10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________________

FORM 10-Q

______________________________________________

(Mark One)

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

For the quarterly period ended August 27, 2016

OR

¨ 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: 0-20184

______________________________________________

The Finish Line, Inc.

(Exact name of registrant as specified in its charter)

______________________________________________

Indiana	35-1537210
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
3308 North Mitthoeffer Road Indianapolis, Indiana	46235
(Address of principal executive offices)	(zip code)

317-899-1022

(Registrant’s telephone number, including area code)

(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 x  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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x 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 the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934.

Large accelerated filer	x	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 Exchange Act). Yes ¨ No x

The number of shares of the registrant’s Class A Common Stock outstanding on September 9, 2016 was 40,562,251.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

THE FINISH LINE, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	August 27, 2016		August 29, 2015		February 27, 2016
	(unaudited)		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	114,301	$	100,234	$	79,495
Accounts receivable, net	20,288		17,575		18,227
Merchandise inventories, net	372,263		366,335		376,506
Income taxes receivable	—		1,238		28,877
Other	15,966		25,450		18,248
Total current assets	522,818		510,832		521,353
Property and equipment:
Land	1,557		1,557		1,557
Building	43,928		43,758		43,768
Leasehold improvements	211,500		252,596		198,193
Furniture, fixtures, and equipment	267,156		194,772		256,483
Construction in progress	11,999		106,122		9,182
	536,140		598,805		509,183
Less accumulated depreciation	286,153		320,400		265,790
Total property and equipment, net	249,987		278,405		243,393
Goodwill	44,029		44,507		44,029
Other assets, net	8,487		9,101		8,773
Total assets	$	825,321	$	842,845	$	817,548

See accompanying notes.

2

THE FINISH LINE, INC.

CONSOLIDATED BALANCE SHEETS - (CONTINUED)

(in thousands, except per share data)

	August 27, 2016			August 29, 2015			February 27, 2016
	(unaudited)			(unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	179,038		$	122,316		$	157,651
Employee compensation	14,635			21,249			18,839
Accrued property and sales tax	10,622			10,306			10,710
Income taxes payable	8,494			—			—
Other liabilities and accrued expenses	32,781			29,556			33,987
Total current liabilities	245,570			183,427			221,187
Commitments and contingencies
Deferred credits from landlords	34,001			31,503			32,327
Deferred income taxes	21,265			25,283			25,441
Other long-term liabilities	9,291			11,953			10,949
Shareholders’ equity:
Preferred stock, $.01 par value; 1,000 shares authorized; none issued	—			—			—
Common stock, $.01 par value; 110,000 shares authorized; 60,145 shares issued
Shares outstanding - (August 27, 2016 - 40,562; August 29, 2015 - 44,845; February 27, 2016 - 42,377)	601			601			601
Additional paid-in capital	242,039			230,383			237,129
Retained earnings	662,639			665,423			639,296
Treasury stock - (August 27, 2016 - 19,197; August 29, 2015 - 14,913; February 27, 2016 - 17,381)	(390,085		)	(305,728		)	(349,382		)
Total shareholders’ equity	515,194			590,679			527,644
Total liabilities and shareholders’ equity	$	825,321		$	842,845		$	817,548

See accompanying notes.

3

THE FINISH LINE, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(unaudited)

	Thirteen Weeks Ended					Twenty-Six Weeks Ended
	August 27, 2016			August 29, 2015		August 27, 2016			August 29, 2015
Net sales	$	509,403		$	483,150	$	962,918		$	926,544
Cost of sales (including occupancy costs)	349,929			323,943		663,633			628,361
Gross profit	159,474			159,207		299,285			298,183
Selling, general, and administrative expenses	124,224			117,604		249,123			234,061
Impairment charges and store closing costs	336			160		371			328
Operating income	34,914			41,443		49,791			63,794
Interest (expense) income, net	(32		)	1		(26		)	(1		)
Income before income taxes	34,882			41,444		49,765			63,793
Income tax expense	12,807			15,583		18,064			24,198
Net income	22,075			25,861		31,701			39,595
Net loss attributable to redeemable noncontrolling interest	—			41		—			96
Net income attributable to The Finish Line, Inc.	$	22,075		$	25,902	$	31,701		$	39,691
Basic earnings per share attributable to The Finish Line, Inc. shareholders	$	0.53		$	0.57	$	0.75		$	0.87
Basic weighted average shares	40,944			44,866		41,357			45,151
Diluted earnings per share attributable to The Finish Line, Inc. shareholders	$	0.53		$	0.57	$	0.75		$	0.86
Diluted weighted average shares	41,122			45,207		41,506			45,463
Dividends declared per share	$	0.10		$	0.09	$	0.20		$	0.18

See accompanying notes.

4

THE FINISH LINE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Twenty-Six Weeks Ended
	August 27, 2016			August 29, 2015
Operating activities:
Net income	$	31,701		$	39,595
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment charges and store closing costs	371			328
Depreciation and amortization	23,589			20,395
Deferred income taxes	(4,176		)	(1,726		)
(Gain) loss on disposals of property and equipment	(54		)	32
Gain on settlement of contingent consideration	—			(329		)
Share-based compensation	5,664			4,162
Excess tax benefits from share-based compensation	(70		)	(284		)
Changes in operating assets and liabilities:
Accounts receivable, net	(2,061		)	(912		)
Merchandise inventories, net	4,243			(22,299		)
Other assets	2,533			(12,491		)
Accounts payable	25,607			(1,182		)
Employee compensation	(4,204		)	2,156
Income taxes receivable/payable	37,002			8,016
Other liabilities and accrued expenses	(2,534		)	(628		)
Deferred credits from landlords	1,674			2,360
Net cash provided by operating activities	119,285			37,193
Investing activities:
Capital expenditures for property and equipment	(35,133		)	(35,012		)
Acquisitions, net of cash acquired	—			(8,278		)
Proceeds from disposals of property and equipment	380			20
Net cash used in investing activities	(34,753		)	(43,270		)
Financing activities:
Borrowings on revolving credit facility	30,000			—
Repayments on revolving credit facility	(30,000		)	—
Dividends paid to shareholders	(8,512		)	(8,282		)
Proceeds from issuance of common stock, net of settlement of tax withholding obligations	1,275			1,683
Excess tax benefits from share-based compensation	70			284
Purchases of treasury stock	(42,559		)	(35,922		)
Purchase of redeemable noncontrolling interest	—			(1,000		)
Cash paid for settlements of contingent consideration	—			(21		)
Net cash used in financing activities	(49,726		)	(43,258		)
Net increase (decrease) in cash and cash equivalents	34,806			(49,335		)
Cash and cash equivalents at beginning of period	79,495			149,569
Cash and cash equivalents at end of period	$	114,301		$	100,234
Supplemental disclosure of noncash operating and investing activities:
Capital expenditures incurred but not yet paid as of August 27, 2016 and August 29, 2015	$	1,492		$	3,356
Capital expenditures incurred but not yet paid as of February 27, 2016 and February 28, 2015	$	5,712		$	13,532

See accompanying notes.

5

THE FINISH LINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Summary of Significant Accounting Policies

Basis of Presentation. The accompanying unaudited consolidated financial statements of The Finish Line, Inc., along with its consolidated subsidiaries (individually and collectively referred to as the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. Preparation of the financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included. All intercompany transactions and balances have been eliminated.

The Company has experienced, and expects to continue to experience, significant variability in sales, net income, and merchandise inventories from reporting period to reporting period due to back to school and holiday selling seasons. Therefore, the results of the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year.

These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended February 27, 2016 (“fiscal 2016”), as filed with the Securities and Exchange Commission (“SEC”) on April 26, 2016.

Segment Information. The Company is a premium retailer of athletic shoes, apparel, and accessories for men, women, and kids, throughout the United States and Puerto Rico, through multiple operating segments. The Company’s operating segments have similar economic characteristics, which include a similar nature of products sold, type of customer, and method of distribution. As such, the Company’s operating segments are aggregated into one reportable segment. The following table sets forth net sales of the Company by major category for each of the following periods (in thousands):

	Thirteen Weeks Ended
Category	August 27, 2016				August 29, 2015
Footwear	$	468,353	92	%	$	432,323	89	%
Softgoods	41,050		8	%	50,827		11	%
Total net sales	$	509,403	100	%	$	483,150	100	%

	Twenty-Six Weeks Ended
Category	August 27, 2016				August 29, 2015
Footwear	$	886,969	92	%	$	834,501	90	%
Softgoods	75,949		8	%	92,043		10	%
Total net sales	$	962,918	100	%	$	926,544	100	%

Recent Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance on revenue from contracts with customers and has subsequently issued several amendments which clarify the guidance as well as provide guidance for implementation. The guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB approved a one year deferral of the effective date, to make it effective for annual or interim reporting periods beginning after December 15, 2017. The guidance allows for either a full retrospective or a modified retrospective transition method. The Company is currently assessing the impact of adopting this guidance and its potential impact to its consolidated results of operations, financial position, and cash flows.

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In July 2015, the FASB issued guidance on simplifying the measurement of inventory. The guidance, which applies to inventory that is measured using any method other than the last-in, first-out (“LIFO”) or retail inventory method, requires that entities measure inventory at the lower of cost or net realizable value. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and should be applied on a prospective basis. The Company is currently assessing the potential impact of adopting this guidance, but does not, at this time, anticipate a material impact to its consolidated results of operations, financial position, or cash flows.

In November 2015, the FASB issued guidance on the balance sheet classification of deferred taxes. The guidance requires that all deferred tax assets and liabilities be classified as noncurrent on the balance sheet. The Company adopted this standard for the annual period beginning on March 1, 2015, and applied it retrospectively. As a result of adopting this standard, all deferred tax assets and liabilities have been classified as noncurrent. The balance sheet as of August 29, 2015 was retrospectively adjusted, which resulted in a $5.0 million decrease in the current deferred income tax liability balance and a $5.0 million increase in the long-term deferred income tax liability balance.

In February 2016, the FASB issued guidance on accounting for leases. A primary purpose of the guidance is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Specifically, lessees will be required to recognize the rights and obligations resulting from leases classified as operating leases as assets and liabilities. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and requires a modified retrospective adoption, with early adoption permitted. The Company is currently assessing the impact of adopting this guidance and its potential impact to its consolidated results of operations, financial position, and cash flows.

In March 2016, the FASB issued guidance on simplifying several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows, and accounting for forfeitures. The guidance is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, and early adoption is permitted. The manner of adoption varies, with certain provisions applied on a retrospective or modified retrospective approach, while others are applied prospectively. The Company is currently assessing the impact of adopting this guidance and its potential impact to its consolidated results of operations, financial position, and cash flows.

Other recently issued accounting pronouncements did not, or are not believed by management to have a material effect on the Company’s present or future consolidated financial statements.

2. Fair Value Measurements

Fair value measurements are determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants exclusive of any transaction costs. The Company utilizes a fair value hierarchy based upon the observability of inputs used in valuation techniques as follows:

Level 1:	Observable inputs such as quoted prices in active markets;
Level 2:	Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3:	Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The following table provides a summary of the recognized assets and liabilities that are measured at fair value on a recurring basis (in thousands):

	August 27, 2016						August 29, 2015						February 27, 2016
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets:
Non-qualified deferred compensation plan	$	5,503	$	—	$	—	$	6,102	$	—	$	—	$	5,538	$	—	$	—
Liabilities:
Contingent consideration liabilities	$	—	$	—	$	—	$	—	$	—	$	420	$	—	$	—	$	—

7

Included in Level 1 assets are mutual fund investments under a non-qualified deferred compensation plan. The Company estimates the fair value of these investments on a recurring basis using readily available market prices.

Included in Level 3 liabilities are the contingent consideration liabilities related to the Company’s acquisitions. The liabilities are adjusted to fair value each reporting period. The categorization of the framework used to price the liabilities is considered Level 3, due to the subjective nature of the unobservable inputs used to determine the fair values.

There were no transfers into or out of Level 1, Level 2, or Level 3 assets or liabilities for any of the periods presented.

Level 3 Valuation Techniques

Financial assets and liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques and at least one significant model assumption or input is unobservable.

During the twenty-six weeks endedAugust 27, 2016 and August 29, 2015, the Company did not have any significant non-recurring measurements of assets or liabilities.

3. Debt Agreement

On November 30, 2012, the Company entered into an unsecured $100 million Amended and Restated Revolving Credit Facility Credit Agreement (the “Amended Credit Agreement”) with certain Lenders, which expires on November 30, 2017. The Amended Credit Agreement provides that, under certain circumstances, the Company may increase the maximum amount of the credit facility in an aggregate principal amount not to exceed $200 million. The Amended Credit Agreement is used by the Company, among other things, to issue letters of credit, support working capital needs, fund capital expenditures, and for other general corporate purposes.

Approximately $1.6 million in stand-by letters of credit were outstanding as of August 27, 2016 under the Amended Credit Agreement. No advances were outstanding under the Amended Credit Agreement as of August 27, 2016. Accordingly, the total revolving credit availability under the Amended Credit Agreement was $98.4 million as of August 27, 2016.

The Company’s ability to borrow monies in the future under the Amended Credit Agreement is subject to certain conditions, including compliance with certain covenants and making certain representations and warranties. The Amended Credit Agreement contains restrictive covenants that limit, among other things, mergers and acquisitions. In addition, the Company must maintain a maximum leverage ratio (as defined in the Amended Credit Agreement) and minimum consolidated tangible net worth (as defined in the Amended Credit Agreement). The Company was in compliance with all such covenants as of August 27, 2016.

The Amended Credit Agreement pricing grid is adjusted quarterly and is based on the Company’s leverage ratio. The minimum pricing is LIBOR plus 0.90% or Base Rate (as defined in the Amended Credit Agreement) and the maximum pricing is LIBOR plus 1.75% or Base Rate plus 0.75%. The Company is also subject to an unused commitment fee based on the Company’s leverage ratio with minimum pricing of 0.10% and maximum pricing of 0.25%. In addition, the Company is subject to a letter of credit fee based on the Company’s leverage ratio with minimum pricing of 0.40% and maximum pricing of 1.25%.

4. Earnings Per Share

Basic earnings per share attributable to The Finish Line, Inc. shareholders is calculated by dividing net income attributable to The Finish Line, Inc. associated with common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share attributable to The Finish Line, Inc. shareholders assumes the issuance of additional shares of common stock by the Company upon exercise of all outstanding stock options and contingently issuable securities if the effect is dilutive, in accordance with the treasury stock method or two-class method (whichever is more dilutive) discussed in Accounting Standards Codification (“ASC”) 260-10, Earnings Per Share.

ASC 260-10 requires the inclusion of restricted stock as participating securities, since they have the right to share in dividends, if declared, equally with common shares. During periods of net income, participating securities are allocated a proportional share of net income attributable to The Finish Line, Inc. determined by dividing total weighted average participating securities by the sum of total weighted average common shares and participating securities (“the two-class method”). During periods of net loss, no effect is given to participating securities since they do not share in the losses of the Company. Participating securities have the effect of diluting both basic and diluted earnings per share during periods of net income.

8

The following is a reconciliation of the numerators and denominators used in computing earnings per share (in thousands, except per share amounts):

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	August 27, 2016		August 29, 2015		August 27, 2016		August 29, 2015
Net income attributable to The Finish Line, Inc.	$	22,075	$	25,902	$	31,701	$	39,691
Net income attributable to The Finish Line, Inc. attributable to participating securities	420		311		577		476
Net income attributable to The Finish Line, Inc. available to common shareholders	$	21,655	$	25,591	$	31,124	$	39,215
Basic earnings per share attributable to The Finish Line, Inc. shareholders:
Weighted-average number of common shares outstanding	40,944		44,866		41,357		45,151
Basic earnings per share attributable to The Finish Line, Inc. shareholders	$	0.53	$	0.57	$	0.75	$	0.87
Diluted earnings per share attributable to The Finish Line, Inc. shareholders:
Weighted-average number of common shares outstanding	40,944		44,866		41,357		45,151
Dilutive effect of potential common shares(a)	178		341		149		312
Diluted weighted-average number of common shares outstanding	41,122		45,207		41,506		45,463
Diluted earnings per share attributable to The Finish Line, Inc. shareholders	$	0.53	$	0.57	$	0.75	$	0.86

(a) The computation of diluted earnings per share attributable to The Finish Line, Inc. shareholders excludes options to purchase approximately 3.1 million and 1.3 million shares of common stock in the thirteen weeks endedAugust 27, 2016 and August 29, 2015, respectively, and 3.0 million and 1.3 million shares of common stock in the twenty-six weeks endedAugust 27, 2016 and August 29, 2015, respectively, because the impact of such options would have been antidilutive.

5. Common Stock

On July 21, 2011, the Company’s Board of Directors authorized a share repurchase program to repurchase shares of the Company’s common stock with subsequent amendments on March 26, 2015 and July 13, 2016 authorizing further share repurchases through December 31, 2019 (the “Share Repurchase Program”).

The Company purchased 2.0 million shares of its common stock at an average price of $21.28 per share for an aggregate amount of $42.6 million during the twenty-six weeks endedAugust 27, 2016. As of August 27, 2016, there were 5,291,936 shares remaining available to repurchase under the Share Repurchase Program.

As of August 27, 2016, the Company held 19,196,721 shares of its common stock as treasury shares at an average price of $20.32 per share for an aggregate carrying amount of $390.1 million. The Company’s treasury shares may be issued upon the exercise of employee stock options, under the Employee Stock Purchase Plan (“ESPP”), in the form of restricted stock, or for other corporate purposes. The number of shares of common stock reserved to be issued upon the exercise of options, restricted stock, or other awards is limited as defined in the 2002 Stock Incentive Plan of The Finish Line, Inc. (the “2002 Incentive Plan”) and The Finish Line, Inc. 2009 Incentive Plan Amended and Restated as of April 16, 2014, and further amended as of June 27 and July 14, 2016 (the “Amended and Restated 2009 Incentive Plan”). Further purchases will occur from time to time as market conditions warrant and as the Company deems appropriate when judged against other alternative uses of cash.

On July 14, 2016, the Company announced a quarterly cash dividend of $0.10 per share of the Company’s common stock. The Company declared dividends of $8.4 million during the twenty-six weeks endedAugust 27, 2016, of which $4.1 million was included in other liabilities and accrued expenses on the Company’s consolidated balance sheet as of August 27, 2016. Further declarations of dividends remain at the discretion of the Company’s Board of Directors.

