aug.1, 2009			Aug.2, 2008			(Decrease)

Net sales		100.0	%		100.0	%		13.6	%		100.0	%		100.0	%		18.9	%
Cost of sales (including buying, distribution, and occupancy costs)		57.3	%		58.6	%		11.2	%		57.0	%		58.8	%		15.2	%
Gross profit		42.7	%		41.4	%		17.1	%		43.0	%		41.2	%		24.4	%
Selling expenses		19.4	%		19.7	%		12.0	%		19.1	%		19.7	%		15.5	%
General and administrative expenses		3.5	%		2.1	%		91.2	%		3.6	%		3.1	%		37.9	%
Income from operations		19.8	%		19.6	%