-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WruKXZI4af6pkQQfSwcp/ry0XpeZSlnHLCQj8SrOCJzhklOJ4sKn5ZglXkhwIbcz 9DTlxPtaQrEECMP2gaq9qA== 0000898430-97-002738.txt : 19970701 0000898430-97-002738.hdr.sgml : 19970701 ACCESSION NUMBER: 0000898430-97-002738 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970531 FILED AS OF DATE: 19970630 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FINISH LINE INC /DE/ CENTRAL INDEX KEY: 0000886137 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-SHOE STORES [5661] IRS NUMBER: 351537210 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20184 FILM NUMBER: 97632226 BUSINESS ADDRESS: STREET 1: 3308 N MITTHOEFFER RD CITY: INDINAPOLIS STATE: IN ZIP: 46236 BUSINESS PHONE: 3178991022 MAIL ADDRESS: STREET 1: 3308 N MITTHOEFFER ROAD CITY: INDIANAPOLIS STATE: IN ZIP: 46236 10-Q 1 FORM 10-Q FOR THE QUARTERLY PERIOD ENDED 5/31/97 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 thirteen week period ended May 31, 1997 ------------ 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) Delaware 35-1537210 - -------------------------------------------------------------------------------- (State or other jurisdiction (I.R.S. Employer identification number) of incorporation or organization) 3308 North Mitthoeffer Road Indianapolis, Indiana 46236 - -------------------------------------------------------------------------------- (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 --- --- Shares of common stock outstanding at June 20, 1997: Class A 18,005,042 Class B 7,967,206 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS THE FINISH LINE, INC. CONSOLIDATED BALANCE SHEETS (In thousands)
May 31, March 1, 1997 1997 --------- -------- (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 47,206 $ 51,212 Short-term marketable securities 9,232 11,516 Accounts receivable 6,317 4,849 Merchandise inventories 88,419 81,991 Deferred income taxes 1,630 2,785 Other 1,816 3,631 -------- -------- Total current assets 154,620 155,984 PROPERTY AND EQUIPMENT: Land 315 315 Building 4,238 4,238 Leasehold improvements 34,883 32,732 Furniture, fixtures, and equipment 15,256 14,071 Construction in progress 3,954 4,120 -------- -------- 58,646 55,476 Less accumulated depreciation 17,508 15,958 -------- -------- 41,138 39,518 OTHER ASSETS: Marketable securities 19,940 20,106 Deferred income taxes 2,077 2,110 Other 8 -- -------- -------- 22,025 22,216 -------- -------- Total assets $217,783 $217,718 ======== ========
See accompanying notes. Page 2 of 12 THE FINISH LINE, INC. CONSOLIDATED BALANCE SHEETS (In thousands)
May 31, March 1, 1997 1997 --------- -------- (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts Payable $ 29,202 $ 27,589 Notes payable to bank 350 -- Employee compensation and related payroll taxes 2,456 4,853 Accrued income taxes 1,564 5,176 Accrued property and sales tax 2,209 2,448 Other liabilities and accrued expenses 3,275 3,839 -------- -------- Total current liabilities 39,056 43,905 Long-term deferred rent payments 4,118 3,938 STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value; 1,000 shares authorized; none issued -- -- Common Stock, $.01 par value Class A: Shares authorized - 30,000 Shares issued and outstanding - (May 31, 1997 - 17,995; March 1, 1997 - 17,192) 180 172 Class B: Shares authorized - 12,000 Shares issued and outstanding - (May 31, 1997 - 7,967; March 1, 1997 - 8,750) 80 87 Additional paid-in capital 118,375 118,132 Retained earnings 55,974 51,484 -------- -------- Total stockholders' equity 174,609 169,875 -------- -------- Total liabilities and stockholders' equity $217,783 $217,718 ======== ========
See accompanying notes. Page 3 of 12 THE FINISH LINE, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited)
Thirteen Three Weeks Weeks Ended Ended May 31, May 31, 1997 1996 ------- ------- Net sales $87,537 $71,744 Cost of sales (including occupancy expenses) 60,903 50,212 ------- ------- Gross profit 26,634 21,532 Selling, general, and administrative expenses 20,083 16,042 ------- ------- Operating income 6,551 5,490 Interest expense (income) - net (722) 194 ------- ------- Income before income taxes 7,273 5,296 Provision for federal and state income taxes 2,782 2,119 ------- ------- Net income $ 4,491 $ 3,177 ======= ======= Fully diluted net income per share $.17 $.15 ======= ======= Fully diluted weighted average shares 26,568 21,336 ======= =======