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6. Commitments and Contingencies

The Company is subject, from time to time, to certain legal proceedings and claims in the ordinary course of conducting its business. The Company establishes a liability related to its legal proceedings and claims when it has determined that it is probable that the Company has incurred a liability and the related amount can be reasonably estimated. If the Company determines that an obligation is reasonably possible, the Company will, if material, disclose the nature of the loss contingency and the estimated range of possible loss, or include a statement that no estimate of loss can be made. The Company believes there are no pending legal proceedings in which the Company is currently involved which will have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

7. Share-Based Compensation

General

Total share-based compensation expense for the twenty-six weeks endedAugust 27, 2016 and August 29, 2015 was $5.7 million and $4.2 million, respectively.

Stock Option Activity

Stock options have been granted to non-employee directors, officers, and other key employees. Generally, options outstanding under the 2002 Incentive Plan and Amended and Restated 2009 Incentive Plan are exercisable at a price equal to the fair market value on the date of grant, vest over four years, and expire ten years after the date of grant. During the twenty-six weeks endedAugust 27, 2016 and August 29, 2015, the Company granted approximately 1,438,000 and 762,000 options, respectively. The estimated weighted-average fair value of the individual options granted during the twenty-six weeks endedAugust 27, 2016 and August 29, 2015, was $4.82 and $6.57, respectively, on the date of the grant. The fair values for all options granted were determined using a Black-Scholes option-pricing model with the following weighted average assumptions:

	Twenty-Six Weeks Ended
	August 27, 2016		August 29, 2015
Dividend yield	2.2	%	1.5	%
Volatility	32.9	%	33.4	%
Risk-free interest rate	1.3	%	1.4	%
Expected life	5.0 years		5.0 years

The dividend yield assumption is based on the Company’s history and expectation of dividend payouts. The expected volatility assumption is based on the Company’s analysis of historical volatility. The risk-free interest rate assumption is based upon the average daily closing rates during the period for U.S. treasury notes that have a life which approximates the expected life of the option. The expected life of employee stock options represents the weighted-average period the stock options are expected to remain outstanding based on historical exercise experience.

As of August 27, 2016, there was $8.6 million of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested options. That expense is expected to be recognized over a weighted average period of 1.7 years.

Restricted Stock Activity

The Company has granted shares of the Company’s common stock to non-employee directors, officers, and other key employees that are subject to restrictions. The shares of restricted stock granted to employees under the Amended and Restated 2009 Incentive Plan generally cliff-vest after a three-year period or vest upon the achievement of specified levels of net income or earnings per share growth over a three-year period. For performance-based awards, should the net income or earnings per share growth criteria not be met over the three-year period, the shares will be forfeited. All restricted stock awards issued to non-employee directors cliff-vest after a one-year period from the grant date. During the twenty-six weeks endedAugust 27, 2016 and August 29, 2015, the Company granted approximately 470,000 and 208,000 restricted shares, respectively.

As of August 27, 2016, there was $9.9 million of total unrecognized compensation expense, net of estimated forfeitures, related to nonvested restricted stock. That expense is expected to be recognized over a weighted average period of 1.7 years.

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

This quarterly report on Form 10-Q may contain certain statements that the Company believes are, or may be considered to be, “forward-looking” statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

These forward-looking statements generally can be identified by the use of statements that include, but are not limited to, words or phrases such as “believe,” “expect,” “anticipate,” “estimate,” “intend,” “future,” “forecast,” “outlook,” “foresee,” “predict,” “potential,” “plan,” “project,” “goal,” “will,” “will be,” “continue,” “lead to,” “expand,” “grow,” “confidence,” “could,” “should,” “may,” “might,” or any variations of such words or other words or phrases with similar meanings. Similarly, statements that describe the Company’s objectives, plans, or goals also are forward-looking statements. All of these forward-looking statements are subject to risks, management assumptions, and uncertainties that could cause the Company’s actual results to differ materially from those contemplated by the relevant forward-looking statement. The principal risk factors that could cause actual performance and future actions to differ materially from the forward-looking statements include, but are not limited to, the Company’s reliance on a few key vendors for a majority of its merchandise purchases (including a significant portion from one key vendor); the availability and timely receipt of products; the ability to timely fulfill and ship products to customers; fluctuations in oil prices causing changes in gasoline and energy prices, resulting in changes in consumer spending as well as increases in utility, freight, and product costs; product demand and market acceptance risks; deterioration of macro-economic and business conditions; the inability to locate and obtain or retain acceptable lease terms for the Company’s stores; the effect of competitive products and pricing; loss of key employees; execution of strategic growth initiatives (including actual and potential mergers and acquisitions and other components of the Company’s capital allocation strategy); cybersecurity risks, including breach of customer data; a major failure of technology and information systems; and the other risks detailed in the Company’s Securities and Exchange Commission filings. Readers are urged to consider these factors carefully in evaluating the forward-looking statements. The forward-looking statements included in this Form 10-Q are made only as of the date of this report and the Company undertakes no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances.

General

The following discussion and analysis should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations, including Critical Accounting Policies, contained in the Company’s Annual Report on Form 10-K for the year ended February 27, 2016.

The Company is a premium retailer of athletic shoes, apparel, and accessories for men, women, and kids, throughout the United States and Puerto Rico, through multiple operating segments.

Brick and mortar comparable store sales are sales from Finish Line stores open longer than one year, beginning in the thirteenth month of a store’s operation. Expanded stores are excluded from the brick and mortar comparable store sales calculation until the thirteenth month following the re-opening of the store and temporarily closed stores are excluded during the months that the store is closed. Brick and mortar comparable store sales do not include sales from JackRabbit (previously referred to by the Company as Running Specialty Group) or shops within department stores.

Digital comparable sales are the change in sales year over year for the reporting period derived from finishline.com and m.finishline.com.

Finish Line comparable store sales is the aggregation of brick and mortar comparable store sales and digital comparable sales.

Shops within department stores comparable store sales are sales from branded shops within department stores open longer than one year, including e-commerce sales, beginning in the thirteenth month of a shop’s operation. Expanded shops are excluded from the shops within department stores comparable store sales calculation until the thirteenth month following the re-opening of the shop and temporarily closed shops are excluded during the months that the shop is closed. Additionally, non-branded shops are excluded from the shops within department stores comparable store sales calculation.

JackRabbit comparable store sales are sales from JackRabbit stores open longer than one year or operated longer than one year after being acquired, including e-commerce sales, beginning in the thirteenth month of a store’s operation or after it was acquired. Expanded stores are excluded from the JackRabbit comparable store sales calculation until the thirteenth month following the re-opening of the store and temporarily closed stores are excluded during the months that the store is closed.

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The following tables set forth store/shop and square feet information of the Company for each of the following periods:

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
Number of stores/shops	August 27, 2016		August 29, 2015		August 27, 2016		August 29, 2015
Finish Line:
Beginning of period	586		624		591		637
Opened	4		3		5		5
Closed	(5	)	(7	)	(11	)	(22	)
End of period	585		620		585		620
Branded shops within department stores:
Beginning of period	392		395		392		395
Opened	—		—		—		—
Closed	(1	)	(1	)	(1	)	(1	)
End of period	391		394		391		394
JackRabbit:
Beginning of period	71		76		72		71
Acquired	—		—		—		4
Opened	—		—		—		1
Closed	(1	)	—		(2	)	—
End of period	70		76		70		76
Total:
Beginning of period	1,049		1,095		1,055		1,103
Acquired	—		—		—		4
Opened	4		3		5		6
Closed	(7	)	(8	)	(14	)	(23	)
End of period	1,046		1,090		1,046		1,090

Square feet information	August 27, 2016	August 29, 2015
Finish Line:
Square feet	3,249,455	3,395,611
Average store size	5,555	5,477
Branded shops within department stores:
Square feet	509,880	448,861
Average shop size	1,304	1,139
JackRabbit:
Square feet	255,758	275,571
Average store size	3,654	3,626
Total:
Square feet	4,015,093	4,120,043

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Results of Operations

The following tables set forth net sales of the Company by major category for each of the following periods (in thousands):

	Thirteen Weeks Ended
Category	August 27, 2016				August 29, 2015
Footwear	$	468,353	92	%	$	432,323	89	%
Softgoods	41,050		8	%	50,827		11	%
Total net sales	$	509,403	100	%	$	483,150	100	%

	Twenty-Six Weeks Ended
Category	August 27, 2016				August 29, 2015
Footwear	$	886,969	92	%	$	834,501	90	%
Softgoods	75,949		8	%	92,043		10	%
Total net sales	$	962,918	100	%	$	926,544	100	%

The following table and subsequent discussion set forth operating data of the Company as a percentage of net sales for each of the following periods:

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	August 27, 2016		August 29, 2015		August 27, 2016		August 29, 2015
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales (including occupancy costs)	68.7		67.0		68.9		67.8
Gross profit	31.3		33.0		31.1		32.2
Selling, general, and administrative expenses	24.4		24.4		25.9		25.3
Impairment charges and store closing costs	0.1		—		—		—
Operating income	6.8		8.6		5.2		6.9
Interest (expense) income, net	—		—		—		—
Income before income taxes	6.8		8.6		5.2		6.9
Income tax expense	2.5		3.2		1.9		2.6
Net income	4.3		5.4		3.3		4.3
Net loss attributable to redeemable noncontrolling interest	—		—		—		—
Net income attributable to The Finish Line, Inc.	4.3	%	5.4	%	3.3	%	4.3	%

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Thirteen and Twenty-Six Weeks EndedAugust 27, 2016 Compared to the Thirteen and Twenty-Six Weeks EndedAugust 29, 2015

Net Sales

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	August 27, 2016			August 29, 2015			August 27, 2016			August 29, 2015
	(dollars in thousands)						(dollars in thousands)
Brick and mortar stores sales	$	332,289		$	337,218		$	621,339		$	629,409
Digital sales	75,505			60,715			143,418			128,400
Shops within department stores sales	77,362			60,780			150,443			120,302
JackRabbit sales	24,247			24,437			47,718			48,433
Total net sales	$	509,403		$	483,150		$	962,918		$	926,544
Brick and mortar comparable store sales increase (decrease)	1.4		%	(0.2		)%	1.6		%	(0.1		)%
Digital comparable sales increase	24.4		%	12.1		%	11.7		%	23.3		%
Finish Line comparable store sales increase	5.1		%	1.5		%	3.4		%	3.4		%
Shops within department stores comparable store sales increase	31.1		%	N/A			28.7		%	N/A
JackRabbit comparable store sales increase (decrease)	3.2		%	(4.0		)%	3.0		%	(3.7		)%

Net sales increased 5.4% for the thirteen weeks endedAugust 27, 2016 compared to the thirteen weeks endedAugust 29, 2015, which was primarily due to the following:

• An increase in Finish Line sales (composed of brick and mortar sales and digital sales) of 2.5% primarily due to an increase of 5.1% in Finish Line comparable store sales, which was due to an increase in store average dollar per transaction and digital conversion and traffic, partially offset by a decrease in store conversion and traffic and digital average dollar per transaction. The Finish Line comparable store sales increase was partially offset by a decrease in net Finish Line store count for the thirteen weeks endedAugust 27, 2016 as compared to the thirteen weeks endedAugust 29, 2015.

• An increase in shops within department stores sales of 27.3%, primarily due to an increase in comparable sales, partially offset by a decrease in non-branded shop sales; and

• A decrease in JackRabbit sales of 0.8%, primarily due to decreased store count, partially offset by a JackRabbit comparable store sales increase of 3.2%.

Consolidated footwear sales increased 8.3% for the thirteen weeks endedAugust 27, 2016 compared to the thirteen weeks endedAugust 29, 2015, which was primarily driven by a women's footwear sales increase in the low-double digits and a men's and kids' footwear sales increase in the high-single digits. Consolidated softgoods sales decreased 19.2% for the thirteen weeks endedAugust 27, 2016 compared to the thirteen weeks endedAugust 29, 2015, driven by softness in apparel and accessories.

Net sales increased 3.9% for the twenty-six weeks endedAugust 27, 2016 compared to the twenty-six weeks endedAugust 29, 2015, which was primarily due to the following:

• An increase in Finish Line sales (composed of brick and mortar sales and digital sales) of 0.9% primarily due to a Finish Line comparable store sales increase of 3.4%, which was due to an increase in store average dollar per transaction and traffic and digital conversion, partially offset by a decrease in store conversion and digital average dollar per transaction and traffic. The Finish Line comparable store sales increase was partially offset by a decrease in net Finish Line store count for the twenty-six weeks endedAugust 27, 2016 as compared to the twenty-six weeks endedAugust 29, 2015.

• An increase in shops within department stores sales of 25.1%, primarily due to an increase in comparable sales, partially offset by a decrease in non-branded shop sales; and

• A decrease in JackRabbit sales of 1.5%, primarily due to decreased store count, partially offset by a JackRabbit comparable store sales increase of 3.0%.

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Consolidated footwear sales increased 6.3% for the twenty-six weeks endedAugust 27, 2016 compared to the twenty-six weeks endedAugust 29, 2015, which was primarily driven by percentage increases in the high-single digits in women’s and kids’ footwear sales and a men's footwear sales increase in the low-single digits. Consolidated softgoods sales decreased 17.5% for the twenty-six weeks endedAugust 27, 2016 compared to the twenty-six weeks endedAugust 29, 2015, which was primarily driven by softness in apparel and accessories.

Cost of Sales (Including Occupancy Costs) and Gross Profit

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	August 27, 2016			August 29, 2015			August 27, 2016			August 29, 2015
	(dollars in thousands)						(dollars in thousands)
Cost of sales (including occupancy costs)	$	349,929		$	323,943		$	663,633		$	628,361
Gross profit	$	159,474		$	159,207		$	299,285		$	298,183
Gross profit as a percentage of net sales	31.3		%	33.0		%	31.1		%	32.2		%

Gross profit, as a percentage of net sales, decreased 1.7% for the thirteen weeks endedAugust 27, 2016 as compared to the thirteen weeks endedAugust 29, 2015, which was primarily due to a 2.0% decrease in product margin, as a percentage of net sales, partially offset by a 0.3% decrease in occupancy costs, as a percentage of net sales. The 2.0% decrease in product margin, as a percentage of net sales, was primarily due to the Company continuing to work through higher inventory levels during the thirteen weeks endedAugust 27, 2016.

Gross profit, as a percentage of net sales, decreased 1.1% for the twenty-six weeks endedAugust 27, 2016 as compared to the twenty-six weeks endedAugust 29, 2015, which was primarily due to a 1.3% decrease in product margin, as a percentage of net sales, partially offset by a 0.2% decrease in occupancy costs, as a percentage of net sales. The 1.3% decrease in product margin, as a percentage of net sales, was primarily due to the Company continuing to work through higher inventory levels during the twenty-six weeks endedAugust 27, 2016.

Selling, General, and Administrative Expenses

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	August 27, 2016			August 29, 2015			August 27, 2016			August 29, 2015
	(dollars in thousands)						(dollars in thousands)
Selling, general, and administrative expenses	$	124,224		$	117,604		$	249,123		$	234,061
Selling, general, and administrative expenses as a percentage of net sales	24.4		%	24.4		%	25.9		%	25.3		%

Selling, general, and administrative expenses increased $6.6 million for the thirteen weeks endedAugust 27, 2016 as compared to the thirteen weeks endedAugust 29, 2015, which was primarily due to the following: (1) an increase in depreciation expense of $1.8 million, which was primarily due to the replacement of the Company's warehouse and order management system in the third quarter of fiscal 2016; (2) incremental supply chain expenses of approximately $1.0 million as a result of the replacement of the Company’s warehouse and order management system in fiscal 2016; (3) incremental credit card costs; (4) increases in variable costs in fulfillment, credit costs, and Macys.com license fees, in conjunction with the 5.4%increase in consolidated net sales, offset by a reduction in incentive compensation costs.

Selling, general, and administrative expenses increased $15.1 million for the twenty-six weeks endedAugust 27, 2016 as compared to the twenty-six weeks endedAugust 29, 2015, which was primarily due to the following: (1) an increase in depreciation expense of $3.2 million, which was primarily due to the replacement of the Company's warehouse and order management system in the third quarter of fiscal 2016; (2) incremental supply chain expenses of approximately $3.0 million as a result of the replacement of the Company’s warehouse and order management system in fiscal 2016; (3) incremental credit card costs; (4) increases in variable costs in fulfillment, credit costs, and Macys.com license fees, in conjunction with the 3.9%increase in consolidated net sales, offset by a reduction in incentive compensation costs.

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Impairment Charges and Store Closing Costs

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	August 27, 2016			August 29, 2015			August 27, 2016			August 29, 2015
	(dollars in thousands)						(dollars in thousands)
Impairment charges and store closing costs	$	336		$	160		$	371		$	328
Impairment charges and store closing costs as a percentage of net sales	0.1		%	—		%	—		%	—		%
Number of stores/shops closed	7			8			14			23

During the thirteen and twenty-six weeks endedAugust 27, 2016 and August 29, 2015, the impairment charges and store closing costs recorded by the Company represented the non-cash write-off of fixtures and equipment related to store/shop closings.

Interest (Expense) Income, Net

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	August 27, 2016			August 29, 2015			August 27, 2016			August 29, 2015
	(dollars in thousands)						(dollars in thousands)
Interest (expense) income, net	$	(32	)	$	1		$	(26	)	$	(1	)
Interest (expense) income, net as a percentage of net sales	—		%	—		%	—		%	—		%

Interest income is earned on the Company’s investments and interest expense is incurred on the unused commitment fee and letter of credit fees related to the Company’s Amended and Restated Revolving Credit Facility Credit Agreement.

Income Tax Expense

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	August 27, 2016			August 29, 2015			August 27, 2016			August 29, 2015
	(dollars in thousands)						(dollars in thousands)
Income tax expense	$	12,807		$	15,583		$	18,064		$	24,198
Income tax expense as a percentage of net sales	2.5		%	3.2		%	1.9		%	2.6		%
Effective income tax rate	36.7		%	37.6		%	36.3		%	37.9		%

The decrease in the effective tax rate for the thirteen and twenty-six weeks endedAugust 27, 2016 is a result of a decrease in non-deductible expenses incurred in the current year compared to the thirteen and twenty-six weeks endedAugust 29, 2015.

