As an investor, I'm always disappointed when a company doesn't include its balance sheet and statement of cash flows with its earnings release. This is one of the many reasons why it is very important for investors to read their companies' quarterly and annual SEC filings. Case in point: the retailer Buckle (NYSE:BKE) and its latest quarterly (10-Q) filing.
A few weeks ago, when I took a look at Buckle, I mentioned that I'd need to wait for its SEC filing to get the full story, because its press release provided a very limited amount of information on its quarterly performance. Generally, when I say this, I'm trying to caution investors; if a company is quietly disclosing information to the SEC and not trumpeting it in an earnings release, there's reason to be wary. However, with Buckle, that's not the case. I'm encouraged by what I found in the company's quarterly filing, along with its record of increasing dividends and responsible use of capital.
The biggest change that leapt out at me in Buckle's latest 10-Q concerns the company's cash balance. The much lower stockholders' equity balance on the balance sheet offers a clue to where this cash went, but the statement of cash flows confirms it. Buckle spent $85 million of its substantial cash hoard to repurchase 9.6% of its diluted outstanding shares in the first quarter. That's not a small move for any company; for a company with a $700 million market cap, it's a very large one. For shareholders, it added up to $0.05 more in earnings per share than if the company was still sitting on the cash.
While the buyback is important to potential and current Buckle investors, it's not that uncommon lately. Gap (NYSE:GPS), Abercrombie & Fitch (NYSE:ANF), and Starbucks (NASDAQ:SBUX) have all been busy buying back shares in the last year, and like Buckle, they have plenty of cash left over. The real lesson investors should learn from this particular buyback is the importance of reading a company's filings. It's not just a business's earnings that matter, but how it uses them.
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Nathan Parmelee owns shares in Starbucks and has a beneficial interest in shares of Gap, but has no financial interest in any of the other companies mentioned. The Motley Fool has an ironclad disclosure policy.