See accompanying notes. Page 4 of 12 THE FINISH LINE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) - (Unaudited)
Thirteen Three Weeks Weeks Ended Ended May 31, May 31, 1997 1996 ------- ------- OPERATING ACTIVITIES: Net Income $ 4,491 $ 3,177 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 1,550 1,386 Deferred income taxes 1,188 (98) Gain on disposal of property and equipment (4) (6) Changes in operating assets and liabilities: Accounts receivable (1,468) (1,121) Merchandise inventories (6,428) 2,621 Other current assets 1,815 (298) Other assets (8) -- Accounts payable 1,613 (7,483) Employee compensation and related payroll taxes (2,397) (827) Accrued income taxes (3,612) (304) Other liabilities and accrued expenses (803) (35) Deferred rent payments 180 180 ------- ------- Net cash used in operating activities (3,883) (2,808) INVESTING ACTIVITIES: Purchases of property and equipment (3,184) (2,197) Proceeds from disposal of property and equipment 18 13 Purchases of marketable securities (393) -- Proceeds from maturity of marketable securities 2,843 -- ------- ------- Net cash used in investing activities (716) (2,184) FINANCING ACTIVITIES: Proceeds from short-term and long-term debt 7,950 33,100 Principal payments on short-term and long-term debt (7,600) (27,900) Proceeds and tax benefits from exercise of stock options 243 396 ------- ------- Net cash provided by financing activities 593 5,596 ------- ------- Net increase (decrease) in cash and cash equivalents (4,006) 604 Cash and cash equivalents at beginning of period 51,212 1,686 ------- ------- Cash and cash equivalents at end of period $47,206 $ 2,290 ======= ========
See accompanying notes Page 5 of 12 THE FINISH LINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of Presentation The accompanying unaudited consolidated financial statements of The Finish Line, Inc. and its wholly-owned subsidiary Spike's Holding, Inc. (collectively, the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included. The Company has experienced, and expects to continue to experience, significant variability in sales and net income from reporting period to reporting period. 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. Except for the historical information contained herein, the matters discussed in this filing are forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from those expressed in any of the forward looking statements. Such risks and uncertainties include, but are not limited to, product demand and market acceptance risks, the effect of economic conditions, the effect of competitive products and pricing, the availability of products, management of growth, and the other risks detailed in the Company's Securities and Exchange Commission filings. These financial statements should be read in conjunction with the financial statements and notes thereto for the year ended March 1, 1997. 2. Change in Fiscal Year End Effective with the quarter ended March 1, 1997, the Company changed its fiscal year from a fiscal year ending each February 28 to a 52/53 week retail calendar year ending on the last Saturday closest to February 28. As a result of this change, each of the Company's quarters will consist of thirteen weeks. In a 53 week fiscal year, the fourth quarter will include fourteen weeks. The thirteen weeks ended May 31, 1997 includes 91 days versus 92 days for the first quarter of fiscal 1997 which ended on May 31, 1996. All results presented herein reflect such 1 day difference in the reporting periods. 3. Accounting Change In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on February 28, 1998. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact of Statement 128 on the calculation of primary (basic) and fully diluted (diluted) earnings per share for these periods is not expected to be material. Page 6 of 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The following table and subsequent discussion sets forth operating data of the Company as a percentage of net sales for the periods indicated below.