Net Loss Attributable to Redeemable Noncontrolling Interest

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	August 27, 2016			August 29, 2015			August 27, 2016			August 29, 2015
	(dollars in thousands)						(dollars in thousands)
Net loss attributable to redeemable noncontrolling interest	$	—		$	41		$	—		$	96
Net loss attributable to redeemable noncontrolling interest as a percentage of net sales	—		%	—		%	—		%	—		%

The net loss attributable to redeemable noncontrolling interest represents the noncontrolling owner’s portion of the net loss generated by JackRabbit for the applicable period. The decrease in the net loss attributable to redeemable noncontrolling

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interest for the thirteen and twenty-six weeks endedAugust 27, 2016 as compared to the thirteen and twenty-six weeks endedAugust 29, 2015 was due to JackRabbit becoming a wholly owned subsidiary of the Company during the second quarter of fiscal 2016.

Net Income Attributable to The Finish Line, Inc.

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	August 27, 2016			August 29, 2015			August 27, 2016			August 29, 2015
	(dollars in thousands)						(dollars in thousands)
Net income attributable to The Finish Line, Inc.	$	22,075		$	25,902		$	31,701		$	39,691
Net income attributable to The Finish Line, Inc. as a percentage of net sales	4.3		%	5.4		%	3.3		%	4.3		%
Diluted earnings per share attributable to The Finish Line, Inc. shareholders	$	0.53		$	0.57		$	0.75		$	0.86

Net income attributable to The Finish Line, Inc. decreased $3.8 million for the thirteen weeks endedAugust 27, 2016 compared to the thirteen weeks endedAugust 29, 2015, which was primarily due to the decrease in gross profit, as a percentage of net sales, an increase in selling, general, and administrative expenses related to the additional costs to support the 5.4%increase in net sales and expenses related to the Company's replacement of its warehouse and order management system in the third quarter of fiscal 2016, partially offset by the increase in net sales and a decrease in income tax expense.

Net income attributable to The Finish Line, Inc. decreased $8.0 million for the twenty-six weeks endedAugust 27, 2016 compared to the twenty-six weeks endedAugust 29, 2015, which was primarily due to the decrease in gross profit, as a percentage of net sales, an increase in selling, general, and administrative expenses related to additional costs to support the 3.9%increase in net sales and expenses related to the Company’s replacement of its warehouse and order management system, partially offset by the increase in net sales and a decrease in income tax expense.

Liquidity and Capital Resources

The Company’s primary source of working capital is cash-on-hand and cash flows from operations. The following table sets forth material balance sheet and liquidity measures of the Company (in thousands):

	August 27, 2016		August 29, 2015		February 27, 2016
Cash and cash equivalents	$	114,301	$	100,234	$	79,495
Merchandise inventories, net	$	372,263	$	366,335	$	376,506
Interest-bearing debt	$	—	$	—	$	—
Working capital	$	277,248	$	327,405	$	300,166

Operating Activities

Net cash provided by operating activities for the twenty-six weeks endedAugust 27, 2016 was $119.3 million compared to net cash provided by operating activities of $37.2 million for the twenty-six weeks endedAugust 29, 2015. The increase in cash provided by operating activities was primarily the result of a net increase in the cash inflow from working capital balances and an increase in non-cash expenses, partially offset by a decrease in net income for the twenty-six weeks endedAugust 27, 2016 compared to the twenty-six weeks endedAugust 29, 2015.

At August 27, 2016, the Company had cash and cash equivalents of $114.3 million. Cash and cash equivalents consist primarily of cash on hand and highly liquid instruments with a maturity of three months or less at the date of purchase. At August 27, 2016, substantially all of the Company’s cash was invested in deposit accounts at banks.

Merchandise inventories, net increased 1.6% at August 27, 2016 compared to August 29, 2015, and decreased 1.1% from February 27, 2016. The increase in merchandise inventories, net over the prior year quarter is primarily related to an increase in merchandise inventories to support the expected increase in net sales year over year. The decrease in merchandise inventories from February 27, 2016 is due to seasonality as the Company required more merchandise inventories at the end of the Company’s fiscal year 2016 due to expected elevated net sales for the thirteen weeks ended May 28, 2016 as compared to the

17

thirteen weeks ending November 26, 2016. Accounts payable increased 46.4% at August 27, 2016 compared to August 29, 2015 primarily related to the increase in merchandise inventories and timing of payments to vendors.

Investing Activities

Net cash used in investing activities for the twenty-six weeks endedAugust 27, 2016 was $34.8 million compared to $43.3 million for the twenty-six weeks endedAugust 29, 2015. The decrease in cash used in investing activities was primarily the result of a $8.3 milliondecrease in JackRabbit acquisitions in the current year and a $0.4 millionincrease in proceeds from disposals of property and equipment, offset by a $0.1 millionincrease in capital expenditures.

The Company intends to invest approximately $55-$60 million in capital expenditures during fiscal 2017. Of this amount, approximately $40 million is intended for the construction of approximately 7 new brick and mortar stores and the remodeling or repositioning of 70-80 existing brick and mortar stores. In addition, approximately $5 million is expected to be spent to reposition and expand approximately 50 shops within department stores. The remaining $10-15 million to be invested is related primarily to an upgrade of the Company’s digital platform, mobile first strategy, and information security enhancements. The Company anticipates satisfying all of these capital expenditures through the use of cash-on-hand and operating cash flows.

Financing Activities

Net cash used in financing activities for the twenty-six weeks endedAugust 27, 2016 was $49.7 million compared to $43.3 million for the twenty-six weeks endedAugust 29, 2015. The $6.5 millionincrease in cash used in financing activities was primarily due to a $6.6 millionincrease in stock repurchases, a $0.4 milliondecrease in proceeds from the issuance of common stock, a $0.2 milliondecrease in excess tax benefits from share-based compensation; partially offset by a $1.0 million purchase of the remainder of the redeemable noncontrolling interest in the second quarter fiscal 2016.

Share Repurchase Program

On July 21, 2011, the Company’s Board of Directors authorized a share repurchase program to repurchase shares of the Company’s common stock with subsequent amendments on March 26, 2015 and July 13, 2016 authorizing further share repurchases through December 31, 2019 (the “Share Repurchase Program”).

The Company purchased 2.0 million shares at an average price of $21.28 per share for an aggregate amount of $42.6 million during the twenty-six weeks endedAugust 27, 2016. As of August 27, 2016, there were 5,291,936 shares remaining available to repurchase under the Share Repurchase Program.

As of August 27, 2016, the Company held 19,196,721 shares of its common stock as treasury shares at an average price of $20.32 per share for an aggregate carrying amount of $390.1 million. The Company’s treasury shares may be issued upon the exercise of employee stock options, under the Employee Stock Purchase Plan, in the form of restricted stock, or for other corporate purposes. The number of shares of common stock reserved to be issued upon the exercise of options, restricted stock, or other awards is limited as defined in the 2002 Stock Incentive Plan of The Finish Line, Inc. and The Finish Line, Inc. Amended and Restated 2009 Incentive Plan. Further purchases will occur from time to time as market conditions warrant and as the Company deems appropriate when judged against other alternative uses of cash.

Dividends

On July 14, 2016, the Company announced a quarterly cash dividend of $0.10 per share of the Company’s common stock. The Company declared dividends of $8.4 million during the twenty-six weeks endedAugust 27, 2016, of which $4.1 million was included in other liabilities and accrued expenses on the Company’s consolidated balance sheet as of August 27, 2016. Further declarations of dividends remain at the discretion of the Company’s Board of Directors.

Contractual Obligations

The Company’s contractual obligations primarily consist of operating leases and open purchase orders for merchandise inventory. For the twenty-six weeks endedAugust 27, 2016, there were no significant changes to the Company’s contractual obligations from those identified in the Company’s Annual Report on Form 10-K for the year ended February 27, 2016, other than those which occur in the ordinary course of business (primarily changes in the Company’s merchandise inventory related to purchase obligations, which fluctuate throughout the year as a result of the seasonal nature of the Company’s operations, and changes to operating leases due to store openings and closings).

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Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to adopt accounting policies related to estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, management evaluates the Company’s accounting policies, estimates, and judgments, including those related to inventories, long-lived assets, and contingencies. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

For a discussion of the Company’s market risk associated with interest rates as of February 27, 2016, see “Quantitative and Qualitative Disclosures about Market Risks” in Item 7A of Part II of the Company’s Annual Report on Form 10-K for the fiscal year ended February 27, 2016. For the twenty-six weeks endedAugust 27, 2016, there has been no significant change in related market risk factors.

Item 4. Controls and Procedures

Disclosure Controls and Procedures. With the participation of our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Report. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures were effective in ensuring that (i) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms and (ii) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this Report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is subject, from time to time, to certain legal proceedings and claims in the ordinary course of conducting its business. Although it is not possible to predict with certainty the eventual outcome of any litigation, in the opinion of management, the Company’s legal proceedings are not expected to have a material adverse effect on its financial position, results of operations, or cash flows.

Item 1A. Risk Factors

Risk factors that affect the Company’s business and financial results are discussed in “Risk Factors” in Item 1A of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended February 27, 2016. There has been no significant change to identified risk factors for the twenty-six weeks endedAugust 27, 2016.

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

On July 21, 2011, the Company’s Board of Directors authorized a share repurchase program to repurchase shares of the Company’s common stock with subsequent amendments on March 26, 2015 and July 13, 2016 authorizing further share repurchases through December 31, 2019 (the “Share Repurchase Program”). The total amount of shares authorized to be repurchased under the Share Repurchase Program is 5,291,936.

Details on the shares repurchased under the Share Repurchase Program during the thirteen weeks endedAugust 27, 2016 are as follows:

Period	Total Number of Shares Purchased	Average Price Paid per Share(1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Program
May 29, 2016 – July 2, 2016	100,000	$	20.19	100,000	6,191,936
July 3, 2016 – July 30, 2016	900,000	21.40		900,000	5,291,936
July 31, 2016 – August 27, 2016	—	—		—	5,291,936
	1,000,000	$	21.28	1,000,000

_______________________

(1)The average price paid per share includes any brokerage commissions.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

20

Item 6. Exhibits

(a) Exhibits

Exhibit Number	Description
4.1	The Finish Line, Inc. 2009 Incentive Plan, Amended and Restated as of April 16, 2014, and Further Amended as of June 27 and July 14, 2016 (incorporated by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-8 (Reg. No. 333-212858) filed by the Company on August 3, 2016).
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as amended.
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as amended.
32	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from The Finish Line, Inc.’s Form 10-Q for the quarterly period ended August 27, 2016, formatted in an XBRL Interactive Data File: (i) Consolidated Balance Sheets-unaudited; (ii) Consolidated Statements of Income-unaudited; (iii) Consolidated Statements of Cash Flows-unaudited; and (iv) Notes to Consolidated Financial Statements-unaudited, with detailed tagging of notes and financial statement schedules.

21

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		THE FINISH LINE, INC.
Date:	September 23, 2016	By:	/s/ Edward W. Wilhelm
			Edward W. Wilhelm
			Executive Vice President, Chief Financial Officer

22

EXHIBIT INDEX

Exhibit Number	Description
4.1	The Finish Line, Inc. 2009 Incentive Plan, Amended and Restated as of April 16, 2014, and Further Amended as of June 27 and July 14, 2016 (incorporated by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-8 (Reg. No. 333-212858) filed by the Company on August 3, 2016).
31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as amended.
31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as amended.
32	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from The Finish Line, Inc.’s Form 10-Q for the quarterly period ended August 27, 2016, formatted in an XBRL Interactive Data File: (i) Consolidated Balance Sheets-unaudited; (ii) Consolidated Statements of Income-unaudited; (iii) Consolidated Statements of Cash Flows-unaudited; and (iv) Notes to Consolidated Financial Statements-unaudited, with detailed tagging of notes and financial statement schedules.

23

EX-4.1

Exhibit 4.1

The Finish Line, Inc.

2009 Incentive Plan

Amended and Restated as of April 16, 2014, and

Further Amended as of July 14, 2016

Article 1. Establishment, Purpose and Term.

Section 1.1 Establishment.  The Finish Line, Inc. 2009 Incentive Plan (as amended, the “OriginalPlan”) was originally approved by the Board of Directors of The Finish Line, Inc. (“Company”) on April 24, 2009 (the “Effective Date”) and subsequently approved by the Company’s shareholders on July 23, 2009. The Original Plan was amended and reapproved by the Company’s Board of Directors on April 16, 2014, and the Original Plan, as amended hereby (the “Plan”), was subsequently reapproved by the Company’s shareholders on July 17, 2014. Subject to Section 13.1, Awards may be granted as provided herein for the term of the Plan.

Section 1.2 Purposes.  The purposes of the Plan are to foster and promote the long-term financial success of the Company and materially increase shareholder value by motivating performance through incentive compensation. The Plan also is intended to encourage Participant ownership in the Company, attract and retain talent, and enable Participants to participate in the long-term growth and financial success of the Company. In addition, the Plan provides the ability to make Awards linked to the profitability of the Company’s businesses and increases in shareholder value.

Section 1.3 Term.  The Plan became effective on the Effective Date. No additional Incentive Stock Options shall be made after the tenth anniversary of the date the Plan is last approved by the Company’s shareholders. After the expiration or termination of the Plan, outstanding Awards shall be administered in accordance with the provisions hereof and thereof. The Plan shall continue in effect until all matters relating to the settlement of Awards and administration of the Plan have been completed.

Article 2. Definitions

For purposes of the Plan, the following terms are defined as set forth below and certain other terms used herein have definitions given to them in the first place in which they are used:

Section 2.1 “2002 Plan” means the 2002 Stock Incentive Plan of The Finish Line, Inc. (as Amended and Restated July 21, 2005), as amended.

Section 2.2 “Affiliate” means any individual, corporation, partnership, association, limited liability company, joint-stock company, trust, unincorporated association or other entity that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under control with, the Company.

Section 2.3 “Agreement” means any agreement entered into pursuant to the Plan by which an Award is granted to a Participant.

Section 2.4 “Award” means any Bonus Award, Stock Option, Stock Appreciation Right, Restricted Stock, Deferred Stock, or Performance Award granted to a Participant under the Plan. Awards shall be subject to the terms and conditions of the Plan and shall be evidenced by an Agreement containing such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall deem desirable.

Section 2.5 “Beneficiary” means any person or other entity, which has been designated by a Participant in his or her most recent written beneficiary designation filed with the Committee to receive the compensation, awarded to such Participant under the Plan, to the extent permitted. If there is no designated beneficiary, then the term “Beneficiary” means any person or other entity entitled by will or the laws of descent and distribution to receive such compensation.

Section 2.6 “Board of Directors” or “Board” means the Board of Directors of the Company.

Section 2.7 “Bonus Award” has the meaning set forth in Article 5(a) of this Plan.

Section 2.8 “Cause” means, unless otherwise specifically provided in an Agreement, any act or omission which permits the Company to terminate the written employment agreement or arrangement between the Participant and the Company or an

Affiliate for “cause” as defined in such agreement or arrangement, or in the event there is no such agreement or arrangement or the agreement or arrangement does not define the term “cause,” then “Cause” means the occurrence of one or more of the following events: (a) the willful and continued failure by the Participant to perform his or her material duties with respect to the Company or its Affiliates for a period of more than 30 days; (b) the willful or intentional engaging by the Participant in conduct within the scope of his or her employment that causes material and demonstrable injury, monetarily or otherwise, to the Company including, without limitation, breach of fiduciary duty, fraud, misappropriation, embezzlement or theft; (c) the Participant’s conviction for, or a plea of nolo contendere to, the commission of a felony or other crime involving moral turpitude; or (d) a breach of the Participant’s covenants set forth in any other agreement between the Participant and the Company and the failure of the Executive to cure within 10 days after receipt of notice from the Company.

Section 2.9 “Common Stock” means the Company’s class A common stock as set forth and described in the Company’s articles of incorporation, as amended, whether presently or hereinafter issued, and any other stock or security resulting from adjustment thereof as described hereinafter.

Section 2.10 “Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto and the regulations thereunder, as amended from time to time.

Section 2.11 “Commission” means the Securities and Exchange Commission or any successor thereto.

Section 2.12 “Committee” means the committee of the Board responsible for granting and administering Awards under the Plan, which initially shall be the Compensation Committee of the Board, until such time as the Board may designate another committee. The Committee shall consist solely of two or more directors and each member of the Committee shall be a “non-employee director” within the meaning of Rule 16b-3 and also an “outside director” under Section 162(m) of the Code. In addition, each member of the Committee shall satisfy any independence or other corporate governance standards imposed by the Nasdaq Stock Market or other securities market on which the Stock shall be listed from time to time. Notwithstanding the foregoing, if and to the extent that no Committee exists which has the authority to administer the Plan, the functions of the Committee shall be exercised by the Board and all references herein to the Committee shall be deemed to be references to the Board.

Section 2.13 “Company” means The Finish Line, Inc., an Indiana corporation, and includes any successor or assignee corporation or corporations into which the Company may be merged, changed or consolidated; any corporation for whose securities the securities of the Company shall be exchanged; and any assignee of or successor to substantially all of the assets of the Company. Wherever the context of the Plan so admits or requires, “Company” also means “Affiliate.”

Section 2.14 “Covered Employee” means a Participant who is a “covered employee” within the meaning of Section 162(m) of the Code.

Section 2.15 “Deferred Stock” means a right granted to a Participant under Section 9.1 hereof to receive Stock at the end of a specified deferral period.

Section 2.16 “Domestic Relations Order” has the meaning set forth in the Code.

Section 2.17 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

Section 2.18 “Exercise Price” means the price that a Participant must pay to exercise an Award or the amount upon which the value of an Award is based.

Section 2.19 “Fair Market Value” means, as of any given date, the average of the high and low market price on the Nasdaq Stock Market or such other public trading market on which the Stock is traded on that date. If there is no regular public trading market for such Stock, the Fair Market Value of the Stock shall be determined by the Committee in good faith. In each case, the Fair Market Value shall be determined without regard to whether the Stock is restricted or represents a minority interest.

Section 2.20 “Grant Date” means the date as of which an Award is granted pursuant to the Plan. In no event may the Grant Date be earlier than the Effective Date unless the effectiveness of the Award is contingent on the approval of the Plan by the Company’s shareholders.

