ITEM 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On January 26, 2023, the Compensation Committee of the Board of Directors of The Buckle, Inc. (the “Company”) approved the Company’s compensation program for executive officers for the upcoming 2023 fiscal year. Participants in this compensation program include the Company’s President and Chief Executive Officer, its Senior Vice President of Finance and Chief Financial Officer, and its other “named executive officers” as defined in Item 402(a)(3) of Regulation S-K and in Instruction 4 to Item 5.02 of Form 8-K.
The elements of the compensation program approved by the Compensation Committee for fiscal 2023 are consistent with the compensation program approved for the Company’s executive officers for fiscal 2022. Specifically, the elements for each executive officer include:
•A competitive base salary;
•An incentive cash bonus, based upon the actual performance of the Company;
•Benefits including a health and welfare plan, 401(k) plan, and supplemental non-qualified deferred compensation plan (to provide officers with a benefit comparable to that being currently provided to other employees under the 401(k) plan); and
•Shares of Restricted Stock (hereafter referred to as “Non-Vested Stock” in accordance with terminology used in Generally Accepted Accounting Principles).
Additional information regarding the compensation program is as follows:
Base Salaries for Fiscal 2023
The base salaries for fiscal 2023 for the Company’s President and Chief Executive Officer, its Senior Vice President of Finance and Chief Financial Officer, and its other named executive officers, as approved by the Compensation Committee, are as follows:
| | | | | | | | |
| Name and Title | | Base Salary
($) |
| | |
| Dennis H. Nelson, President and Chief Executive Officer | | 1,200,000 | |
| Thomas B. Heacock, Senior Vice President of Finance and Chief Financial Officer | | 555,000 | |
| Kari G. Smith, Executive Vice President of Stores | | 627,000 | |
| Brett P. Milkie, Senior Vice President of Leasing | | 595,000 | |
Incentive Cash Bonuses and the 2023 Incentive Plan
As part of the compensation program for fiscal 2023, the Compensation Committee approved the Company’s 2023 Management Incentive Plan, which is included as Exhibit 10.1 to this Form 8-K (the “2023 Incentive Plan”). The 2023 Incentive Plan is modeled after the Company’s 2022 Management Incentive Plan (the “2022 Incentive Plan”), which was included as Exhibit A to the Company’s Proxy Statement for its 2022 Annual Meeting of Stockholders.
The 2023 Incentive Plan is a one-year plan designed to motivate the Company’s key employees to improve stockholder value by linking a portion of their compensation to the Company’s financial performance. The 2022 Incentive Plan also was a one-year plan designed to motivate the Company’s key employees to improve stockholder value by linking a portion of their compensation to the Company’s financial performance.
Description of the 2023 Incentive Plan
The 2023 Incentive Plan will be administered by the Compensation Committee. The Compensation Committee’s powers include authority, within the limitations set forth in the 2023 Incentive Plan, to:
•Select the persons to be granted “cash awards,” as defined in the 2023 Incentive Plan;
•Determine the time when cash awards will be granted;
•Determine whether objectives and conditions for earning cash awards have been met; and
•Determine whether payment of cash awards will be made at the end of an award period or deferred.
Any employee of the Company whose performance the Compensation Committee determines can have a significant effect on the success of the Company – designated a “key employee” by the 2023 Incentive Plan – will be granted an annual incentive cash award under the 2023 Incentive Plan. Because the number of key employees may change over time and because the selection of participants is discretionary, it is impossible to determine the number of persons who will be eligible for awards under the 2023 Incentive Plan during its term. However, it is anticipated that seven persons will receive cash awards for fiscal 2023 under the 2023 Incentive Plan.
The 2023 Incentive Plan includes the creation of a “bonus pool” as a cash incentive for executives. This bonus pool will be calculated utilizing the Company’s “pre-bonus net income,” as defined in the 2023 Incentive Plan, as the key performance metric. Dollars will be added to the bonus pool in two methods: (i) 1.2% of fiscal 2023’s pre-bonus net income will be included as a “base amount,” as defined in the 2023 Incentive Plan; and (ii) if fiscal 2023’s pre-bonus net income exceeds the Company’s “target pre-bonus net income amount,” as defined in the 2023 Incentive Plan, then a percentage of the amount above the target will be added to the base amount in calculating the total bonus pool, as outlined in the 2023 Incentive Plan. Bonus pool awards pursuant to the 2023 Incentive Plan will be in addition to base salaries.
Cash Awards
Each participant in the 2023 Incentive Plan will receive a cash award equal to 100% of their respective share of the bonus pool. The President and Chief Executive Officer’s share of the bonus pool for fiscal 2023, as approved by the Compensation Committee, is 37 points (approximately 37% of the allocated points). The share of each other participant in the bonus pool will be determined by the President and Chief Executive Officer under the terms of the 2023 Incentive Plan.
