The following discussion should be read in conjunction with the consolidated financial statements and notes thereto of the Company included in this Form 10-Q. All references herein to the "Company", "Buckle", "we", "us", or similar terms refer to The Buckle, Inc. and its subsidiary. The following is management's discussion and analysis of certain significant factors which have affected the Company's financial condition and results of operations during the periods included in the accompanying consolidated financial statements.

EXECUTIVE OVERVIEW

Company management considers the following items to be key performance indicators in evaluating Company performance.

Comparable Store Sales - Stores are deemed to be comparable stores if they were open in the prior year on the first day of the fiscal period being presented. Stores which have been remodeled, expanded, and/or relocated, but would otherwise be included as comparable stores, are not excluded from the comparable store sales calculation. Online sales are 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.

RESULTS OF OPERATIONS

The following table sets forth certain financial data expressed as a percentage
of net sales and the percentage change in the dollar amount of such items
compared to the prior period:

                               Percentage of Net Sales             Percentage             Percentage of Net Sales            Percentage
                                Thirteen Weeks Ended               Increase/              Thirty-nine Weeks Ended             Increase/
                         Oct. 27, 2012         Oct. 29, 2011       (Decrease)       Oct. 27, 2012         Oct. 29, 2011      (Decrease)

Net sales                         100.0 %               100.0 %            3.9 %             100.0 %               100.0 %           5.2 %
Cost of sales
(including buying,
 distribution, and
occupancy costs)                   55.9 %                56.6 %            2.6 %              57.3 %                57.5 %           4.8 %
Gross profit                       44.1 %                43.4 %            5.7 %              42.7 %                42.5 %           5.6 %
Selling expenses                   17.3 %                18.3 %           -1.8 %              18.0 %                18.6 %           1.3 %
General and
administrative
expenses                            3.5 %                 3.0 %           22.7 %               3.7 %                 3.4 %          14.3 %
Income from
operations                         23.3 %                22.1 %            9.6 %              21.0 %                20.5 %           8.1 %
Other income, net                   0.1 %                 0.1 %          -45.2 %               0.3 %                 0.3 %          -3.5 %
Income before income
taxes                              23.4 %                22.2 %            9.3 %              21.3 %                20.8 %           7.9 %
Provision for income
taxes                               8.6 %                 8.2 %            9.3 %               7.8 %                 7.7 %           7.9 %
Net income                         14.8 %                14.0 %            9.3 %              13.5 %                13.1 %           7.9 %

Net sales increased from $273.4 million in the third quarter of fiscal 2011 to $284.1 million in the third quarter of fiscal 2012, a 3.9% increase. Comparable store sales increased by $6.1 million, or 2.4%, for the thirteen week period ended October 27, 2012 compared to the same period in the prior year. The increase in comparable store sales was primarily due to a 4.2% increase in the average retail price per piece of merchandise sold during the period, partially offset by a 1.0% decrease in the number of transactions at comparable stores and a 0.9% decrease in the average number of units sold per transaction. Sales growth for the thirteen week period was attributable to the inclusion of a full quarter of operating results for the four new stores opened after the first half of fiscal 2011, to the opening of nine new stores during the first three quarters of fiscal 2012, and to growth in online sales. Online sales for the quarter (which are not included in comparable store sales) increased 3.8% to $19.6 million.

The Company's average retail price per piece of merchandise sold increased $2.13, or 4.2%, during the third quarter of fiscal 2012 compared to the third quarter of fiscal 2011. This $2.13 increase was primarily attributable to the following changes (with their corresponding effect on the overall average price per piece): a shift in the merchandise mix ($1.45), a 16.2% increase in average footwear price points ($0.39), an 8.3% increase in average accessory price points ($0.33), and a 1.2% increase in average knit shirt price points ($0.14); which were partially offset by reduced average price points in certain other categories ($0.18). These changes are primarily a reflection of merchandise shifts in terms of brands and product styles, fabrics, details, and finishes.