Section 2.21 “Incentive Stock Option” means any Option that is intended to be, is designated as, and actually qualifies as, an “incentive stock option” within the meaning of Section 422 of the Code.

Section 2.22 “Non-Qualified Stock Option” means a Stock Option that is not an Incentive Stock Option.

Section 2.23 “Option Period” means the period during which the Option shall be exercisable in accordance with an Agreement and Article 6.

Section 2.24 “Participant” means a person who satisfies the eligibility conditions of Section 4.6 and to whom an Award has been granted by the Committee under the Plan. In the event that a Representative is appointed for a Participant, then the term “Participant” shall mean such appointed Representative. Notwithstanding the appointment of a Representative, the term “Termination of Employment” shall mean the Termination of Employment of the Participant.

Section 2.25 “Performance Award” means an Award consisting of Performance Shares or Performance Units described in Article 10.

Section 2.26 “Performance Goals” mean the level of performance established by the Committee as the Performance Goal with respect to a Performance Measure. Performance Goals may vary from Performance Period to Performance Period and from Participant to Participant and may be established on a stand-alone basis, in tandem or in the alternative.

Section 2.27 “Performance Measure” means any measure based on any of the performance criteria set out in this Section, either alone or in any combination, and, if not based on individual performance, on either a consolidated or a division or business unit level, as the Committee may determine and measured on an absolute basis or relative to a pre-established target, to previous year’s results or to a designated comparison group: individual Participant financial or non-financial performance goals; sales; cash flow; cash flow from operations; operating profit or loss; operating income or loss; net operating income or loss; net income or loss; operating margin; net income margin; profit margin; return on assets; return on net assets; four-wall contribution; economic value added; return on total assets; return on equity; return on capital; return on operating income; total shareholder return; revenue or loss; revenue growth or decline; earnings before interest, taxes, depreciation and amortization (“EBITDA”); EBITDA growth or decline; basic earnings per share (positive or negative); diluted earnings per share (positive or negative); funds from operations per share; per share growth (positive or negative); cash available for distribution; market share; cash available for distribution per share; per share growth or decline; share price performance on an absolute basis and relative to an index of earnings per share; improvements in the Company’s attainment of expense levels; overhead reduction; expense reduction or control; or implementing or completion of critical projects. The foregoing criteria shall have any reasonable definitions that the Committee may specify, which may include or exclude any or all of the following items as the Committee may specify: extraordinary, unusual or non-recurring items; effects of accounting changes; effects of financing activities; expenses for restructuring or productivity initiatives; other non-operating items; spending for acquisitions; effects of divestitures; effects of litigation activities and settlements; stock compensation; bonuses for officers, senior management and corporate management, and professionals; and executive severance of a material nature (in excess of $500,000). Any such performance criterion or combination of such criteria may apply to the Participant’s Award opportunity in its entirety or to any designated portion or portions of the Award opportunity, as the Committee may specify. In the event Section 162(m) of the Code or applicable tax or other laws change to permit the Committee discretion to alter the governing performance measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval. Performance Measures may vary from Performance Period to Performance Period and from Participant to Participant.

Section 2.28 “Performance Period” means the time period during which a Performance Award shall be earned and shall be at least one (1) fiscal year in length, unless otherwise determined by the Committee.

Section 2.29 “Performance Unit” means a right granted pursuant to the terms and conditions established by the Committee which is described in Section 10.1.

Section 2.30 “Performance Share” means a right granted pursuant to the terms and conditions established by the Committee which is described in Section 10.1.

Section 2.31 “Plan” means The Finish Line, Inc. 2009 Incentive Plan, as herein set forth and as may be amended from time to time.

Section 2.32 “Representative” means (a) the person or entity acting as the executor or administrator of a Participant’s estate pursuant to the last will and testament of a Participant or pursuant to the laws of the jurisdiction in which the Participant had the Participant’s primary residence at the date of the Participant’s death; (b) the person or entity acting as the guardian or temporary guardian of a Participant; or (c) the person or entity which is the Beneficiary of the Participant upon or following the

Participant’s death; provided that only one of the foregoing shall be the Representative at any point in time as determined under applicable law and recognized by the Committee.

Section 2.33 “Restricted Stock” means Stock granted to a Participant under Section 8.1 and which is subject to certain restrictions and to a risk of forfeiture or repurchase by the Company.

Section 2.34 “Rule 16b-3” means Rule 16b-3, as from time to time in effect and applicable to the Plan and Participants, promulgated by the Commission under Section 16 of the Exchange Act.

Section 2.35 “Stock” means the Company’s Common Stock, whether presently or hereafter issued, and any other stock or security resulting from adjustment thereof as described hereinafter.

Section 2.36 “Stock Appreciation Right” means a right granted under Section 7.1.

Section 2.37 “Stock Option” or “Option” means a right, granted to a Participant under Section 6.1, to purchase Stock at a specified price during specified time periods.

Section 2.38 “Termination of Employment” means the occurrence of any act or event whether pursuant to an employment agreement or otherwise that actually or effectively causes or results in the person’s ceasing, for whatever reason, to be an officer or employee of the Company or of any Affiliate, including, without limitation, death, disability, dismissal, severance at the election of the Participant, retirement, or severance as a result of the discontinuance, liquidation, sale or transfer by the Company or its Affiliates of a business owned or operated by the Company or its Affiliates. With respect to any non-employee member of the Board or of a board of directors of an Affiliate, Termination of Employment means the termination of a Participant’s status as a non-employee director of the Board or of a board of directors of an Affiliate. With respect to any other person who is not an employee with respect to the Company or an Affiliate, the Agreement shall establish what act or event shall constitute a Termination of Employment for purposes of the Plan. A Termination of Employment shall occur with respect to an employee who is employed by an Affiliate if the Affiliate shall cease to be an Affiliate and the Participant shall not immediately thereafter become an employee of the Company or an Affiliate.

Article 3. Compensation Committee Administration.

Section 3.1 Committee Structure.  The Plan shall be administered by the Committee, but any action that may be taken by the Committee may also be taken by the full Board of Directors of the Company.

Section 3.2 Committee Actions.  Subject to the Committee’s charter, the Committee may authorize any one or more of its members or an officer of the Company to execute and deliver documents on behalf of the Committee or the Committee may allocate among one or more of its members, or may delegate to one or more of its agents, such duties and responsibilities as it determines.

Section 3.3 Committee Authority.  Subject to applicable law, the Company’s articles of incorporation and by-laws, the Committee’s charter or the terms of the Plan, the Committee shall have the authority:

(a)to select those persons to whom Awards may be granted from time to time;

(b)   to determine whether and to what extent Awards are to be granted hereunder;

(c)  to determine the number of shares of Stock to be covered by each Award granted hereunder;

(d)  to determine the terms and conditions of any Award granted hereunder, including any provisions deemed by the Committee in good faith to be necessary or appropriate for a “nonqualified deferred compensation plan,” as defined in Section 409A(d)(1) of the Code, to avoid being subject to taxation under Section 409A(a)(1) of the Code, provided that the Exercise Price of any Option or Stock Appreciation Right shall not be less than the Fair Market Value per share of the underlying Stock as of the Grant Date;

(e)   to adjust the terms and conditions, at any time or from time to time, of any Award (including acceleration of vesting of any Award), subject to the limitations contained elsewhere herein, including, but not limited to, Section 13.1 and Section 13.10;

(f)   to determine to what extent and under what circumstances Stock and other amounts payable with respect to an Award shall be deferred, subject to compliance in good faith with the requirements of the Plan and Section 409A of the Code to avoid the Award being subject to taxation under Section 409A(a)(1) of the Code;

(g)  to provide for the forms of Agreement to be utilized in connection with this Plan;

(h)   to determine what legal requirements are applicable to the Plan, Awards, and the issuance of Stock, and to require of a Participant that appropriate action be taken with respect to such requirements;

(i)    to cancel, with the consent of the Participant (if required under the Plan or the applicable Agreement) or as otherwise provided in the Plan or the applicable Agreement, outstanding Awards;

(j)    to require as a condition of the exercise of an Award or the issuance or transfer of a certificate (or other representation of title) of Stock, the withholding from a Participant of the amount of any taxes as may be necessary in order for the Company or any other employer to obtain a deduction or as may be otherwise required by law;

(k)   to determine whether and with what effect an individual has incurred a Termination of Employment;

(l)    to determine the restrictions or limitations on the transfer of Stock;

(m)  to determine whether an Award is to be adjusted, modified or purchased, or is to become fully or partially exercisable, under the Plan or the terms of an Agreement;

(n)   to determine the permissible methods of Award exercise and payment within the terms and conditions of the Plan and the applicable Agreement;

(o)   to adopt, amend and rescind such rules and regulations as, in its opinion, may be advisable in the administration of this Plan;

(p)   to appoint and compensate agents, counsel, auditors or other specialists to aid it in the discharge of its duties; and

(q)   to make all other determinations which may be necessary or advisable for the administration of the Plan.

The Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable, to interpret the terms and provisions of the Plan and any Award issued under the Plan (and any Agreement) and to otherwise supervise the administration of the Plan. The Committee’s policies and procedures may differ with respect to Awards granted at different times and may differ with respect to a Participant from time to time, or with respect to different Participants at the same or different times.

Section 3.4 Committee Determinations and Decisions.  Any determination made by the Committee pursuant to the provisions of the Plan shall be made in its sole discretion, and in the case of any determination relating to an Award may be made at the time of the grant of the Award or, unless in contravention of any express term of the Plan or an Agreement, at any time thereafter. All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on all persons, including the Company and Participants unless revised by the Committee, subject to any ratifications or approvals of the Board that the Committee or Board may request. Any determination shall not be subject to de novo review if challenged in court. Neither the Committee (including any member thereof) nor the Company shall have any liability to any Participant for any matter it determined in good faith as being in compliance with the Code even if such determination was later proved incorrect.

Article 4. Shares and Eligibility

Section 4.1 Number of Shares.  The maximum number of shares of Common Stock which may be used for Awards under this Plan (all of which may be issued pursuant to the exercise of Incentive Stock Options) shall be equal to 10,500,000 shares; provided that in any case the maximum number of such shares which may be used for Awards other than Stock Options or Stock Appreciation Rights shall be 4,000,000 shares. Upon approval of the Plan by the Company’s shareholders on July 23, 2009, the 2002 Plan is no longer available for use for the grant of new incentive awards other than awards granted wholly from shares returned to the 2002 Plan by forfeiture after the annual shareholder meeting in July, 2009. The shares of Common Stock available for Awards under the Plan may be authorized and unissued shares, treasury shares or a combination thereof, as the Committee shall determine.

Section 4.2 Release of Shares.  Subject to Section 4.1, the Committee shall have full authority to determine the class and number of shares of Stock available for Awards. In its discretion the Committee may include (without limitation), as available for distribution, (a) shares of Stock subject to any Award that have been previously forfeited; or (b) shares under an Award that otherwise terminates without issuance of Stock being made to a Participant. Any shares that are available immediately prior to the termination of the Plan, or any shares of Stock returned to the Company for any reason subsequent to the termination of the Plan, may be transferred to a successor plan.

Section 4.3 Restrictions on Shares.  Stock issued upon exercise of an Award shall be subject to the terms and conditions specified herein and to such other terms, conditions and restrictions as the Committee in its discretion may determine and/or provide in the Agreement. The Company shall not be required to issue or deliver any certificates for Stock, cash or other property prior to (a) the completion of any registration or qualification of such shares under federal, state or other law, or any ruling or regulation of any government body which the Committee determines to be necessary or advisable; (b) the satisfaction of any applicable withholding obligation in order for the Company or an Affiliate to obtain a deduction or discharge its legal obligation with respect to the exercise of an Award; and (c) satisfaction of any other terms, conditions or restrictions specified by the Committee herein, in any applicable Agreement or otherwise. The Company may cause any certificate (or other representation of title) for any shares of Stock to be delivered to be properly marked with a legend or other notation reflecting the limitations on transfer of such Stock as provided in this Plan, any shareholder agreement then in effect, or as the Committee may otherwise require. The Committee may require any person exercising an Award to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of the Stock in compliance with applicable law or otherwise.

Section 4.4 Shareholder Rights.  No person shall have any rights of a shareholder as to Stock subject to an Award until, after proper exercise of the Award or other action required, such shares shall have been recorded on the Company’s official shareholder records as having been issued and transferred. Upon exercise of the Award or any portion thereof, the Company will have a reasonable period in which to issue and transfer the shares, and a Participant will not be treated as a shareholder for any purpose whatsoever prior to such issuance and transfer. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date such shares are recorded as issued and transferred in the Company’s official shareholder records, except as provided herein or in an Agreement.

Section 4.5 Effect of Certain Corporate Changes.  Notwithstanding anything to the contrary herein, in the event of any share dividend, share split, combination or exchange of shares, recapitalization or other change in the capital structure of the Company, corporate separation or division of the Company (including, but not limited to, a split-up, spin-off, split-off or distribution to Company shareholders other than a cash dividend), reorganization, rights offering, a partial or complete liquidation, or any other corporate transaction, Company securities offering or event involving the Company and having an effect similar to any of the foregoing, then the Committee shall make appropriate adjustments or substitutions as described below in this Section and in compliance with the Code. The adjustments or substitutions may relate to the number of shares of Stock available for Awards under the Plan, the number of shares of Stock covered by outstanding Awards, the Exercise Price per share of outstanding Awards, and any other characteristics or terms of the Awards as the Committee may deem necessary or appropriate to reflect equitably the effects of such changes to the Participants; provided, however, that to the extent that Section 409A, Section 422 or Section 162(m) of the Code shall apply to an Award, any such adjustments or substitutions shall only be made to the extent that, in the Committee’s good faith determination, they comply with the requirements of Section 409A to avoid being subject to taxation under Section 409A(a)(1) of the Code, Section 422 of the Code to continue treatment as an “incentive stock option” under Section 422 of the Code and Section 162(m) of the Code to continue treatment as qualified performance based compensation under Section 162(m) of the Code.

Section 4.6   Eligibility.  Except as herein provided, the persons who shall be eligible to participate in the Plan and be granted Awards shall be those persons who are current or prospective employees of, or consultants or advisors to, the Company or any Affiliate, or current or prospective non-employee members of the Board of Directors of the Company or any Affiliate. Of those persons described in the preceding sentence, the Committee may, from time to time, select persons to be granted Awards and shall determine the terms and conditions with respect thereto. In making any such selection and in determining the form of the Award, the Committee shall give consideration to such factors deemed appropriate by the Committee.

Article 5. Bonus Awards

(a)   General.  The Committee shall have authority to establish, from time to time, various programs under the Plan pursuant to which Participants may be granted Bonus Awards. A “Bonus Award” shall entitle the Participant to earn incentive compensation based on the achievement of performance goals established for one or more performance periods. For each program, the Committee shall establish the terms and conditions of each program which may include, without limitation, the performance period, the Participants who will participate in the program, the various

possible award levels for each Participant, which may include a threshold, target and maximum award and may or may not be based on percentages of base salary, and the performance goals that must be met for each award level to be earned. An Agreement with each Participant shall not be necessary.

(b)   Earning Bonus Award.  A Participant shall not earn a Bonus Award and no payment shall be made until the Committee determines that the performance goals have been obtained for the relevant award level for the relevant performance period and that the other material terms have been satisfied for the performance period. Whether or not a Participant has earned a Bonus Award shall be determined by the Committee in its sole discretion. Following determination of a Bonus Award, the Committee may make adjustments to a Bonus Award to reflect individual performance during such performance period.

(c)   Payment.  Unless otherwise determined by the Committee, payment for all Bonus Awards shall be made in cash within the short-term deferral period in accordance with Section 409A of the Code unless otherwise deferred pursuant to the Company’s then applicable non-qualified deferred compensation plan.

(d)   Non-transferability of Bonus Awards.  Unless otherwise specifically provided in the Agreement, no Bonus Award shall be sold, assigned, margined, transferred, encumbered, conveyed, gifted, alienated, hypothecated, pledged or disposed of, other than by will or by the laws of descent and distribution; provided, however, under no circumstances may a Participant assign, transfer, convey or dispose of a Bonus Award for consideration unless pursuant to a Domestic Relations Order.

(e) Termination of Employment. Except as otherwise provided by the Committee, in the event a Participant incurs a Termination of Employment, all Bonus Awards shall be forfeited by the Participant.

Article 6. Stock Options

Section 6.1 General.  The Committee shall have authority to grant Options under the Plan at any time or from time to time. The Committee shall consider the potential impact of Section 409A of the Code on each grant of Options and, if necessary, shall make the terms and conditions of the Options, in its good faith determination, comply with the requirements of Section 409A of the Code to avoid being subject to taxation under Section 409A(a)(1) of the Code. An Option shall entitle the Participant to receive Stock upon exercise of such Option, subject to the Participant’s satisfaction in full of any conditions, restrictions or limitations imposed in accordance with the Plan or an Agreement (the terms and provisions of which may differ from other Agreements) including, without limitation, payment of the Exercise Price.

Section 6.2 Grant.  The grant of an Option shall occur as of the Grant Date determined by the Committee, provided that the Grant Date shall not be earlier than the date upon which the Committee acts to grant the Option. Options may be granted alone or in connection with other Awards. An Award of Options shall be evidenced by, and subject to the terms of, an Agreement. The Committee shall have the authority to grant any Participant Incentive Stock Options, Non-Qualified Stock Options or both types of Options (in each case with or without Stock Appreciation Rights); provided, however, only a person who is a common-law employee of the Company, any “parent corporation” of the Company, or a “subsidiary corporation” of the Company (each term as defined in Section 424 of the Code) on the date of grant shall be eligible to be granted an Incentive Stock Option. To the extent that any Option is not designated as an Incentive Stock Option or even if so designated does not qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock Option.

Section 6.3 Terms and Conditions.  Options shall be subject to such terms and conditions as shall be determined by the Committee, including and subject to the following:

(a)   Exercise Price.  The Exercise Price per share shall not be less than the Fair Market Value per share on the Grant Date. If an Option which is intended to qualify as an Incentive Stock Option is granted to an individual who owns or who is deemed to own shares possessing more than ten percent (10%) of the combined voting power of all classes of shares of the Company, a parent corporation or any subsidiary corporation (each term as defined in Section 6.2) (a “10% Owner”), the Exercise Price per share shall not be less than one hundred ten percent (110%) of the Fair Market Value per share on the Grant Date.

