-----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, UghNZFEeBiG8QMxmhWBVoeI2svpoTQ91TuBFJkYPKxh/xHuY6itkDhcxQoxA647u fDE/AAp/ZiVf5H4o5x0B2w== 0000898430-02-000025.txt : 20020413 0000898430-02-000025.hdr.sgml : 20020413 ACCESSION NUMBER: 0000898430-02-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011201 FILED AS OF DATE: 20020104 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: 2501550 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 d10q.txt FORM 10-Q 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 December 1, 2001 ---------------- 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 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 --- --- Shares of common stock outstanding at December 21, 2001: Class A 19,779,588 Class B 4,362,442 1 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS THE FINISH LINE, INC. CONSOLIDATED BALANCE SHEETS (In thousands)
December 1, March 3, 2001 2001 ----------- -------- (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 30,406 $ 45,422 Marketable securities 5,500 6,513 Accounts receivable 6,332 3,476 Merchandise inventories 167,094 145,503 Income taxes recoverable 3,927 -- Other 11,064 7,233 -------- -------- Total current assets 224,323 208,147 PROPERTY AND EQUIPMENT: Land 315 315 Building 10,578 10,486 Leasehold improvements 96,789 91,657 Furniture, fixtures, and equipment 45,309 41,515 Construction in progress 1,736 2,849 -------- -------- 154,727 146,822 Less accumulated depreciation 62,889 52,348 -------- -------- 91,838 94,474 OTHER ASSETS: Deferred income taxes 7,603 6,247 -------- -------- Total assets $323,764 $308,868 ======== ========
See accompanying notes. 2 THE FINISH LINE, INC. CONSOLIDATED BALANCE SHEETS (In thousands)
December 1, March 3, 2001 2001 ----------- --------- (unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 58,571 $ 53,450 Employee compensation 5,568 6,640 Accrued property and sales tax 4,071 3,914 Deferred income taxes 6,214 906 Other liabilities and accrued expenses 7,817 9,597 -------- -------- Total current liabilities 82,241 74,507 Long-term deferred rent payments 8,324 7,614 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 - (December 1, 2001 - 21,998; March 3, 2001 - 20,022) Shares outstanding - (December 1, 2001 - 19,754; March 3, 2001 - 18,181) 220 200 Class B: Shares authorized - 12,000 Shares issued and outstanding - (December 1, 2001 - 4,362; March 3, 2001 - 6,268) 44 63 Additional paid-in capital 123,265 122,748 Retained earnings 127,712 118,257 Accumulated other comprehensive income 23 12 Treasury stock - (December 1, 2001 - 2,244; March 3, 2001 - 1,841) (18,065) (14,533) -------- -------- Total stockholders' equity 233,199 226,747 -------- -------- Total liabilities and stockholders' equity $323,764 $308,868 ======== ========
See accompanying notes. 3 THE FINISH LINE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
Thirteen Weeks Ended Thirty Nine Weeks Ended --------------------------- --------------------------- December 1, November 25, December 1, November 25, 2001 2000 2001 2000 ----------- ------------ ----------- ------------ Net sales $142,266 $134,503 $499,867 $471,702 Cost of sales (including occupancy expenses) 107,297 101,378 365,589 344,687 -------- -------- -------- -------- Gross profit 34,969 33,125 134,278 127,015 Selling, general, and administrative expenses 38,748 37,404 122,038 114,457 Repositioning charge reversal (549) -- (1,209) -- -------- -------- -------- -------- Operating income (loss) (3,230) (4,279) 13,449 12,558 Interest income - net 387 328 1,325 720 -------- -------- -------- -------- Income (loss) before income taxes (2,843) (3,951) 14,774 13,278 Provision (benefit) for income taxes (1,023) (1,462) 5,319 4,913 -------- -------- -------- -------- Net income (loss) $ (1,820) $ (2,489) $ 9,455 $ 8,365 ======== ======== ======== ======== Basic net income (loss) per share $ (.08) $ (.10) $ .39 $ .34 ======== ======== ======== ======== Basic weighted average shares 24,173 24,479 24,339 24,461 ======== ======== ======== ======== Diluted net income (loss) per share $ (.07) $ (.10) $ .38 $ .34 ======== ======== ======== ======== Diluted weighted average shares 24,549 24,679 24,660 24,682 ======== ======== ======== ========
See accompanying notes. 4 THE FINISH LINE, INC. CONSOLIDATED STATEMENTS OF CASH FLOW (In thousands) (Unaudited)
Thirty-Nine Weeks Ended --------------------------------- December 1, November 25, 2001 2000 ----------- ------------ OPERATING ACTIVITIES: Net Income $ 9,455 $ 8,365 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 12,178 12,278 Contribution of treasury stock to profit sharing plan -- 1,758 Repositioning charge reversal (1,209) -- Deferred income taxes 3,945 1,171 Gain on disposal of property and equipment (7) 174 Changes in operating assets and liabilities: Accounts receivable (2,856) (3,164) Merchandise inventories (21,591) (28,591) Other current assets (3,831) 17 Other assets -- 55 Accounts payable 5,121 22,131 Employee compensation and related payroll taxes (1,072) (6) Accrued income taxes payable/recoverable (6,849) (1,843) Other liabilities and accrued expenses 2,508 (424) Deferred rent payments 710 995 -------- -------- Net cash provided by (used in) operating activities (3,498) 12,916 INVESTING ACTIVITIES: Purchases of property and equipment (10,515) (12,142) Proceeds from disposal of property and equipment 980 89 Proceeds from sale of investments -- 2,483 Proceeds from maturity of marketable securities 1,031 500 -------- -------- Net cash used in investing activities (8,504) (9,070) FINANCING ACTIVITIES: Proceeds from short-term debt -- 47,415 Principal payments on short-term debt and long-term debt -- (47,415) Proceeds and tax benefits from exercise of stock options 517 191 Common stock repurchased (3,531) (1,393) -------- -------- Net cash used in financing activities (3,014) (1,202) -------- -------- Net increase (decrease) in cash and cash equivalents (15,016) 2,644 Cash and cash equivalents at beginning of period 45,422 13,061 -------- -------- Cash and cash equivalents at end of period $ 30,406 $ 15,705 ======== ========