Net sales increased from $725.9 million for the first three quarters of fiscal 2011 to $763.4 million for the first three quarters of fiscal 2012, a 5.2% increase. Comparable store sales increased by $21.1 million, or 3.2%, for the thirty-nine week period ended October 27, 2012 compared to the same period in the prior year. The comparable store sales increase was primarily due to 5.9% increase in the average retail price per piece of merchandise sold during the period, partially offset by a 1.5% decrease in the number of transactions at comparable stores and a 0.9% decrease in the average number of units sold per transaction. Sales growth for the thirty-nine week period was also attributable to the inclusion of a full three quarters of operating results for the 13 new stores opened during fiscal 2011, to the opening of 9 new stores during the first three quarters of fiscal 2012, and to growth in online sales. Online sales for the year-to-date period increased 10.0% to $55.4 million. Average sales per square foot (for sales at physical retail store locations) increased 1.9% from $318.24 for the thirty-nine week period ended October 29, 2011 to $324.42 for the thirty-nine week period ended October 27, 2012. Total square footage as of October 27, 2012 was 2.204 million.

The Company's average retail price per piece of merchandise sold increased $2.71, or 5.9%, during the first three quarters of fiscal 2012 compared to the first three quarters of fiscal 2011. This $2.71 increase was primarily attributable to the following changes (with their corresponding effect on the overall average price per piece): a shift in the merchandise mix ($1.14), a 1.6% increase in average denim price points ($0.33), a 12.5% increase in average footwear price points ($0.30), a 9.2% increase in average active apparel price points ($0.29), a 7.7% increase in average accessory price points ($0.29), a 2.4% increase in average knit shirt price points ($0.27), and increased average price points in certain other categories ($0.09). These changes are primarily a reflection of merchandise shifts in terms of brands and product styles, fabrics, details, and finishes.

Gross profit after buying, distribution, and occupancy expenses increased from $118.7 million in the third quarter of fiscal 2011 to $125.4 million in the third quarter of fiscal 2012, a 5.7% increase. As a percentage of net sales, gross profit increased from 43.4% in the third quarter of fiscal 2011 to 44.1% in the third quarter of fiscal 2012. The improvement was attributable to an increase in actual merchandise margins (0.90%, as a percentage of net sales), which was partially offset by an increase in certain occupancy, distribution, and buying costs (0.20%, as a percentage of net sales).

Year-to-date, gross profit increased from $308.8 million for the thirty-nine week period ended October 29, 2011 to $326.1 million for the thirty-nine week period ended October 27, 2012, a 5.6% increase. As a percentage of net sales, gross profit increased from 42.5% for the first three quarters of fiscal 2011 to 42.7% for the first three quarters of fiscal 2012. The improvement was attributable to an increase in actual merchandise margins (0.25%, as a percentage of net sales), which was partially offset by an increase in certain occupancy, distribution, and buying costs (0.05%, as a percentage of net sales).

Selling expenses declined from $50.1 million for the third quarter of fiscal 2011 to $49.3 million for the third quarter of fiscal 2012, a 1.8% decrease. As a percentage of net sales, selling expenses decreased from 18.3% for the third quarter of fiscal 2011 to 17.3% for the third quarter of fiscal 2012. The reduction was primarily attributable to decreases in expenses related to store payroll (0.40%, as a percentage of net sales), the incentive bonus accrual (0.30%, as a percentage of net sales), bankcard fees (0.20%, as a percentage of net sales), and internet order fulfillment (0.20%, as a percentage of net sales); which were partially offset by increases in certain other selling expenses (0.10%, as a percentage of net sales).