Thirteen Three Weeks Weeks Ended Ended May 31, May 31, 1997 1996 ------- ------- (Unaudited) Net Sales 100.0% 100.0% Cost of sales (including occupancy expenses) 69.6 70.0 ----- ----- Gross profit 30.4 30.0 Selling, general and administrative expenses 22.9 22.4 ----- ----- Operating income 7.5 7.6 Interest expense (income) - net (.8) .3 ----- ----- Income before federal and state income taxes 8.3 7.3 Provision for federal and state income taxes 3.2 2.9 ----- ----- Net income 5.1% 4.4% ====== ======
THIRTEEN WEEKS ENDED 5/31/97 COMPARED TO FIRST QUARTER ENDED 5/31/96 Net sales increased 22.0% to $87.5 million for the thirteen weeks ended May 31, 1997 from $71.7 million for the quarter ended May 31, 1996. Of this increase, $13.1 million was attributable to a 16.2% increase in the number of stores open during the period from 229 at May 31, 1996 to 266 at May 31, 1997. The balance of the increase was attributable to a $700,000 increase in net sales from the eleven existing stores open only part of the first three months of last year and a comparable store sales increase of 0.7% for the thirteen weeks ended May 31, 1997 for those stores opened during the entire three months of last year. Comparable net footwear sales for the thirteen weeks ended May 31, 1997 increased 1.7% versus the thirteen weeks ended May 31, 1996. Comparable net activewear and accessories decreased 2.3% for the comparable period. Net sales per square foot decreased to $77 from $82 for the same period of the prior year. Gross profit for the thirteen weeks ended May 31, 1997 was $26.6 million, an increase of $5.1 million over the quarter ended May 31, 1996. During this same period, gross profit increased to 30.4% of net sales versus 30.0% for the prior year. Of this .4% increase, 1.1% was due to higher margins for products sold which was partially offset by a .7% increase in occupancy costs as a percentage of net sales. Page 7 of 12 Selling, general and administrative expenses increased $4.1 million (25.2%) to $20.1 million (22.9% of net sales) for the thirteen weeks ended May 31, 1997 from $16.0 million (22.4% of net sales) for the quarter ended May 31, 1996. This dollar increase was primarily attributable to the operating costs related to operating 37 additional stores at May 31, 1997 versus May 31, 1996. The increase as a percentage of net sales is primarily a result of store wages not being leveraged due to the modest comparable net sales increase of 0.7% for the thirteen weeks ended May 31, 1997, as well as net sales including one less day than the prior year due to the change to the retail calendar. Net interest income was $722,000 (.8% of net sales) for the thirteen week period ended May 31, 1997, compared to net interest expense of $194,000 (.3% of net sales) for the quarter ended May 31, 1996, an increase of $916,000. This increase was the result of using the proceeds of the Company's public offering completed on June 19, 1996 to repay all existing outstanding indebtedness under the Company's unsecured committed Loan Agreement with the remainder of these proceeds (along with the proceeds from the Company's public offering completed on December 18, 1996), being invested in interest bearing instruments. The Company's provision for federal and state income taxes increased $663,000 for the thirteen weeks ended May 31, 1997. The increase is due to the increased level of income before income taxes for the thirteen weeks ended May 31, 1997, partially offset by a decrease in the effective tax rate to 38.25% for the thirteen weeks ended May 31, 1997 from 40.0% for the quarter ended May 31, 1996. The decrease in effective tax rate is a result of the Company's significant investment in tax exempt instruments along with implementation of tax planning initiatives. Net income increased 41.4% to $4.5 million for the thirteen weeks ended May 31, 1997 compared to $3.2 million for the quarter ended May 31, 1996. Fully diluted net income per share increased 13.3% to $.17 for the thirteen weeks ended May 31, 1997 compared to $.15 for the quarter ended May 31, 1996. Fully diluted weighted average shares outstanding were 26,568,000 and 21,336,000, respectively, for the periods ended May 31, 1997 and 1996. The increase in shares outstanding resulted from the completion of two public stock offerings in fiscal 1997. Liquidity and Capital Resources The Company had a net use of cash of $3.9 million from its operating activities during the thirteen weeks ended May 31, 1997 as compared to a net use of cash from operating activities of $2.8 million during the quarter ended May 31, 1996. The Company had a net use of cash from its investing activities, of $716,000 and $2.2 million for the thirteen weeks ended May 31, 1997 