No cash award payment for the 2023 fiscal year may be made to an executive officer until the Company’s pre-bonus net income for the year is certified by the Compensation Committee. A participant shall not be entitled to receive payment of an award under the 2023 Incentive Plan unless such participant is still in the employ of the Company on the last day of the fiscal year for which the cash award is earned.
Non-Vested Stock
Non-Vested Stock was granted by the Compensation Committee on January 29, 2023 in accordance with the Company’s Amended and Restated 2005 Restricted Stock Plan. The Amended and Restated 2005 Restricted Stock Plan was last approved by the Company’s stockholders at the Meeting held May 31, 2013, and it was amended with the approval of the Company’s stockholders on each of June 1, 2018 and June 7, 2021. The Amended and Restated 2005 Restricted Stock Plan permits the Company, acting by the Compensation Committee, to grant awards of Non-Vested Stock, including performance awards. The Amended and Restated 2005 Restricted Stock Plan grants the Compensation Committee the authority to determine and select the performance criteria and the applicable performance period, and to establish performance goals, without further stockholder approval, so long as the performance criteria, performance period, and performance goals are consistent with the Amended and Restated 2005 Restricted Stock Plan as approved by the stockholders.
On January 29, 2023, the Compensation Committee granted shares of Non-Vested Stock pursuant to the Amended and Restated 2005 Restricted Stock Plan to the Company’s President and Chief Executive Officer, its Senior Vice President of Finance and Chief Financial Officer, and its other named executive officers as follows:
| | | | | | | | | | | | | | |
| Name | | Performance Based Shares
(#) | Non-Performance Based Shares
(#) | Total Number of Non-Vested Shares
(#) |
| | | | |
| Dennis H. Nelson | | 110,000 | | 10,000 | | 120,000 | |
| Thomas B. Heacock | | 16,000 | | 2,400 | | 18,400 | |
| Kari G. Smith | | 17,000 | | 2,800 | | 19,800 | |
| Brett P. Milkie | | 16,000 | | 2,400 | | 18,400 | |
For fiscal 2023, as shown in the above table, the Compensation Committee approved and awarded both performance based and non-performance based shares.
Performance based shares awarded under the Amended and Restated 2005 Restricted Stock Plan include a primary performance feature whereby 50% of the shares granted will vest over four years if the Company achieves the target (as established by the Compensation Committee) for fiscal 2023 pre-bonus net income, the next 25% of the shares granted will vest over four years if the Company’s fiscal 2023 pre-bonus net income increases at least 2.5% over the target, and the final 25% of the shares granted will vest over four years if the Company’s fiscal 2023 pre-bonus net income increases at least 5.0% over the target. Performance based shares also include a secondary performance feature enabling vesting for up to 100% of the shares granted as follows: 25% of the shares granted will vest over four years if the Company’s net income from operations (adjusted to exclude expenses recorded for equity compensation) exceeds 12.0% of net sales for the fiscal year, an additional 25% of the shares granted will vest over four years if the Company’s net income from operations (adjusted to exclude expenses recorded for equity compensation) exceeds 14.0% of net sales for the fiscal year, an additional 25% of the shares granted will vest over four years if the Company’s net income from operations (adjusted to exclude expenses recorded for equity compensation) exceeds 16.0% of net sales for the fiscal year, and the final 25% of the shares granted will vest over four years if the Company’s net income from operations (adjusted to exclude expenses recorded for equity compensation) exceeds 20% of net sales for the fiscal year. The primary and secondary performance features operate independently and the actual number of shares that vest will be the greater of the two amounts derived from the applicable calculation methods. Upon the Compensation Committee’s certification of the achievement of the performance results, 20% of the Non-Vested Stock shares would vest immediately, with 20% vesting on February 1, 2025, 30% on January 31, 2026, and 30% on January 30, 2027.
Non-performance based shares awarded under the Amended and Restated 2005 Restricted Stock Plan are not subject to performance objectives and will vest over a period of four years as follows: 20% on February 3, 2024, 20% on February 1, 2025, 30% on January 31, 2026, and 30% on January 30, 2027.
The employee must remain in the employ of the Company on the vesting date in order to become vested in both the performance based and the non-performance based shares.
Full Text of 2023 Incentive Plan and Amended and Restated 2005 Restricted Stock Plan
The foregoing descriptions of the Company’s 2023 Incentive Plan and its Amended and Restated 2005 Restricted Stock Plan do not purport to be complete and are qualified by reference to the full text of those plans. A copy of the 2023 Incentive Plan is included as Exhibit 10.1 to this Form 8-K. A copy of the Amended and Restated 2005 Restricted Stock Plan was included as Exhibit B to the Company’s Proxy Statement for the Annual Meeting held on May 31, 2013.
ITEM 9.01(d). Exhibits
Exhibit 10.1 The Buckle, Inc. 2023 Management Incentive Plan
Exhibit 104 Cover Page Interactive Data File (embedded within the Inline XBRL document)