Year-to-date, selling expenses increased from $135.3 million in the first three quarters of fiscal 2011 to $137.0 million in the first three quarters of fiscal 2012, a 1.3% increase. As a percentage of net sales, selling expenses decreased from 18.6% in fiscal 2011 to 18.0% in fiscal 2012. The reduction was primarily attributable to decreases in expenses related to the incentive bonus accrual (0.25%, as a percentage of net sales), bankcard fees (0.25%, as a percentage of net sales), store payroll (0.20%, as a percentage of net sales), and internet order fulfillment (0.15%, as a percentage of net sales); which were partially offset by increases in certain other selling expenses (0.25%, as a percentage of net sales).

General and administrative expenses increased from $8.1 million in the third quarter of fiscal 2011 to $10.0 million in the third quarter of fiscal 2012, a 22.7% increase. As a percentage of net sales, general and administrative expenses increased from 3.0% in the third quarter of fiscal 2011 to 3.5% in the third quarter of fiscal 2012. Increases in vacation pay expense (0.25%, as a percentage of net sales), equity compensation expense (0.15%, as a percentage of net sales), and certain other general and administrative expenses (0.20%, as a percentage of net sales) were partially offset by a reduction in expense related to the incentive bonus accrual (0.10%, as a percentage of net sales).

Year-to-date, general and administrative expense increased from $24.9 million for the first three quarters of fiscal 2011 to $28.5 million for the first three quarters of fiscal 2012, a 14.3% increase. As a percentage of net sales, general and administrative expenses increased from 3.4% in fiscal 2011 to 3.7% in fiscal 2012. Increases in vacation pay expense (0.30%, as a percentage of net sales) and equity compensation expense (0.15%, as a percentage of net sales) were partially offset by reductions in expense related to the incentive bonus accrual (0.10%, as a percentage of net sales) and certain other general and administrative expenses (0.05%, as a percentage of net sales).

As a result of the above changes, the Company's income from operations increased 9.6% to $66.2 million for the third quarter of fiscal 2012 compared to $60.4 million for the third quarter of fiscal 2011. Income from operations was 23.3% of net sales for the third quarter of fiscal 2012 compared to 22.1% of net sales for the third quarter of fiscal 2011. Income from operations, for the thirty-nine week period ended October 27, 2012, increased 8.1% to $160.6 million compared to $148.5 million for the thirty-nine week period ended October 29, 2011. Income from operations was 21.0% of net sales for the first three quarters of fiscal 2012 compared to 20.5% of net sales for the first three quarters of fiscal 2011.

Other income decreased from $0.3 million for the third quarter of fiscal 2011 to $0.2 million for the third quarter of fiscal 2012. Other income for the year-to-date period decreased from $2.4 million for the thirty-nine week period ended October 29, 2011 to $2.3 million for the thirty-nine week period ended October 27, 2012. The Company's other income is derived primarily from interest and dividends received on the Company's cash and investments.

Income tax expense as a percentage of pre-tax income was 36.8% in both the third quarter of fiscal 2012 and the third quarter of fiscal 2011, bringing net income to $41.9 million in the third quarter of fiscal 2012 compared to $38.3 million in the third quarter of fiscal 2011, an increase of 9.3%. Income tax expense was also 36.8% of pre-tax income in the first three quarters of fiscal 2012 and the first three quarters of fiscal 2011, bringing year-to-date net income to $102.9 million for fiscal 2012 compared to $95.4 million for fiscal 2011, an increase of 7.9%.

LIQUIDITY AND CAPITAL RESOURCES

As of October 27, 2012, the Company had working capital of $301.3 million, including $213.0 million of cash and cash equivalents and short-term investments of $31.7 million. The Company's cash receipts are generated from retail sales and from investment income, and the Company's primary ongoing cash requirements are for inventory, payroll, occupancy costs, dividend payments, new store expansion, remodeling, and other capital expenditures. Historically, the Company's primary source of working capital has been cash flow from operations. During the first three quarters of fiscal 2012 and fiscal 2011, the Company's cash flow from operations was $92.4 million and $85.8 million, respectively.