(b)   Option Period.  The Option Period of each Option shall be fixed by the Committee. In the case of an Incentive Stock Option, the Option Period shall not exceed ten (10) years from the Grant Date.  If an Option which is intended to be an Incentive Stock Option is granted to a 10% Owner, the Option Period shall not exceed five (5) years from the Grant Date.  No Option which is intended to be an Incentive Stock Option shall be granted more than ten (10) years from the

date the Plan is adopted by the Company or the date the Plan is approved by the shareholders of the Company, whichever is earlier.

(c) Exercisability.  Subject to Section 11.2 and Section 6.4, an Option shall be exercisable in whole or in such installments and at such times, as established by the Committee in an Agreement; provided, however, no Incentive Stock Option may be exercised before the Plan is approved by the shareholders of the Company in the manner prescribed by Section 422 of the Code. The Committee may provide in an Agreement for an accelerated exercise of all or part of an Option upon such events or standards that it may determine, including one or more Performance Measures. In addition, the Committee may at any time accelerate the exercisability of all or part of any Option. If an Option is designated as an Incentive Stock Option, the aggregate Fair Market Value (determined on the Grant Date of the Option) of the Stock as to which such Incentive Stock Option which is exercisable for the first time during any calendar year (under the Plan or any other plan of the Company or any parent corporation or subsidiary corporation) shall not exceed $100,000. Except as otherwise provided in Article 11 in connection with acceleration events, or certain occurrences of termination, no Award granted under this Plan to an officer or director of the Company may be exercised, and no restrictions relating thereto may lapse, within six months of the date of such grant if (i) the requirements of Exchange Act Rule 16b-3(d)(1) were not satisfied with respect to the issuance of such Award; and (ii) the Committee has not otherwise waived such limitation.

(d) Method of Exercise.  Subject to the provisions of this Article 6 and the applicable Agreement, a Participant may exercise Options, in whole or in part, during the Option Period by giving written notice of exercise on a form provided by the Committee to the Company specifying the number of shares of Stock subject to the Option to be purchased. Such notice shall be accompanied by payment in full of the purchase price by cash or certified check or such other form of payment as the Company may accept. If permitted in the applicable Agreement or otherwise by the Committee, payment in full or in part may also be made by (i) delivering Stock already owned by the Participant (for any minimum period required by the Committee) having a total Fair Market Value on the date of such delivery equal to the Exercise Price; (ii) the delivery of cash by a broker-dealer as a “cashless” exercise, provided such method of payment may not be used by an executive officer of the Company or a member of the Board to the extent such payment method would violate Rule 16b-3 or the Exchange Act; (iii) withholding by the Company of Stock subject to the Option having a total Fair Market Value as of the date of delivery equal to the Exercise Price; or (iv) any combination of cash and the foregoing.

(e) Conditions for Issuance of Shares.  No shares of Stock shall be issued until full payment therefor has been made. A Participant shall have all of the rights of a shareholder of the Company holding the class of shares that is subject to such Option (including, if applicable, the right to vote the shares and the right to receive dividends) when the Participant has given written notice of exercise, has paid in full for such shares, and such shares have been recorded on the Company’s official shareholder records as having been issued and transferred.

(f) Non-transferability of Options.  Unless otherwise specifically provided in the applicable Agreement, no Option shall be sold, assigned, margined, transferred, encumbered, conveyed, gifted, alienated, hypothecated, pledged, or disposed of, other than by will or by the laws of descent and distribution, and all Options shall be exercisable during the Participant’s lifetime only by the Participant; provided, however, under no circumstances may a Participant assign, transfer, convey or dispose of an Option for consideration unless pursuant to a Domestic Relations Order.

Section 6.4 Termination of Employment.  Except as otherwise provided by the Committee in the applicable Agreement, any portion of the Option that was not vested and exercisable on the date of Termination of Employment shall expire and be forfeited on such date, and any portion of the Option that was vested and exercisable on date of Termination of Employment shall also expire and be forfeited on such date to the extent not exercised before that date. Notwithstanding the foregoing, (a) with respect to Options granted to employees, except for such longer or shorter periods as provided in the applicable Agreement with respect to Non-Qualified Stock Options and for such shorter periods as provided in the applicable Agreement with respect to Incentive Stock Options, if the Termination of Employment was other than for Cause, death or disability (as defined in Section 22(e)(3) of the Code), the portion of the Option that is vested as of the date of Termination of Employment shall expire and be forfeited at midnight ninety (90) days from the date of such termination and if Termination of Employment was on account of death or disability (as defined above) the portion of the Option that is vested as of the date of Termination of Employment shall expire and be forfeited at midnight one (1) year from the date of such termination, and (b) with respect to Options granted to non-employee members of the Board of Directors the portion of the Option that is vested as of the date of Termination of Employment shall expire and be forfeited at midnight two (2) years from the date of such termination. Notwithstanding anything herein to the contrary, no Option shall be exercisable after the date set forth in the applicable Agreement.

Article 7. Stock Appreciation Rights.

Section 7.1 General.  The Committee shall have authority to grant Stock Appreciation Rights under the Plan at any time or from time to time. Stock Appreciation Rights may be awarded alone or in tandem with other Awards granted under the Plan. The Committee shall consider the potential impact of Section 409A of the Code on each grant of Stock Appreciation Rights and, if determined to be necessary, shall make the terms or conditions of the Stock Appreciation Rights, in its good faith determination, comply with the requirements of Section 409A of the Code to avoid being subject to taxation under Section 409A(a)(1) of the Code. Subject to the Participant’s satisfaction in full of any conditions, restrictions or limitations imposed in accordance with the Plan or the applicable Agreement, a Stock Appreciation Right shall entitle the Participant to surrender to the Company the Stock Appreciation Right and to receive in Stock the number of shares described in Section 7.3(b).

Section 7.2 Grant.  The grant of a Stock Appreciation Right shall occur as of the Grant Date determined by the Committee. A Stock Appreciation Right entitles a Participant to receive Stock as described in Section 7.3(b). An Award of Stock Appreciation Rights shall be evidenced by, and subject to the terms of, an Agreement.

Section 7.3 Terms and Conditions.  Stock Appreciation Rights shall be subject to such terms and conditions as shall be determined by the Committee and set forth in an Agreement, including (but not limited to) the following:

(a) Period and Exercise.  The term of a Stock Appreciation Right shall be established by the Committee. A Stock Appreciation Right shall be for such period and, subject to Section 11.2 and Section 7.3(e), shall be exercisable in whole or in installments and at such times as established by the Committee in an Agreement. The Committee may provide in an Agreement for an accelerated exercise of all or part of a Stock Appreciation Right upon such events or standards that it may determine, including one or more Performance Measures. In addition, the Committee may at any time accelerate the exercisability of all or part of any Stock Appreciation Right. Stock Appreciation Rights shall be exercised by the Participant’s giving written notice of exercise, on a form provided by the Committee, to the Company specifying the portion of the Stock Appreciation Right to be exercised.

(b) Delivery of Stock.  Upon the exercise of a Stock Appreciation Right, a Participant shall receive a number of shares of Stock equal in value to the excess of the Fair Market Value per share of Stock on the date of exercise over the Exercise Price per share of Stock specified in the related Agreement, multiplied by the number of shares in respect of which the Stock Appreciation Right is exercised; provided, however, the Agreement may provide for payment in cash, or a combination of Stock and cash, or the Committee may reserve the right to determine the manner of payment at the time the Stock Appreciation Right is exercised. The Exercise Price per share shall not be less than the Fair Market Value per share on the Grant Date. The aggregate Fair Market Value per share of Stock shall be determined as of the date of exercise of such Stock Appreciation Right.

(c) Grants in Connection With Options.If the Stock Appreciation Right is granted in connection with an Option under the Plan then (i) the Participant, upon exercise of all or any part of the Stock Appreciation Rights, shall surrender to the Company, unexercised, that portion of the underlying Option relating to the same number of shares of Stock as is covered by the Stock Appreciation Rights (or the portion of the Stock Appreciation Rights so exercised), (ii) the Stock Appreciation Right shall terminate and no longer be exercisable upon the termination or exercise of the related Option and Options which have been so surrendered shall no longer be exercisable to the extent the related Stock Appreciation Rights have been exercised, and (iii) the Stock Appreciation Right shall be exercisable only to the extent that the related Option is exercisable and the Stock Appreciation Right shall expire no later than the date on which the related Option expires.

(d) Non-transferability of Stock Appreciation Rights.  Except as specifically provided in the Plan or in the applicable Agreement, no Stock Appreciation Rights shall be sold, assigned, margined, transferred, encumbered, conveyed, gifted, alienated, hypothecated, pledged or disposed of, other than by will or the laws of descent and distribution, and all Stock Appreciation Rights shall be exercisable during the Participant’s lifetime only by the Participant; provided, however, under no circumstances may a Participant assign, transfer, convey or dispose of a Stock Appreciation Right for consideration unless pursuant to a Domestic Relations Order.

(e) Termination of Employment.  A Stock Appreciation Right shall be forfeited or terminated at such time as an Option would be forfeited or terminated under Section 6.4, unless otherwise provided in an Agreement.

Article 8. Restricted Stock

Section 8.1 General.  The Committee shall have authority to grant Restricted Stock under the Plan at any time or from time to time. The Committee shall consider the potential impact of Section 409A of the Code on each grant of Restricted Stock and, if determined to be necessary, shall make the terms and conditions of the Restricted Stock, in its good faith determination, comply with the requirements of Section 409A of the Code to avoid being subject to taxation under Section 409A(a)(1) of the Code. The Committee may also require the recipient of the grant to make an election under Section 83(b) of the Code if the Restricted Stock so granted is subject to transfer restrictions or a substantial risk of forfeiture and if not required by the Company but the Participant makes an election under Section 83(b) of the Code the Participant shall promptly file a copy of such election with the Company. The Committee shall determine the number of shares of Restricted Stock to be awarded to any Participant, the time or times within which such Awards may be subject to forfeiture, and any other terms and conditions of the Awards. Each Award shall be confirmed by, and be subject to the terms of, an Agreement which contains the applicable terms and conditions of the Award, including the rate or times provided by the Committee for the lapse of any forfeiture restrictions or other conditions regarding the Award. The Committee may provide in an Agreement for an accelerated lapse of any such restrictions upon such events or standards that it may determine, including one or more Performance Measures. In addition, the Committee may at any time accelerate the lapse of any such restrictions with respect to all or part of any Restricted Stock.

Section 8.2 Grant, Awards and Certificates.  The grant of an Award of Restricted Stock shall occur as of the Grant Date determined by the Committee. Restricted Stock may be awarded either alone or in addition to other Awards granted under the Plan. Notwithstanding the limitations on issuance of Stock otherwise provided in the Plan, each Participant receiving an Award of Restricted Stock shall be issued a certificate (or other representation of title) in respect of such Restricted Stock. Such certificate shall be registered in the name of such Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award as determined by the Committee and any restrictions the Stock may be subject to, including any shareholder agreement then in effect. The Committee may require that the certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed and that, as a condition of any Award of Restricted Stock, the Participant shall have delivered a share power, endorsed in blank, relating to the Stock covered by such Award.

Section 8.3 Terms and Conditions.  Restricted Stock shall be subject to such terms and conditions as shall be determined by the Committee, including the following:

(a) Rights.  Except as provided in Section 8.3(c) and notwithstanding Section 4.4 and except as otherwise provided in the applicable Agreement, (i) the Participant shall have, with respect to the Restricted Stock, all of the rights of a shareholder of the Company holding the class of Stock that is the subject of the Restricted Stock, including, if applicable, the right to vote the shares, and (ii) for Restricted Stock which is performance based the Participant shall not have the right to receive any dividends until the Restricted Stock is vested at which time all unpaid and accrued dividends shall be paid. If any dividends or other distributions are paid in shares of Stock, all such shares shall be subject to the same restrictions on transferability as the shares of Restricted Stock with respect to which they were paid.

(b) Criteria.  As described in Section 8.1 above, the Committee may provide in an Agreement for the lapse of restrictions in installments and may accelerate the vesting of all or any part of any Award and waive the restrictions for all or any part of such Award; such provisions of an Agreement or Committee action may be based on service, performance by the Participant or by the Company or the Affiliate, including any division or department for which the Participant is employed, Performance Goals for a Performance Period, or such other factors or criteria as the Committee may determine.

(c) Limitations on Transferability.  Subject to the provisions of the Plan and the Agreement, during a period set by the Committee, commencing with the date of such Award (the “Restriction Period”), the Participant shall not be permitted to sell, assign, margin, transfer, encumber, convey, gift, alienate, hypothecate, pledge or dispose of Restricted Stock; provided, however, under no circumstances may a Participant assign, transfer, convey or dispose of Restricted Stock for consideration unless pursuant to a Domestic Relations Order.

(d) Termination of Employment.  Unless otherwise provided in an Agreement or determined by the Committee, if the Participant incurs a Termination of Employment all shares of Restricted Stock still subject to restriction shall be forfeited by the Participant, except the Committee shall have the discretion to waive in whole or in part any or all remaining restrictions with respect to any or all of such Participant’s Restricted Stock.

Article 9. Deferred Stock.

Section 9.1 General.  The Committee shall have authority to grant an Award of Deferred Stock under the Plan at any time or from time to time. Deferred Stock may be awarded either alone or in addition to other Awards granted under the Plan. The Committee may denominate a Deferred Stock Award in either shares of Stock or units. The Committee shall consider the impact of Section 409A of the Code on each grant of Deferred Stock and, if determined to be necessary, shall make the terms and conditions of the Deferred Stock, in its good faith determination, comply with the requirements of Section 409A of the Code to, except as otherwise provided in Section 9.2(e) or Section 9.2(f), avoid being subject to taxation under Section 409A(a)(1) of the Code. The Committee shall determine the number of shares of Deferred Stock to be awarded to any Participant, the duration of the period (the “Deferral Period”) prior to which the Stock will be delivered, and the conditions under which receipt of the Stock will be deferred and any other terms and conditions of the Awards. Each Deferred Stock Award shall be evidenced by, and subject to the terms of, an Agreement.

Section 9.2 Terms and Conditions.  Deferred Stock Awards shall be subject to such terms and conditions as shall be determined by the Committee, including the following:

(a) Rights.  Any rights, other than any rights explicitly set forth herein, with respect to Deferred Stock shall be provided for in an Agreement.

(b) Criteria.  Based on service, performance by the Participant or by the Company or the Affiliate, including any division or department for which the Participant is employed, Performance Goals for a Performance Period, or such other factors or criteria as the Committee may determine, the Committee may provide for the lapse of deferral limitations in installments and may accelerate the vesting of all or any part of any Award and waive the deferral limitations for all or any part of such Award.

(c) Limitations on Transferability.  Subject to the provisions of the Plan and the Agreement, Deferred Stock Awards may not be sold, assigned, margined, transferred, encumbered, conveyed, gifted, alienated, hypothecated, pledged, or disposed of during the Deferral Period; provided, however, under no circumstances may a Participant assign, transfer, convey or dispose of Deferred Stock Award for consideration unless pursuant to a Domestic Relations Order.

(d) Termination of Employment.  Unless otherwise provided in an Agreement or determined by the Committee, if the Participant incurs a Termination of Employment the rights to the shares still covered by the Award shall be forfeited by the Participant, except the Committee shall have the discretion to waive in whole or in part any or all remaining deferral limitations with respect to any or all of such Participant’s Deferred Stock.

(e) Delivery.  At the expiration of the Deferral Period, the Committee shall deliver Stock to the Participant pursuant to the Deferred Stock Award; provided, however, an Agreement may provide for the further deferral of receipt of the Deferred Stock payable under an Award for a specified time (or pursuant to a fixed schedule) or until the occurrence of a permissible distribution event under Section 409A of the Code; provided, further, however, the deferral in such Agreement must be fixed no later than the time specified by Section 409A of the Code.

(f) Election.  If permitted in an Agreement, a Participant may elect to further defer receipt of the Deferred Stock payable under an Award for a specified time (or pursuant to a fixed schedule) or until the occurrence of a permissible distribution event under Section 409A of the Code, subject to such terms and conditions determined by the Committee. Any such election must be made no later than the time provided by Section 409A of the Code, as determined by the Committee.

Article 10. Performance Awards

Section 10.1 General.  The Committee shall have authority to grant Performance Awards under the Plan at any time or from time to time. The Committee shall consider the impact of Section 409A of the Code on each grant of a Performance Award and, if determined to be necessary, shall make the terms and conditions of the Performance Awards, in its good faith determination, comply with the requirements of Section 409A of the Code to avoid being subject to taxation under Section 409A(a)(1) of the Code. A Performance Unit and a Performance Share each consist of the right to receive shares of Stock or cash, as provided in the particular Agreement, and may be awarded either alone or in addition to other Awards granted under the Plan. Performance Units shall be denominated in units of value (including dollar value of shares of Stock) and Performance Shares shall be denominated in a number of shares of Stock. Subject to the terms of the Plan, the Committee shall have complete discretion to determine the number of Performance Units and Performance Shares, if any, granted to each Participant, the conditions for vesting or lapsing of restrictions, the time or times within which such Awards may be subject to forfeiture, whether dividend

equivalents shall be paid and any other terms and conditions of the Awards. Each Performance Award shall be evidenced by, and be subject to the terms of, an Agreement.

Section 10.2 Earning Performance Awards.  The Committee shall determine the extent to which any Performance Award has been earned.

Section 10.3 Termination of Employment.  Unless otherwise specifically provided in an Agreement or determined by the Committee, in the event that a Participant incurs a Termination of Employment, all Performance Awards shall be forfeited by the Participant to the Company. Any distribution of earned Performance Awards authorized by an Agreement or determined by the Committee may be made at the same time payments are made to Participants who did not incur a Termination of Employment during the applicable Performance Period.

Section 10.4 Nontransferability.  Unless otherwise specifically provided in an Agreement, Performance Awards may not be sold, assigned, margined, transferred, encumbered, conveyed, gifted, alienated, hypothecated, pledged, or disposed of, other than by will or by the laws of descent and distribution; provided, however, under no circumstances may a Participant assign, transfer, convey or dispose of a Performance Award for consideration unless pursuant to a Domestic Relations Order.

Article 11. Change in Control Provisions.