and the quarter ended May 31, 1996, respectively. Of the $716,000 in 1997, $3.2 million was used for new stores construction which was partially offset by a $2.5 million net maturity of marketable securities. The Company's working capital was $115.6 million at May 31, 1997 which was a $3.5 million increase in working capital from $112.1 million at March 1, 1997. Page 8 of 12 Merchandise inventories were $88.4 million at May 31, 1997 compared to $82.0 million at March 1, 1997. On a per square foot basis, merchandise inventories at May 31, 1997 decreased 9.8% compared to May 31, 1996, and were 4.4% lower than at March 1, 1997. The Company believes present levels are appropriate for the selling season. At May 31, 1997, the Company had cash and cash equivalents of $47.2 million and short-term marketable securities of $9.2 million and $350,000 of short term interest bearing debt. Cash equivalents are primarily invested in tax exempt instruments with maturities of one to twenty-eight days. Short-term marketable securities range in maturity from 90-365 days from date of purchase and are primarily invested in tax exempt municipal obligations. In April 1997 the Company announced plans to accelerate its store expansion from a previously announced increase in retail square footage of 35% for fiscal 1998 to an increase of approximately 40% to 45%. Management believes that cash on hand, operating cash flow and borrowings under the Company's existing bank facility will be sufficient to complete the Company's fiscal 1998 store expansion program and to satisfy the Company's other capital requirements through fiscal 1998. In 1996, President Clinton signed a bill which among other items, increased the minimum wage effective October 1, 1996 from $4.25 to $4.75 per hour and subsequently to $5.15 per hour on September 1, 1997. Although many of the Company's store employees are part-time and paid hourly, the passage of this bill is not expected to have a material adverse effect on the Company's financial condition or results of operation. Page 9 of 12 PART II - OTHER INFORMATION ITEM 1: Legal Proceedings ----------------- None. ITEM 2: Changes in Securities --------------------- None. ITEM 3: Defaults Upon Senior Securities ------------------------------- None. ITEM 4: Submission of Matters to a Vote of Security-Holders --------------------------------------------------- None. ITEM 5: Other Information ----------------- None. ITEM 6: Exhibits and Reports on Form 8-K: --------------------------------- (a) Exhibits 11 - Computation of Net Income Per Share 27 - Financial Data Schedule (b) Reports on Form 8-K The Company filed a report on Form 8-K on March 7, 1997 with respect to a resolution of the Board of Directors of The Finish Line, Inc. dated March 4, 1997 in which the Board approved and ratified a change in the Company's fiscal year end. Page 10 of 12 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: June 25, 1997 By: /s/ Steven J. Schneider ---------------------------- Sr. Vice President, Finance, Chief Financial Officer and Secretary Page 11 of 12 EX-11 2 COMPUTATION OF NET INCOME PER SHARE EXHIBIT 11 COMPUTATION OF NET INCOME PER SHARE (In thousands, except per share amounts)
Thirteen Three Weeks Weeks Ended Ended May 31, May 31, 1997 1996 ------- ------- Primary - ------- Average shares outstanding 25,958 20,646 Net effect of dilutive stock options - based on the treasury stock method using average market price 610 560 ======= ======= Total 26,568 21,206 ======= ======= Net income $ 4,491 $ 3,177 ======= ======= Per share amount $ .17 $ .15 ======= ======= Fully Diluted - ------------- Average shares outstanding 25,958 20,646 Net effect of dilutive stock options - based on the treasury stock method using the higher of the average market price for the period or the market price at the end of the period 610 690 ======= ======= Total 26,568 21,336 ======= ======= Net income $ 4,491 $ 3,177 ======= ======= Per share amount $ .17 $ .15 ======= =======
NOTE: Average shares outstanding used for net income per share included in the Company's financial statements reflect the effect of the stock options granted since their effect is approximately 3% dilutive. Only fully diluted earnings per share have been disclosed in the Company's financial statements as primary earnings per share are substantially the same. Page 12 of 12 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED MAY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 OTHER FEB-28-1998 MAR-02-1997 MAY-31-1997 47,206 9,232 6,317 0 88,419 154,620 58,646 17,508 217,783 39,056 0 0 0 260 174,349 217,783 87,537 87,537 60,903 60,903 20,083 0 (722) 7,273 2,782 4,491 0 0 0 4,491 0 .17
-----END PRIVACY-ENHANCED MESSAGE-----