The uses of cash for both thirty-nine week periods include payment of annual bonuses accrued at fiscal year end, changes in inventory and accounts payable for build-up of inventory levels, dividend payments, construction costs for new and remodeled stores, and other capital expenditures.

During the first three quarters of fiscal 2012 and 2011, the Company invested $24.1 million and $28.0 million, respectively, in new store construction, store renovation, and store technology upgrades. The Company also spent $2.0 million and $3.5 million in the first three quarters of fiscal 2012 and 2011, respectively, in capital expenditures for the corporate headquarters and distribution facility.

During the remainder of fiscal 2012, the Company anticipates completing approximately three additional store construction projects, including approximately one new store and approximately two stores to be substantially remodeled and/or relocated. Management estimates that total capital expenditures during fiscal 2012 will be approximately $28 to $34 million, which includes primarily planned new store and store remodeling projects. The Company believes that existing cash and cash equivalents, investments, and cash flow from operations will be sufficient to fund current and long-term anticipated capital expenditures and working capital requirements for the next several years. The Company has a consistent record of generating positive cash flow each year and, as of October 27, 2012, had total cash and investments of $278.6 million. The Company does not currently have plans for a merger or acquisition and has fairly consistent plans for new store expansion and remodels. Based upon past results and current plans, management does not anticipate any large swings in the Company's need for cash in the upcoming years other than payment of the Company's special cash dividend in December 2012 as referenced under the "Dividend payments" heading that follows.

Future conditions, however, may reduce the availability of funds based upon factors such as a decrease in demand for the Company's product, change in product mix, competitive factors, and general economic conditions as well as other risks and uncertainties which would reduce the Company's sales, net profitability, and cash flows. Also, the Company's acceleration in store openings and/or remodels or the Company entering into a merger, acquisition, or other financial related transaction could reduce the amount of cash available for further capital expenditures and working capital requirements.

The Company has available an unsecured line of credit of $25.0 million with Wells Fargo Bank, N.A. for operating needs and letters of credit. The line of credit provides that outstanding letters of credit cannot exceed $20.0 million. Borrowings under the line of credit provide for interest to be paid at a rate based on LIBOR. The Company has, from time to time, borrowed against these lines during periods of peak inventory build-up. There were no bank borrowings during the first three quarters of fiscal 2012 or 2011.

Dividend payments - During the first three quarters of fiscal 2012, the Company paid total cash dividends of $28.8 million in the form of a $0.20 per share dividend during each of the three quarters. During the first three quarters of fiscal 2011, the Company paid total cash dividends of $135.1 million as follows: $0.20 per share in each of the three quarters and a special one-time cash dividend of $2.25 per share in the third quarter.

On November 6, 2012, 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 5, 2012, the Board authorized a $4.50 per share special cash dividend to be paid to shareholders of record at the close of business on December 7, 2012. The Board also authorized a $0.20 per share quarterly dividend to be paid to shareholders of record at the close of business on December 7, 2012. The $0.20 per share quarterly dividend accelerates and replaces the regular quarterly dividend that has historically been paid in January. Both the special cash dividend and the regular quarterly dividend are payable on December 21, 2012 and will be paid together. Based on the number of shares outstanding as of October 27, 2012, the Company anticipates that the total dividend payment will be approximately $225.3 million. The Company plans to fund the dividend from its current cash balance of $213.0 million and cash flow from operations during the months of fiscal November and December.

Auction-Rate Securities - As of October 27, 2012, total cash and investments included $11.4 million of auction-rate securities ("ARS") and preferred securities, which compares to $14.2 million of ARS and preferred securities as of January 28, 2012. All of the $11.4 million of ARS and preferred securities as of October 27, 2012 has been included in long-term investments. 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. During February 2008, 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 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 anticipate, however, that further auction failures will have a material impact on the Company's ability to fund its business.