Section 11.1 Definition of Change in Control. For purposes of this Plan, “ChangeinControl” shall mean the consummation of one or more of the following:

(a) the sale, exchange, lease or other disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any “person” or “group” (as such terms are used in the Securities Exchange Act of 1934, as amended);

(b) any person or group is or becomes the beneficial owner, directly or indirectly, of more than 35% of the total voting power of the voting stock of the Company (or any entity which controls the Company or which is a successor to all or substantially all of the assets of the Company), including by way of merger, consolidation, tender or exchange offer or otherwise;

(c) a merger, consolidation or similar reorganization of the Company with or into another entity, if the shareholders of Common Stock immediately prior to such transaction do not own a majority of the voting power of the voting stock of the surviving company or its parent immediately after the transaction in substantially the same proportions as immediately prior to such transaction; or

(d) during any 12‑month period, individuals who at the beginning of such period constituted the Board (together with any new directors whose election by the Board (whether through the filling of a vacancy or otherwise) or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company then still in office, who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the board of directors then in office.

Notwithstanding anything herein to the contrary, for Awards that are subject to Section 409A of the Code, the Committee may, in its sole discretion, prescribe in an applicable Agreement or other written agreement approved by the Committee, an alternative definition of “Change in Control” that is intended to satisfy the requirements of Section 409A of the Code and, to the extent required by Section 409A of the Code, provides that a Change in Control shall not be deemed to occur unless such event constitutes a “change in control event” within the meaning of Section 409A of the Code.

Section 11.2 Impact of Event.  Notwithstanding any other provision of the Plan to the contrary, and unless otherwise specifically provided in an Agreement, in the event of a Change in Control (determined without regard to subclause (a) of the definition set forth in Section 11.1), all Bonus Awards, Stock Options, Stock Appreciation Rights, Restricted Stock and Deferred Stock which are outstanding and have not otherwise vested shall be deemed vested and any performance goal or other condition with respect to any Performance Shares or Performance Units shall be deemed satisfied, immediately prior to the consummation of the Change in Control (determined without regard to subclause (a) of the definition set forth in Section 11.1).

Section 11.3 Additional Discretion.  The Committee shall have full discretion, notwithstanding anything herein or in an Agreement to the contrary, with respect to an outstanding Award upon a transaction described in Section 11.1 to provide that the securities of another entity be substituted hereunder for the Stock and to make equitable adjustment with respect thereto.

Section 11.4 Sole Determination.  The adjustments contained in this Article 11 and the manner of application of its provisions shall be determined solely by the Committee.

Article 12. Provisions Applicable to Shares Acquired Under this Plan.

Section 12.1 No Company Obligation.  Except to the extent specifically required by applicable securities laws, none of the Company, an Affiliate or the Committee shall have any duty or obligation to affirmatively disclose material information to a record or beneficial holder of Stock or an Award, and such holder shall have no right to be advised of any material information regarding the Company or any Affiliate at any time prior to, upon, or in connection with receipt or the exercise or distribution of an Award. The Company makes no representation or warranty as to the future value of the Stock issued or acquired in accordance with the provisions of the Plan.

Article 13. Miscellaneous

Section 13.1 Amendments and Termination.  The Board may amend, alter, or discontinue the Plan at any time, but no amendment, alteration or discontinuation shall be made which would materially impair the rights of a Participant under an Award theretofore granted without the Participant’s consent. Notwithstanding the immediately preceding sentence, an amendment may be made without a Participant’s consent to (a) cause the Plan or an Award to comply with applicable law (including, but not limited to, any changes needed to avoid taxation of an Award as a “nonqualified deferred compensation plan” under Section 409A or under Section 280G of the Code) or (b) permit the Company or an Affiliate a tax deduction under applicable law including, without limitation, Section 162(m) of the Code. The Committee may amend, alter or discontinue the terms of any Award theretofore granted, prospectively or retroactively, on the same conditions and limitations (and exceptions to limitations) as apply to the Board, and further subject to any approval or limitations the Board may impose. Notwithstanding the foregoing, any amendments to the Plan shall require shareholder approval to the extent required by federal or state law or any regulations or rules promulgated thereunder or the rules of the national securities exchange or market on which shares of Stock are listed.

Section 13.2 Unfunded Status of Plan.  It is intended that the Plan be an “unfunded” plan for incentive compensation. The Company may create trusts or other arrangements to meet the obligations created under the Plan to deliver Stock or make payments; provided, however, that the existence of such trusts or other arrangements is consistent with the “unfunded” status of the Plan and all property held thereunder and income thereon shall remain solely the property and rights of the Company (without being restricted to satisfying the obligations created under the Plan) and shall be subject to the claims of the Company’s general creditors. The Company’s obligations created under the Plan shall constitute a general, unsecured obligation, payable solely out of its general assets.

Section 13.3 Listing, Registration and Compliance with Laws and Regulations. All Awards made under this Plan shall be subject to the requirement that if at any time the Committee shall determine, in its discretion, that the listing, registration or qualification of the Stock subject to such Award upon any securities exchange or under any state or federal securities or other law or regulation, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition to or in connection with the granting of the Awards or the issuance or purchase of shares thereunder, no Awards may be granted or exercised and no restrictions on Awards be lifted, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. The holders of such Awards shall supply the Company with such certificates, representations and information as the Company shall request and shall otherwise cooperate with the Company in obtaining such listing, registration, qualification, consent or approval. In the case of officers and other Persons subject to Section 16(b) of the Exchange Act, the Committee may at any time impose any limitations upon the exercise of an Option, Stock Appreciation Right or Restricted Stock or the lifting of restrictions on an Award of Deferred Stock or a Performance Award that, in the Committee’s discretion, are necessary or desirable in order to comply with such Section 16(b) and the rules and regulations thereunder. If the Company, as part of an offering of securities or otherwise, finds it desirable because of federal or state regulatory requirements to reduce the period during which any Options, Stock Appreciation Rights or Restricted Stock may be exercised, the Committee, may, in its discretion and without the Participant’s consent, so reduce such period on not less than 15 days written notice to the holders thereof.

Section 13.4 Provisions Relating to Section 162(m) of the Code. Awards to Covered Employees shall be governed by the terms and conditions of this Section 13.4 in addition to the remainder of the Plan, to the extent the Committee desires such Awards to be qualified performance-based compensation under Section 162(m) of the Code. Notwithstanding anything herein to the contrary, the Committee may establish Awards where only a portion is structured to satisfy the requirements for qualified performance-based compensation under Section 162(m) of the Code as long as it is objectively clear which portion of the

Award is not structured to satisfy the requirements for qualified performance-based compensation under Section 162(m) of the Code and which portion is structured to satisfy such requirements. Should terms and conditions set forth under this Section 13.4 conflict with the remainder of the Plan, the terms and conditions of this Section 13.4 shall prevail.

(a) No Delegation.  The Committee shall not delegate responsibility for any employee the Committee believes may be a Covered Employee.

(b) Performance Goals. The specific Performance Goals for employees who are Covered Employees shall be based upon one or more of the Performance Measures that apply to the individual, a business unit or the Company as a whole, and measured over a Performance Period.

(c) Establishment of Performance Goals. All Performance Goals relating to Covered Employees for a relevant Performance Period shall be established by the Committee in writing prior to the beginning of the Performance Period, or by such other later date for the Performance Period as may be permitted under Section 162(m) of the Code, which is currently no later than ninety (90) days after the commencement of a Performance Period (or, if shorter, no later than after 25% of the Performance Period has elapsed).

(d) Objective. The Performance Goals must be objective and must satisfy third party “objectivity” standards as provided in Section 162(m) of the Code.

(e) Adjustments. The Committee shall appropriately adjust any evaluation of performance under Performance Measures to exclude any of the following events that occurs during a Performance Period (as long as such exclusion does not result in any Award or program with regard to Covered Employees to fail to satisfy the requirements to be qualified performance-based compensation under Section 162(m) of the Code): (i) asset write-downs, (ii) litigation or claim judgments or settlements, (iii) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results, (iv) accruals for reorganization and restructuring programs and (v) any extraordinary non-recurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to shareholders for the applicable year.

(f) Negative Discretion Only. The Committee shall have no discretion to increase any payment, but shall have negative discretion to decrease any payment.

(g) Pre-Payment Certification. The Award and payment of any Award under the Plan to a Covered Employee shall be contingent upon the attainment of the Performance Goals that are applicable to such Award. The Committee shall certify in writing prior to payment of any such Award that such applicable Performance Goals have been satisfied. Resolutions adopted by the Committee may be used for this purpose.

(h) Limitations on Stock Options and Stock Appreciation Rights.  The total aggregate maximum number of shares of Stock for which Stock Options and Stock Appreciation Rights, in the aggregate, may be granted to any Covered Employee during any fiscal year shall not exceed 1,000,000 shares.

(i) Limitation on Bonus Award.  The total aggregate maximum amount of compensation that could be paid to any Covered Employee pursuant to a Bonus Award during any fiscal year shall not exceed $4 million.

(j) Limitation on Restricted Stock.  The total aggregate maximum number of shares of Restricted Stock that may be granted to any Covered Employee during any fiscal year shall not exceed 750,000 shares.

(k) Limitation on Deferred Stock and Performance Awards.  The total aggregate maximum value (determined on the date of grant) of Awards of Deferred Stock and Performance Awards, in the aggregate, that may be granted to any Covered Employee during any fiscal year shall not exceed $5 million.

(l) Deduction.  Notwithstanding anything contained in this Plan to the contrary, the Company may delay payment to any Participant to the extent that the Company reasonably anticipates that if the payment were made as scheduled, the Company’s deduction with respect to such payment would not be permitted due to the application of Section 162(m) of the Code and then only if all payments that could be delayed are also delayed. The delayed payment shall be made at the time required by Section 409A of the Code. The Award subject of the delayed payment shall be automatically transferred to the then applicable Finish Line non-qualified deferred compensation plan and be invested pursuant to the investment elections in effect for the participant pursuant to that plan. This Section 13.4(l) shall be interpreted and

implemented in accordance with Section 409A of the Code and may be amended by the Committee in the Committee’s sole discretion to ensure such compliance.

(m) Other Restrictions.  All Awards under the Plan to Covered Employees or to other Participants who may become Covered Employees at a relevant future date shall be further subject to such other terms, conditions, restrictions, and requirements as the Committee may determine to be necessary to carry out the purposes of this Section 13.4 which is to avoid the loss of deduction by the Company under Section 162(m) of the Code.

(n) No Impermissible Discretion.  To the extent any provision of the Plan creates impermissible discretion under Section 162(m) of the Code or would otherwise violate Section 162(m) of the Code with regard to Covered Employees, such provision shall have no force or effect.

Section 13.5 No Additional Obligation.  Nothing contained in the Plan shall prevent the Company or an Affiliate from adopting other or additional compensation or benefit arrangements for its employees.

Section 13.6 Withholding.  No later than the date as of which an amount first becomes includible in the gross income of the Participant for federal income tax purposes with respect to any Award, the Participant shall pay to the Company (or other entity identified by the Committee), or make arrangements satisfactory to the Company or other entity identified by the Committee regarding the payment of, any federal, state, or local taxes of any kind (including any employment taxes) required by law to be withheld with respect to such income. The obligations of the Company under the Plan shall be conditional on such payment or arrangements, and the Company and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant. Subject to approval by the Committee, a Participant may elect to have such tax withholding obligation satisfied, in whole or in part, by (a) authorizing the Company to withhold from shares of Stock to be issued pursuant to any Award a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the required statutory minimum (but no more than such required minimum) with respect to the Company’s withholding obligation, or (b) transferring to the Company shares of Stock owned by the Participant with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the required statutory minimum (but no more than such required minimum) with respect to the Company’s withholding obligation.

Section 13.7 Controlling Law.  The Plan and all Awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Indiana (other than its law respecting choice of law). The Plan shall be construed to comply with all applicable law and to avoid liability to the Company, an Affiliate or a Participant. In the event of litigation arising in connection with actions under the Plan, the parties to such litigation shall submit to the jurisdiction of courts located in Marion County, Indiana, or to the federal district court that encompasses said county.

Section 13.8 Offset.  Any amounts owed to the Company or an Affiliate by the Participant of whatever nature may be offset by the Company from the value of any Award to be transferred to the Participant, and Stock, cash or other thing of value under this Plan or an Agreement may be held by the Company and not transferred to such Participant unless and until all disputes between the Company and the Participant have been fully and finally resolved and the Participant has waived all claims to such against the Company or an Affiliate.

Section 13.9 No Rights with Respect to Continuance of Employment.  Nothing contained herein shall be deemed to alter the relationship between the Company or an Affiliate and a Participant, or the contractual relationship between a Participant and the Company or an Affiliate if there is a written contract regarding such relationship. Nothing contained herein shall be construed to constitute a contract of employment between the Company or an Affiliate and a Participant. The Company or an Affiliate and each of the Participants continue to have the right to terminate the employment or service relationship at any time for any reason, except as provided in a written contract. The Company or an Affiliate shall have no obligation to retain the Participant in its employ or service as a result of this Plan. There shall be no inference as to the length of employment or service hereby, and the Company or an Affiliate reserves the same rights to terminate the Participant’s employment or service as existed prior to the individual becoming a Participant in this Plan.

Section 13.10 Awards in Substitution for Awards Granted by Other Corporations.  Awards may be granted under the Plan from time to time in substitution for awards held by employees, directors or service providers of other corporations who are about to become officers or employees of the Company or an Affiliate as the result of a merger or consolidation of the employing corporation with the Company or an Affiliate, or the acquisition by the Company or an Affiliate of the assets of the employing corporation, or the acquisition by the Company or Affiliate of the shares of the employing corporation, as the result of which it becomes an Affiliate. The terms and conditions of the Awards so granted may vary from the terms and conditions set forth in this Plan at the time of such grant as the Committee may deem appropriate to conform, in whole or in part, to the

provisions of the awards in substitution for which they are granted and to ensure that the requirements imposed under Sections 162(m), 409A and 424 of the Code are met.

Section 13.11 Delivery of Stock Certificates.  To the extent the Company uses certificates to represent shares of Stock, certificates to be delivered to Participants under this Plan shall be deemed delivered for all purposes when the Company or a stock transfer agent of the Company shall have mailed such certificates in the United States mail, addressed to the Participant, at the Participant’s last known address on file with the Company. Any reference in this Section or elsewhere in the Plan or an Agreement to actual stock certificates and/or the delivery of actual stock certificates shall be deemed satisfied by the electronic record-keeping and electronic delivery of shares of Stock or other mechanism then utilized by the Company and its agents for reflecting ownership of such shares.

Section 13.12 Indemnification.  To the maximum extent permitted under the Company’s articles of incorporation and by-laws, each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by the Company against and from (a) any loss, cost, liability or expense (including attorneys’ fees) that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under this Plan or any Award Agreement, and (b) from any and all amounts paid by him or her in settlement thereof, with the Company’s prior written approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit or proceeding against him or her; provided, however, that he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s articles of incorporation or by-laws, by contract, as a matter of law or otherwise, or under any power that the Company may have to indemnify them or hold them harmless.

Section 13.13 Severability.  If any provision of this Plan shall for any reason be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereby, and this Plan shall be construed as if such invalid or unenforceable provision were omitted.

Section 13.14 Successors and Assigns.  This Plan shall inure to the benefit of and be binding upon each successor and assign of the Company. All obligations imposed upon a Participant, and all rights granted to the Company hereunder, shall be binding upon the Participant’s heirs, legal representatives and successors.

Section 13.15 Entire Agreement.  This Plan and the Agreements constitute the entire agreement with respect to the subject matter hereof and thereof, provided that in the event of any inconsistency between the Plan and an Agreement, the terms and conditions of this Plan shall control.

Section 13.16 Gender and Number.  Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

Section 13.17 Headings.  The headings contained in this Plan are for reference purposes only and shall not affect the meaning or interpretation of this Plan.

Section 13.18 Notice.  All notices and other communications required or permitted to be given under the Plan shall be in writing or other form approved by the Committee and shall be deemed to have been duly given as follows (a) if to the Company mailed first class, postage prepaid at the principal business address of the Company to the attention of the Secretary of the Company; or (b) if to any Participant then delivered personally, mailed first class, postage prepaid at the last address of the Participant known to the sender at the time the notice or other communication is sent or delivered, or by e-mail, interoffice mail, intranet or other means of office communication determined by the Committee.

Section 13.19. Recoupment. All Awards and any and all payments made or required to be made or stock received or required to be issued hereunder and pursuant to any this Plan or any Agreement to any Participant shall be subject to repayment to the Company by the Participant (and the successors, assigns, heirs, estate and personal representative of the Participant) pursuant to the terms of any clawback, recoupment or other policy implemented from time to time by the Board (any such policy, as amended, amended and restated or superseded the “Recoupment Policy”). As additional consideration for any Award granted to a Participant and for any payment made or required to be made or stock received or required to be issued hereunder and pursuant to any Agreement to any Participant, each Participant agrees that he/she is bound by and subject to the Recoupment Policy as in effect at any time and from time to time (whether before, at or after the granting or payment of any award).

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Samuel M. Sato, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Finish Line, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report), that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	September 23, 2016
By:	/s/ Samuel M. Sato
	Samuel M. Sato
	Chief Executive Officer and Director

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Edward W. Wilhelm, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Finish Line, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report), that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	September 23, 2016
By:	/s/ Edward W. Wilhelm
	Edward W. Wilhelm
	Executive Vice President, Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, in his capacity as an officer of The Finish Line, Inc. (the “Company”), for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

• The Quarterly Report of the Company on Form 10-Q for the thirteen and twenty-six weeks endedAugust 27, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78); and

• The information contained in such report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date:	September 23, 2016
By:	/s/ Samuel M. Sato
	Samuel M. Sato
	Chief Executive Officer and Director
By:	/s/ Edward W. Wilhelm
	Edward W. Wilhelm
	Executive Vice President, Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to The Finish Line, Inc. and will be retained by The Finish Line, Inc. and forwarded to the Securities and Exchange Commission or its staff upon request.

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Document and Entity Information - shares	6 Months Ended
	Aug. 27, 2016	Sep. 09, 2016
Document And Entity Information [Abstract]
Entity Registrant Name	FINISH LINE INC /IN/
Entity Central Index Key	0000886137
Current Fiscal Year End Date	--02-25
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Aug. 27, 2016
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		40,562,251
Trading Symbol	FINL

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Aug. 27, 2016	Feb. 27, 2016	Aug. 29, 2015
Current assets:
Cash and cash equivalents	$ 114,301	$ 79,495	$ 100,234
Accounts receivable, net	20,288	18,227	17,575
Merchandise inventories, net	372,263	376,506	366,335
Income taxes receivable	0	28,877	1,238
Other	15,966	18,248	25,450
Total current assets	522,818	521,353	510,832
Property and equipment:
Land	1,557	1,557	1,557
Building	43,928	43,768	43,758
Leasehold improvements	211,500	198,193	252,596
Furniture, fixtures, and equipment	267,156	256,483	194,772
Construction in progress	11,999	9,182	106,122
Property and equipment, gross	536,140	509,183	598,805
Less accumulated depreciation	286,153	265,790	320,400
Total property and equipment, net	249,987	243,393	278,405
Goodwill	44,029	44,029	44,507
Other assets, net	8,487	8,773	9,101
Total assets	825,321	817,548	842,845
Current liabilities:
Accounts payable	179,038	157,651	122,316
Employee compensation	14,635	18,839	21,249
Accrued property and sales tax	10,622	10,710	10,306
Income taxes payable	8,494	0	0
Other liabilities and accrued expenses	32,781	33,987	29,556
Total current liabilities	245,570	221,187	183,427
Commitments and contingencies
Deferred credits from landlords	34,001	32,327	31,503
Deferred income taxes	21,265	25,441	25,283
Other long-term liabilities	9,291	10,949	11,953
Shareholders’ equity:
Preferred stock, $.01 par value; 1,000 shares authorized; none issued	0	0	0
Common stock, $.01 par value; 110,000 shares authorized; 60,145 shares issued, Shares outstanding - (August 27, 2016 - 40,562; August 29, 2015 – 44,845; February 27, 2016 – 42,377)	601	601	601
Additional paid-in capital	242,039	237,129	230,383
Retained earnings	662,639	639,296	665,423
Treasury stock - (August 27, 2016 - 19,197; August 29, 2015 - 14,913; February 27, 2016 - 17,381)	(390,085)	(349,382)	(305,728)
Total shareholders’ equity	515,194	527,644	590,679
Total liabilities and shareholders’ equity	$ 825,321	$ 817,548	$ 842,845

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CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) - $ / shares	Aug. 27, 2016	Feb. 27, 2016	Aug. 29, 2015
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01	$ 0.01
Common stock, Shares authorized	110,000,000	110,000,000	110,000,000
Common stock, Shares issued	60,145,000	60,145,000	60,145,000
Common stock, Shares outstanding	40,562,000	44,845,000	42,377,000
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01	$ 0.01
Preferred stock, Shares authorized	1,000,000	1,000,000	1,000,000
Preferred stock, Shares issued	0	0	0
Treasury stock, Shares held	19,196,721	14,913,000	17,381,000

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CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Aug. 27, 2016	Aug. 29, 2015	Aug. 27, 2016	Aug. 29, 2015
Income Statement [Abstract]
Net sales	$ 509,403	$ 483,150	$ 962,918	$ 926,544
Cost of sales (including occupancy costs)	349,929	323,943	663,633	628,361
Gross profit	159,474	159,207	299,285	298,183
Selling, general, and administrative expenses	124,224	117,604	249,123	234,061
Impairment charges and store closing costs	336	160	371	328
Operating income	34,914	41,443	49,791	63,794
Interest (expense) income, net	(32)	1	(26)	(1)
Income before income taxes	34,882	41,444	49,765	63,793
Income tax expense	12,807	15,583	18,064	24,198
Net income	22,075	25,861	31,701	39,595
Net loss attributable to redeemable noncontrolling interest	0	41	0	96
Net income attributable to The Finish Line, Inc.	$ 22,075	$ 25,902	$ 31,701	$ 39,691
Basic earnings per share (in USD per share)	$ 0.53	$ 0.57	$ 0.75	$ 0.87
Basic weighted average shares	40,944	44,866	41,357	45,151
Diluted earnings per share (in USD per share)	$ 0.53	$ 0.57	$ 0.75	$ 0.86
Diluted weighted average shares	41,122	45,207	41,506	45,463
Dividends declared per share (in USD per share)	$ 0.10	$ 0.09	$ 0.20	$ 0.18

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands	6 Months Ended		12 Months Ended
	Aug. 27, 2016	Aug. 29, 2015	Feb. 27, 2016	Feb. 28, 2015
Operating activities:
Net income	$ 31,701	$ 39,595
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment charges and store closing costs	371	328
Depreciation and amortization	23,589	20,395
Deferred income taxes	(4,176)	(1,726)
(Gain) loss on disposals of property and equipment	(54)	32
Gain on settlement of contingent consideration	0	(329)
Share-based compensation	5,664	4,162
Excess tax benefits from share-based compensation	(70)	(284)
Changes in operating assets and liabilities:
Accounts receivable, net	(2,061)	(912)
Merchandise inventories, net	4,243	(22,299)
Other assets	2,533	(12,491)
Accounts payable	25,607	(1,182)
Employee compensation	(4,204)	2,156
Income taxes receivable/payable	37,002	8,016
Other liabilities and accrued expenses	(2,534)	(628)
Deferred credits from landlords	1,674	2,360
Net cash provided by operating activities	119,285	37,193
Investing activities:
Capital expenditures for property and equipment	(35,133)	(35,012)
Acquisitions, net of cash acquired	0	(8,278)
Proceeds from disposals of property and equipment	380	20
Net cash used in investing activities	(34,753)	(43,270)
Financing activities:
Borrowings on revolving credit facility	30,000	0
Repayments on revolving credit facility	(30,000)	0
Dividends paid to shareholders	(8,512)	(8,282)
Proceeds from issuance of common stock, net of settlement of tax withholding obligations	1,275	1,683
Excess tax benefits from share-based compensation	70	284
Purchases of treasury stock	(42,559)	(35,922)
Purchase of redeemable noncontrolling interest	0	(1,000)
Cash paid for settlements of contingent consideration	0	(21)
Net cash used in financing activities	(49,726)	(43,258)
Net increase (decrease) in cash and cash equivalents	34,806	(49,335)
Cash and cash equivalents at beginning of period	79,495	149,569	$ 149,569
Cash and cash equivalents at end of period	114,301	100,234	79,495	$ 149,569
Supplemental disclosure of noncash operating and investing activities:
Capital expenditures incurred but not yet paid as of August 27, 2016 and August 29, 2015	1,492	3,356	5,712	13,532
Capital expenditures incurred but not yet paid as of February 27, 2016 and February 28, 2015	$ 1,492	$ 3,356	$ 5,712	$ 13,532

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Summary of Significant Accounting Policies

6 Months Ended

Aug. 27, 2016

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation. The accompanying unaudited consolidated financial statements of The Finish Line, Inc., along with its consolidated subsidiaries (individually and collectively referred to as the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. Preparation of the financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included. All intercompany transactions and balances have been eliminated.

The Company has experienced, and expects to continue to experience, significant variability in sales, net income, and merchandise inventories from reporting period to reporting period due to back to school and holiday selling seasons. Therefore, the results of the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year.

These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended February 27, 2016 (“fiscal 2016”), as filed with the Securities and Exchange Commission (“SEC”) on April 26, 2016.

Segment Information. The Company is a premium retailer of athletic shoes, apparel, and accessories for men, women, and kids, throughout the United States and Puerto Rico, through multiple operating segments. The Company’s operating segments have similar economic characteristics, which include a similar nature of products sold, type of customer, and method of distribution. As such, the Company’s operating segments are aggregated into one reportable segment. The following table sets forth net sales of the Company by major category for each of the following periods (in thousands):

	Thirteen Weeks Ended
Category	August 27, 2016				August 29, 2015
Footwear	$	468,353	92	%	$	432,323	89	%
Softgoods	41,050		8	%	50,827		11	%
Total net sales	$	509,403	100	%	$	483,150	100	%

	Twenty-Six Weeks Ended
Category	August 27, 2016				August 29, 2015
Footwear	$	886,969	92	%	$	834,501	90	%
Softgoods	75,949		8	%	92,043		10	%
Total net sales	$	962,918	100	%	$	926,544	100	%

Recent Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance on revenue from contracts with customers and has subsequently issued several amendments which clarify the guidance as well as provide guidance for implementation. The guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB approved a one year deferral of the effective date, to make it effective for annual or interim reporting periods beginning after December 15, 2017. The guidance allows for either a full retrospective or a modified retrospective transition method. The Company is currently assessing the impact of adopting this guidance and its potential impact to its consolidated results of operations, financial position, and cash flows.

In July 2015, the FASB issued guidance on simplifying the measurement of inventory. The guidance, which applies to inventory that is measured using any method other than the last-in, first-out (“LIFO”) or retail inventory method, requires that entities measure inventory at the lower of cost or net realizable value. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and should be applied on a prospective basis. The Company is currently assessing the potential impact of adopting this guidance, but does not, at this time, anticipate a material impact to its consolidated results of operations, financial position, or cash flows.

In November 2015, the FASB issued guidance on the balance sheet classification of deferred taxes. The guidance requires that all deferred tax assets and liabilities be classified as noncurrent on the balance sheet. The Company adopted this standard for the annual period beginning on March 1, 2015, and applied it retrospectively. As a result of adopting this standard, all deferred tax assets and liabilities have been classified as noncurrent. The balance sheet as of August 29, 2015 was retrospectively adjusted, which resulted in a $5.0 million decrease in the current deferred income tax liability balance and a $5.0 million increase in the long-term deferred income tax liability balance.

In February 2016, the FASB issued guidance on accounting for leases. A primary purpose of the guidance is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Specifically, lessees will be required to recognize the rights and obligations resulting from leases classified as operating leases as assets and liabilities. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and requires a modified retrospective adoption, with early adoption permitted. The Company is currently assessing the impact of adopting this guidance and its potential impact to its consolidated results of operations, financial position, and cash flows.

In March 2016, the FASB issued guidance on simplifying several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows, and accounting for forfeitures. The guidance is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, and early adoption is permitted. The manner of adoption varies, with certain provisions applied on a retrospective or modified retrospective approach, while others are applied prospectively. The Company is currently assessing the impact of adopting this guidance and its potential impact to its consolidated results of operations, financial position, and cash flows.

Other recently issued accounting pronouncements did not, or are not believed by management to have a material effect on the Company’s present or future consolidated financial statements.

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Fair Value Measurements

6 Months Ended

Aug. 27, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Fair value measurements are determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants exclusive of any transaction costs. The Company utilizes a fair value hierarchy based upon the observability of inputs used in valuation techniques as follows:

Level 1:	Observable inputs such as quoted prices in active markets;
Level 2:	Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3:	Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The following table provides a summary of the recognized assets and liabilities that are measured at fair value on a recurring basis (in thousands):

	August 27, 2016						August 29, 2015						February 27, 2016
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets:
Non-qualified deferred compensation plan	$	5,503	$	—	$	—	$	6,102	$	—	$	—	$	5,538	$	—	$	—
Liabilities:
Contingent consideration liabilities	$	—	$	—	$	—	$	—	$	—	$	420	$	—	$	—	$	—

Included in Level 1 assets are mutual fund investments under a non-qualified deferred compensation plan. The Company estimates the fair value of these investments on a recurring basis using readily available market prices.

Included in Level 3 liabilities are the contingent consideration liabilities related to the Company’s acquisitions. The liabilities are adjusted to fair value each reporting period. The categorization of the framework used to price the liabilities is considered Level 3, due to the subjective nature of the unobservable inputs used to determine the fair values.

There were no transfers into or out of Level 1, Level 2, or Level 3 assets or liabilities for any of the periods presented.

Level 3 Valuation Techniques

Financial assets and liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques and at least one significant model assumption or input is unobservable.

During the twenty-six weeks endedAugust 27, 2016 and August 29, 2015, the Company did not have any significant non-recurring measurements of assets or liabilities.

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Debt Agreement

6 Months Ended

Aug. 27, 2016

Debt Disclosure [Abstract]

Debt Agreement

Debt Agreement

On November 30, 2012, the Company entered into an unsecured $100 million Amended and Restated Revolving Credit Facility Credit Agreement (the “Amended Credit Agreement”) with certain Lenders, which expires on November 30, 2017. The Amended Credit Agreement provides that, under certain circumstances, the Company may increase the maximum amount of the credit facility in an aggregate principal amount not to exceed $200 million. The Amended Credit Agreement is used by the Company, among other things, to issue letters of credit, support working capital needs, fund capital expenditures, and for other general corporate purposes.

Approximately $1.6 million in stand-by letters of credit were outstanding as of August 27, 2016 under the Amended Credit Agreement. No advances were outstanding under the Amended Credit Agreement as of August 27, 2016. Accordingly, the total revolving credit availability under the Amended Credit Agreement was $98.4 million as of August 27, 2016.

The Company’s ability to borrow monies in the future under the Amended Credit Agreement is subject to certain conditions, including compliance with certain covenants and making certain representations and warranties. The Amended Credit Agreement contains restrictive covenants that limit, among other things, mergers and acquisitions. In addition, the Company must maintain a maximum leverage ratio (as defined in the Amended Credit Agreement) and minimum consolidated tangible net worth (as defined in the Amended Credit Agreement). The Company was in compliance with all such covenants as of August 27, 2016.

The Amended Credit Agreement pricing grid is adjusted quarterly and is based on the Company’s leverage ratio. The minimum pricing is LIBOR plus 0.90% or Base Rate (as defined in the Amended Credit Agreement) and the maximum pricing is LIBOR plus 1.75% or Base Rate plus 0.75%. The Company is also subject to an unused commitment fee based on the Company’s leverage ratio with minimum pricing of 0.10% and maximum pricing of 0.25%. In addition, the Company is subject to a letter of credit fee based on the Company’s leverage ratio with minimum pricing of 0.40% and maximum pricing of 1.25%.

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Earnings Per Share

6 Months Ended

Aug. 27, 2016

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

Basic earnings per share attributable to The Finish Line, Inc. shareholders is calculated by dividing net income attributable to The Finish Line, Inc. associated with common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share attributable to The Finish Line, Inc. shareholders assumes the issuance of additional shares of common stock by the Company upon exercise of all outstanding stock options and contingently issuable securities if the effect is dilutive, in accordance with the treasury stock method or two-class method (whichever is more dilutive) discussed in Accounting Standards Codification (“ASC”) 260-10, Earnings Per Share.

ASC 260-10 requires the inclusion of restricted stock as participating securities, since they have the right to share in dividends, if declared, equally with common shares. During periods of net income, participating securities are allocated a proportional share of net income attributable to The Finish Line, Inc. determined by dividing total weighted average participating securities by the sum of total weighted average common shares and participating securities (“the two-class method”). During periods of net loss, no effect is given to participating securities since they do not share in the losses of the Company. Participating securities have the effect of diluting both basic and diluted earnings per share during periods of net income.

The following is a reconciliation of the numerators and denominators used in computing earnings per share (in thousands, except per share amounts):

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	August 27, 2016		August 29, 2015		August 27, 2016		August 29, 2015
Net income attributable to The Finish Line, Inc.	$	22,075	$	25,902	$	31,701	$	39,691
Net income attributable to The Finish Line, Inc. attributable to participating securities	420		311		577		476
Net income attributable to The Finish Line, Inc. available to common shareholders	$	21,655	$	25,591	$	31,124	$	39,215
Basic earnings per share attributable to The Finish Line, Inc. shareholders:
Weighted-average number of common shares outstanding	40,944		44,866		41,357		45,151
Basic earnings per share attributable to The Finish Line, Inc. shareholders	$	0.53	$	0.57	$	0.75	$	0.87
Diluted earnings per share attributable to The Finish Line, Inc. shareholders:
Weighted-average number of common shares outstanding	40,944		44,866		41,357		45,151
Dilutive effect of potential common shares(a)	178		341		149		312
Diluted weighted-average number of common shares outstanding	41,122		45,207		41,506		45,463
Diluted earnings per share attributable to The Finish Line, Inc. shareholders	$	0.53	$	0.57	$	0.75	$	0.86

(a) The computation of diluted earnings per share attributable to The Finish Line, Inc. shareholders excludes options to purchase approximately 3.1 million and 1.3 million shares of common stock in the thirteen weeks endedAugust 27, 2016 and August 29, 2015, respectively, and 3.0 million and 1.3 million shares of common stock in the twenty-six weeks endedAugust 27, 2016 and August 29, 2015, respectively, because the impact of such options would have been antidilutive.

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Common Stock

6 Months Ended

Aug. 27, 2016

Equity [Abstract]

Common Stock

Common Stock

On July 21, 2011, the Company’s Board of Directors authorized a share repurchase program to repurchase shares of the Company’s common stock with subsequent amendments on March 26, 2015 and July 13, 2016 authorizing further share repurchases through December 31, 2019 (the “Share Repurchase Program”).

The Company purchased 2.0 million shares of its common stock at an average price of $21.28 per share for an aggregate amount of $42.6 million during the twenty-six weeks endedAugust 27, 2016. As of August 27, 2016, there were 5,291,936 shares remaining available to repurchase under the Share Repurchase Program.

As of August 27, 2016, the Company held 19,196,721 shares of its common stock as treasury shares at an average price of $20.32 per share for an aggregate carrying amount of $390.1 million. The Company’s treasury shares may be issued upon the exercise of employee stock options, under the Employee Stock Purchase Plan (“ESPP”), in the form of restricted stock, or for other corporate purposes. The number of shares of common stock reserved to be issued upon the exercise of options, restricted stock, or other awards is limited as defined in the 2002 Stock Incentive Plan of The Finish Line, Inc. (the “2002 Incentive Plan”) and The Finish Line, Inc. 2009 Incentive Plan Amended and Restated as of April 16, 2014, and further amended as of June 27 and July 14, 2016 (the “Amended and Restated 2009 Incentive Plan”). Further purchases will occur from time to time as market conditions warrant and as the Company deems appropriate when judged against other alternative uses of cash.

On July 14, 2016, the Company announced a quarterly cash dividend of $0.10 per share of the Company’s common stock. The Company declared dividends of $8.4 million during the twenty-six weeks endedAugust 27, 2016, of which $4.1 million was included in other liabilities and accrued expenses on the Company’s consolidated balance sheet as of August 27, 2016. Further declarations of dividends remain at the discretion of the Company’s Board of Directors.