ARS and preferred securities are reported at fair market value, and as of October 27, 2012, the reported investment amount is net of a $1.0 million temporary impairment and a $2.7 million other-than-temporary impairment ("OTTI") to account for the impairment of certain securities from their stated par value. The Company reported the $1.0 million temporary impairment, net of tax, as an "accumulated other comprehensive loss" of $0.6 million in stockholders' equity as of October 27, 2012. The Company has accounted for the impairment as temporary, as it currently believes that these ARS can be successfully redeemed or liquidated in the future at par value plus accrued interest.

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 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. The Company believes it has the ability and intent to hold these investments until recovery of market value occurs.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's Discussion and Analysis of Financial Condition and Results of Operations are based upon The Buckle, Inc.'s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires that management make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the financial statement date, and the reported amounts of sales and expenses during the reporting period. The Company regularly evaluates its estimates, including those related to inventory, investments, incentive bonuses, and income taxes. Management bases its estimates on past experience and on various other factors that are thought to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes that the estimates and judgments used in preparing these consolidated financial statements were the most appropriate at that time. Presented below are those critical accounting policies that management believes require subjective and/or complex judgments that could potentially affect reported results of operations. The critical accounting policies and estimates utilized by the Company in the preparation of its condensed consolidated financial statements for the period ending October 27, 2012 have not changed materially from those utilized for the fiscal year ended January 28, 2012, included in The Buckle Inc.'s 2011 Annual Report on Form 10-K.

1. Revenue Recognition. Retail store sales are recorded upon the purchase of merchandise by customers. Online sales are recorded when merchandise is delivered to the customer, with the time of delivery being based on estimated shipping time from the Company's distribution center to the customer. Shipping fees charged to customers are included in revenue and shipping costs are included in selling expenses. The Company recognizes revenue from sales made under its layaway program upon delivery of the merchandise to the customer. Revenue is not recorded when gift cards and gift certificates are sold, but rather when a card or certificate is redeemed for merchandise. A current liability for unredeemed gift cards and certificates is recorded at the time the card or certificate is purchased. The amounts of the gift certificate and gift card liabilities are determined using the outstanding balances from the prior three and four years of issuance, respectively. The liability recorded for unredeemed gift certificates and gift cards was $13.4 million and $20.3 million as of October 27, 2012 and January 28, 2012, respectively. The Company records breakage as other income when the probability of redemption, which is based on historical redemption patterns, is remote.

The Company establishes a liability for estimated merchandise returns based upon the historical average sales return percentage. Customer returns could potentially exceed the historical average, thus reducing future net sales results and potentially reducing future net earnings. The accrued liability for reserve for sales returns was $0.9 million and $0.8 million as of October 27, 2012 and January 28, 2012, respectively.

2. Inventory. Inventory is valued at the lower of cost or market. Cost is determined using an average cost method that approximates the first-in, first-out (FIFO) method. Management makes adjustments to inventory and cost of goods sold, based upon estimates, to reserve for merchandise obsolescence and markdowns that could affect market value, based on assumptions using calculations applied to current inventory levels within each different markdown level. Management also reviews the levels of inventory in each markdown group and the overall aging of the inventory versus the estimated future demand for such product and the current market conditions. Such judgments could vary significantly from actual results, either favorably or unfavorably, due to fluctuations in future economic conditions, industry trends, consumer demand, and the competitive retail environment. Such changes in market conditions could negatively impact the sale of markdown inventory, causing further markdowns or inventory obsolescence, resulting in increased cost of goods sold from write-offs and reducing the Company's net earnings. The liability recorded as a reserve for markdowns and/or obsolescence was $7.1 million and $4.9 million as of October 27, 2012 and January 28, 2012, respectively. The Company is not aware of any events, conditions, or changes in demand or price that would indicate that its inventory valuation may not be materially accurate at this time.

3. Income Taxes. The Company records a deferred tax asset and liability for expected future tax consequences resulting from temporary differences between financial reporting and tax bases of assets and liabilities. The Company considers future taxable income and ongoing tax planning in assessing the value of its deferred tax assets. If the Company determines that it is more . . .