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Commitments and Contingencies

6 Months Ended

Aug. 27, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

The Company is subject, from time to time, to certain legal proceedings and claims in the ordinary course of conducting its business. The Company establishes a liability related to its legal proceedings and claims when it has determined that it is probable that the Company has incurred a liability and the related amount can be reasonably estimated. If the Company determines that an obligation is reasonably possible, the Company will, if material, disclose the nature of the loss contingency and the estimated range of possible loss, or include a statement that no estimate of loss can be made. The Company believes there are no pending legal proceedings in which the Company is currently involved which will have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

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Share-Based Compensation

6 Months Ended

Aug. 27, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Share-Based Compensation

General

Total share-based compensation expense for the twenty-six weeks endedAugust 27, 2016 and August 29, 2015 was $5.7 million and $4.2 million, respectively.

Stock Option Activity

Stock options have been granted to non-employee directors, officers, and other key employees. Generally, options outstanding under the 2002 Incentive Plan and Amended and Restated 2009 Incentive Plan are exercisable at a price equal to the fair market value on the date of grant, vest over four years, and expire ten years after the date of grant. During the twenty-six weeks endedAugust 27, 2016 and August 29, 2015, the Company granted approximately 1,438,000 and 762,000 options, respectively. The estimated weighted-average fair value of the individual options granted during the twenty-six weeks endedAugust 27, 2016 and August 29, 2015, was $4.82 and $6.57, respectively, on the date of the grant. The fair values for all options granted were determined using a Black-Scholes option-pricing model with the following weighted average assumptions:

	Twenty-Six Weeks Ended
	August 27, 2016		August 29, 2015
Dividend yield	2.2	%	1.5	%
Volatility	32.9	%	33.4	%
Risk-free interest rate	1.3	%	1.4	%
Expected life	5.0 years		5.0 years

The dividend yield assumption is based on the Company’s history and expectation of dividend payouts. The expected volatility assumption is based on the Company’s analysis of historical volatility. The risk-free interest rate assumption is based upon the average daily closing rates during the period for U.S. treasury notes that have a life which approximates the expected life of the option. The expected life of employee stock options represents the weighted-average period the stock options are expected to remain outstanding based on historical exercise experience.

As of August 27, 2016, there was $8.6 million of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested options. That expense is expected to be recognized over a weighted average period of 1.7 years.

Restricted Stock Activity

The Company has granted shares of the Company’s common stock to non-employee directors, officers, and other key employees that are subject to restrictions. The shares of restricted stock granted to employees under the Amended and Restated 2009 Incentive Plan generally cliff-vest after a three-year period or vest upon the achievement of specified levels of net income or earnings per share growth over a three-year period. For performance-based awards, should the net income or earnings per share growth criteria not be met over the three-year period, the shares will be forfeited. All restricted stock awards issued to non-employee directors cliff-vest after a one-year period from the grant date. During the twenty-six weeks endedAugust 27, 2016 and August 29, 2015, the Company granted approximately 470,000 and 208,000 restricted shares, respectively.

As of August 27, 2016, there was $9.9 million of total unrecognized compensation expense, net of estimated forfeitures, related to nonvested restricted stock. That expense is expected to be recognized over a weighted average period of 1.7 years.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Aug. 27, 2016

Accounting Policies [Abstract]

Basis of Presentation

The accompanying unaudited consolidated financial statements of The Finish Line, Inc., along with its consolidated subsidiaries (individually and collectively referred to as the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. Preparation of the financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included. All intercompany transactions and balances have been eliminated.

The Company has experienced, and expects to continue to experience, significant variability in sales, net income, and merchandise inventories from reporting period to reporting period due to back to school and holiday selling seasons. Therefore, the results of the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year.

These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended February 27, 2016 (“fiscal 2016”), as filed with the Securities and Exchange Commission (“SEC”) on April 26, 2016.

Segment Information

The Company is a premium retailer of athletic shoes, apparel, and accessories for men, women, and kids, throughout the United States and Puerto Rico, through multiple operating segments. The Company’s operating segments have similar economic characteristics, which include a similar nature of products sold, type of customer, and method of distribution. As such, the Company’s operating segments are aggregated into one reportable segment.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance on revenue from contracts with customers and has subsequently issued several amendments which clarify the guidance as well as provide guidance for implementation. The guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB approved a one year deferral of the effective date, to make it effective for annual or interim reporting periods beginning after December 15, 2017. The guidance allows for either a full retrospective or a modified retrospective transition method. The Company is currently assessing the impact of adopting this guidance and its potential impact to its consolidated results of operations, financial position, and cash flows.

In July 2015, the FASB issued guidance on simplifying the measurement of inventory. The guidance, which applies to inventory that is measured using any method other than the last-in, first-out (“LIFO”) or retail inventory method, requires that entities measure inventory at the lower of cost or net realizable value. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 and should be applied on a prospective basis. The Company is currently assessing the potential impact of adopting this guidance, but does not, at this time, anticipate a material impact to its consolidated results of operations, financial position, or cash flows.

In November 2015, the FASB issued guidance on the balance sheet classification of deferred taxes. The guidance requires that all deferred tax assets and liabilities be classified as noncurrent on the balance sheet. The Company adopted this standard for the annual period beginning on March 1, 2015, and applied it retrospectively. As a result of adopting this standard, all deferred tax assets and liabilities have been classified as noncurrent. The balance sheet as of August 29, 2015 was retrospectively adjusted, which resulted in a $5.0 million decrease in the current deferred income tax liability balance and a $5.0 million increase in the long-term deferred income tax liability balance.

In February 2016, the FASB issued guidance on accounting for leases. A primary purpose of the guidance is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Specifically, lessees will be required to recognize the rights and obligations resulting from leases classified as operating leases as assets and liabilities. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and requires a modified retrospective adoption, with early adoption permitted. The Company is currently assessing the impact of adopting this guidance and its potential impact to its consolidated results of operations, financial position, and cash flows.

In March 2016, the FASB issued guidance on simplifying several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows, and accounting for forfeitures. The guidance is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, and early adoption is permitted. The manner of adoption varies, with certain provisions applied on a retrospective or modified retrospective approach, while others are applied prospectively. The Company is currently assessing the impact of adopting this guidance and its potential impact to its consolidated results of operations, financial position, and cash flows.

Other recently issued accounting pronouncements did not, or are not believed by management to have a material effect on the Company’s present or future consolidated financial statements.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Aug. 27, 2016

Accounting Policies [Abstract]

Net Sales by Major Category

The following table sets forth net sales of the Company by major category for each of the following periods (in thousands):

	Thirteen Weeks Ended
Category	August 27, 2016				August 29, 2015
Footwear	$	468,353	92	%	$	432,323	89	%
Softgoods	41,050		8	%	50,827		11	%
Total net sales	$	509,403	100	%	$	483,150	100	%

	Twenty-Six Weeks Ended
Category	August 27, 2016				August 29, 2015
Footwear	$	886,969	92	%	$	834,501	90	%
Softgoods	75,949		8	%	92,043		10	%
Total net sales	$	962,918	100	%	$	926,544	100	%

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Fair Value Measurements (Tables)

6 Months Ended

Aug. 27, 2016

Fair Value Disclosures [Abstract]

Summary of Recognized Assets and Liabilities

The following table provides a summary of the recognized assets and liabilities that are measured at fair value on a recurring basis (in thousands):

	August 27, 2016						August 29, 2015						February 27, 2016
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets:
Non-qualified deferred compensation plan	$	5,503	$	—	$	—	$	6,102	$	—	$	—	$	5,538	$	—	$	—
Liabilities:
Contingent consideration liabilities	$	—	$	—	$	—	$	—	$	—	$	420	$	—	$	—	$	—

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Earnings Per Share (Tables)

6 Months Ended

Aug. 27, 2016

Earnings Per Share [Abstract]

Reconciliation of Numerators and Denominators used in Computing Earnings Per Share

The following is a reconciliation of the numerators and denominators used in computing earnings per share (in thousands, except per share amounts):

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	August 27, 2016		August 29, 2015		August 27, 2016		August 29, 2015
Net income attributable to The Finish Line, Inc.	$	22,075	$	25,902	$	31,701	$	39,691
Net income attributable to The Finish Line, Inc. attributable to participating securities	420		311		577		476
Net income attributable to The Finish Line, Inc. available to common shareholders	$	21,655	$	25,591	$	31,124	$	39,215
Basic earnings per share attributable to The Finish Line, Inc. shareholders:
Weighted-average number of common shares outstanding	40,944		44,866		41,357		45,151
Basic earnings per share attributable to The Finish Line, Inc. shareholders	$	0.53	$	0.57	$	0.75	$	0.87
Diluted earnings per share attributable to The Finish Line, Inc. shareholders:
Weighted-average number of common shares outstanding	40,944		44,866		41,357		45,151
Dilutive effect of potential common shares(a)	178		341		149		312
Diluted weighted-average number of common shares outstanding	41,122		45,207		41,506		45,463
Diluted earnings per share attributable to The Finish Line, Inc. shareholders	$	0.53	$	0.57	$	0.75	$	0.86

(a) The computation of diluted earnings per share attributable to The Finish Line, Inc. shareholders excludes options to purchase approximately 3.1 million and 1.3 million shares of common stock in the thirteen weeks endedAugust 27, 2016 and August 29, 2015, respectively, and 3.0 million and 1.3 million shares of common stock in the twenty-six weeks endedAugust 27, 2016 and August 29, 2015, respectively, because the impact of such options would have been antidilutive.

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Share-Based Compensation (Tables)

6 Months Ended

Aug. 27, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Fair Value Assumptions

The fair values for all options granted were determined using a Black-Scholes option-pricing model with the following weighted average assumptions:

	Twenty-Six Weeks Ended
	August 27, 2016		August 29, 2015
Dividend yield	2.2	%	1.5	%
Volatility	32.9	%	33.4	%
Risk-free interest rate	1.3	%	1.4	%
Expected life	5.0 years		5.0 years

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Summary of Significant Accounting Policies - Net Sales by Major Category (Detail) $ in Thousands	3 Months Ended		6 Months Ended
	Aug. 27, 2016 USD ($)	Aug. 29, 2015 USD ($)	Aug. 27, 2016 USD ($) Segment	Aug. 29, 2015 USD ($)	Feb. 27, 2016 USD ($)	May 30, 2015 USD ($)
Accounting Policies [Abstract]
Number of reportable segments | Segment			1
Revenue, Major Customer [Line Items]
Net sales	$ 509,403	$ 483,150	$ 962,918	$ 926,544
Deferred income taxes, deferred	$ 21,265	$ 25,283	$ 21,265	$ 25,283	$ 25,441
New Accounting Pronouncement, Early Adoption, Effect
Revenue, Major Customer [Line Items]
Deferred income taxes, current						$ (5,000)
Deferred income taxes, deferred						$ 5,000
Sales | Product Concentration Risk
Revenue, Major Customer [Line Items]
Percentage of net sales	100.00%	100.00%	100.00%	100.00%
Operating Segments | Footwear
Revenue, Major Customer [Line Items]
Net sales	$ 468,353	$ 432,323	$ 886,969	$ 834,501
Operating Segments | Footwear | Sales | Product Concentration Risk
Revenue, Major Customer [Line Items]
Percentage of net sales	92.00%	89.00%	92.00%	90.00%
Operating Segments | Softgoods
Revenue, Major Customer [Line Items]
Net sales	$ 41,050	$ 50,827	$ 75,949	$ 92,043
Operating Segments | Softgoods | Sales | Product Concentration Risk
Revenue, Major Customer [Line Items]
Percentage of net sales	8.00%	11.00%	8.00%	10.00%

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Fair Value Measurements - Summary of Recognized Assets and Liabilities (Detail) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands	Aug. 27, 2016	Feb. 27, 2016	Aug. 29, 2015
Level 1 | Contingent consideration liabilities
Liabilities
Contingent consideration liabilities	$ 0	$ 0	$ 0
Level 1 | Non-qualified deferred compensation plan
Assets
Non-qualified deferred compensation plan	5,503	5,538	6,102
Level 2 | Contingent consideration liabilities
Liabilities
Contingent consideration liabilities	0	0	0
Level 2 | Non-qualified deferred compensation plan
Assets
Non-qualified deferred compensation plan	0	0	0
Level 3 | Contingent consideration liabilities
Liabilities
Contingent consideration liabilities	0	0	420
Level 3 | Non-qualified deferred compensation plan
Assets
Non-qualified deferred compensation plan	$ 0	$ 0	$ 0

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Debt Agreement - Additional Information (Detail) - USD ($)	6 Months Ended
	Aug. 27, 2016	Nov. 30, 2012
Line of Credit Facility [Line Items]
Revolving credit facility commitment fee description	The Amended Credit Agreement pricing grid is adjusted quarterly and is based on the Company’s leverage ratio (as defined in the Amended Credit Agreement). The minimum pricing is LIBOR plus 0.90% or Base Rate (as defined in the Amended Credit Agreement) and the maximum pricing is LIBOR plus 1.75% or Base Rate (as defined in the Amended Credit Agreement) plus 0.75%. The Company is subject to an unused commitment fee based on the Company’s leverage ratio with minimum pricing of 0.10% and maximum pricing of 0.25%. In addition, the Company is subject to a letter of credit fee based on the Company’s leverage ratio with minimum pricing of 0.40% and maximum pricing of 1.25%.
Minimum
Line of Credit Facility [Line Items]
LIBOR rate	0.90%
Commitment fee percentage	0.10%
Letter of credit fee percentage	0.40%
Maximum
Line of Credit Facility [Line Items]
LIBOR rate	1.75%
Base rate	0.75%
Commitment fee percentage	0.25%
Letter of credit fee percentage	1.25%
Amended Credit Agreement
Line of Credit Facility [Line Items]
Unsecured revolving credit facility, maximum borrowing capacity		$ 100,000,000
Revolving credit facility agreement, expiration date	Nov. 30, 2017
Increase in credit facility maximum borrowing capacity		$ 200,000,000
Stand-by letters of credit outstanding	$ 1,600,000
Revolving credit facility available for borrowing	$ 98,400,000

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Earnings Per Share - Reconciliation of Numerators and Denominators used in Computing Earnings Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands		3 Months Ended		6 Months Ended
		Aug. 27, 2016	Aug. 29, 2015	Aug. 27, 2016	Aug. 29, 2015
Earnings Per Share [Abstract]
Net income attributable to The Finish Line, Inc.		$ 22,075	$ 25,902	$ 31,701	$ 39,691
Net income attributable to The Finish Line, Inc. attributable to participating securities		420	311	577	476
Net income attributable to The Finish Line, Inc. available to common shareholders		$ 21,655	$ 25,591	$ 31,124	$ 39,215
Basic earnings per share attributable to The Finish Line, Inc. shareholders:
Weighted-average number of common shares outstanding		40,944	44,866	41,357	45,151
Basic earnings per share attributable to The Finish Line, Inc. shareholders (in USD per share)		$ 0.53	$ 0.57	$ 0.75	$ 0.87
Diluted earnings per share attributable to The Finish Line, Inc. shareholders:
Weighted-average number of common shares outstanding		40,944	44,866	41,357	45,151
Dilutive effect of potential common shares(a)	[1]	178	341	149	312
Diluted weighted-average number of common shares outstanding		41,122	45,207	41,506	45,463
Diluted earnings per share attributable to The Finish Line, Inc. shareholders (in USD per share)		$ 0.53	$ 0.57	$ 0.75	$ 0.86

[1] The computation of diluted earnings per share attributable to The Finish Line, Inc. shareholders excludes options to purchase approximately 3.1 million and 1.3 million shares of common stock in the thirteen weeks ended August 27, 2016 and August 29, 2015, respectively, and 3.0 million and 1.3 million shares of common stock in the twenty-six weeks ended August 27, 2016 and August 29, 2015, respectively, because the impact of such options would have been antidilutive.

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Earnings Per Share - Reconciliation of Numerators and Denominators used in Computing Earnings Per Share - Narrative (Detail) - shares shares in Millions	3 Months Ended		6 Months Ended
	Aug. 27, 2016	Aug. 29, 2015	Aug. 27, 2016	Aug. 29, 2015
Earnings Per Share [Abstract]
Antidilutive shares excluded from computation of diluted earnings per share	3.1	1.3	3.0	1.3

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Common Stock - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		6 Months Ended
	Jul. 14, 2016	Aug. 27, 2016	Aug. 29, 2015	Aug. 27, 2016	Aug. 29, 2015	Feb. 27, 2016
Class of Stock [Line Items]
Treasury stock, shares held		19,196,721	17,381,000	19,196,721	17,381,000	14,913,000
Treasury stock, average price per share (in USD per share)				$ 20.32
Treasury stock, value		$ 390,085	$ 305,728	$ 390,085	$ 305,728	$ 349,382
Dividends declared per share (in USD per share)	$ 0.10	$ 0.10	$ 0.09	$ 0.20	$ 0.18
Common stock dividend declared				$ 8,400
Common stock dividends payment		$ 4,100		$ 4,100
2015 Share Repurchase Program
Class of Stock [Line Items]
Treasury stock purchased				2,000,000
Stock repurchase program, average price per share (in USD per share)				$ 21.28
Treasury stock purchased				$ 42,600
Stock repurchase program, shares available to repurchase		5,291,936		5,291,936

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Share-Based Compensation - Additional Information (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions	6 Months Ended
	Aug. 27, 2016	Aug. 29, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Share-based compensation expense	$ 5.7	$ 4.2
Options vesting period	4 years
Options expiration term	10 years
Options, grants in period	1,438	762
Options, grants in period, weighted average grant date fair value (in USD per share)	$ 4.82	$ 6.57
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 8.6
Period for recognition	1 year 8 months 12 days
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 9.9
Period for recognition	1 year 8 months 12 days
Grants in period (in shares)	470	210
Restricted Stock | Employee
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period	3 years
Restricted Stock | Non Employee Director | Cliff Vesting
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period	1 year
Restricted Stock | Minimum | Employee
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Service period requirement	3 years

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Share-Based Compensation - Weighted Average Assumptions (Details)	6 Months Ended
	Aug. 27, 2016	Aug. 29, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Dividend yield	2.20%	1.50%
Volatility	32.90%	33.40%
Risk-free interest rate	1.30%	1.40%
Expected life	5 years	5 years