See accompanying notes. 5 The Finish Line, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The accompanying unaudited 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 accounting principles generally accepted in the United States 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 accounting principles generally accepted in the United States 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 quarter to quarter. 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 (including market acceptance of the Company's new merchandising strategies undertaken by the new apparel buying team), the effect of economic conditions, the effect of competitive products and pricing, the availability of products, management of growth, the Company's ability to successfully execute and benefit from its repositioning plan, 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 3, 2001. Throughout this document, the term fiscal 2002 refers to the Company's current fiscal year which ends March 2, 2002. 2. Repositioning Reserves In the 4th quarter of 2001 the Company approved a repositioning plan and recorded a pre-tax non-recurring charge totaling $19,809,000. Those charges included inventory markdowns, lease buyouts and asset impairment charges for 17 planned store closings, and asset impairment charges for 14 identified under- performing stores. As of December 1, 2001 the Company has completed 11 of the 17 planned store closures. The Company has made payments of $309,000 against the lease obligation reserve in 2002 and recorded reductions of the lease obligation reserve of $1,209,000 as a change in estimate as a result of the successful negotiation of lease termination costs regarding five stores. The remaining $2,288,000 lease obligation reserve represents expected future lease obligations after store closure for the 6 remaining stores that are planned to be closed in fiscal 2002. The reserve for inventory markdowns was reduced by a net of $11,551,000 for the thirty-nine weeks ended December 1, 2001 in connection with the Company's sale and liquidation of aged inventory below cost. This reduction to the reserve is net of an additional $502,000 charge (recorded in the 1st quarter ended June 2, 2001) to cost of sales to record additional markdowns on inventory to reflect it at its net realizable value. 6 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. The following discussion and analysis should be read in conjunction with the unaudited Financial Statements included elsewhere herein.
Thirteen Thirty - Nine Weeks Ended Weeks Ended ----------------------- -------------------- Dec. 1, Nov. 25, Dec. 1, Nov. 25, 2001 2000 2001 2000 -------- -------- ------- -------- Income Statement Data: (Unaudited) Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales (including occupancy costs) 75.4 75.4 73.1 73.1 ----- ----- ----- ----- Gross profit 24.6 24.6 26.9 26.9 Selling, general and administrative expenses 27.3 27.8 24.4 24.3 Repositioning charge reversal ( .4) -- ( .2) -- ----- ----- ----- ----- Operating income (loss) (2.3) (3.2) 2.7 2.6 Interest income - net .3 .2 .3 .2 ----- ----- ----- ----- Income (loss) before income taxes (2.0) (3.0) 3.0 2.8 Provision (benefit) for income taxes ( .7) (1.1) 1.1 1.0 ----- ----- ----- ----- Net income (loss) (1.3)% (1.9)% 1.9% 1.8% ===== ===== ===== =====
7 Thirteen Weeks Ended December 1, 2001 Compared to Thirteen Weeks Ended November 25, 2000 Net sales increased 5.8% to $142.3 million for the thirteen weeks ended December 1, 2001 from $134.5 million for the thirteen weeks ended November 25, 2000. This increase in net sales was primarily attributable to net sales from new stores and a comparable store sales increase. As of December 1, 2001, the number of stores in operation increased 2.9% to 454 from 441 at November 25, 2000. During the thirteen weeks ended December 1, 2001, the Company's comparable store sales increased 8.0% compared to the same period in the prior year. Comparable footwear net sales for the thirteen weeks ended December 1, 2001 increased approximately 11.7% versus the thirteen weeks ended November 25, 2000. Comparable activewear and accessories net sales decreased approximately 4.6% for the comparable period. Activewear and accessories continue to be negatively effected by the transition to new merchandising strategies undertaken by the new apparel buying team. Net sales per square foot increased to $53 from $52 for the same thirteen week period of the prior year. Gross profit for the thirteen weeks ended December 1, 2001 was $35.0 million, an increase of $1.8 million over the thirteen weeks ended November 25, 2000. Gross profit was 24.6% of net sales for both comparable periods. For the thirteen weeks ended December 1, 2001, margin for product sold decreased .6% which was offset by a .6% decrease in occupancy costs as a percentage of net sales. Selling, general and administrative expenses increased $1.3 million (3.6%) to $38.7 million (27.3% of net sales) for the thirteen weeks ended December 1, 2001 from $37.4 million (27.8% of net sales) for the thirteen weeks ended November 25, 2000. This dollar increase was primarily attributable to the operating costs related to operating 13 additional stores at December 1, 2001 versus November 25, 2000. The decrease as a percentage of net sales is primarily attributable to controls over store payroll and supplies along with leverage created from the 8% comparable store gain for the quarter ended December 1, 2001. In connection with the repositioning plan the Company established a reserve for future lease payments for store closures of $3.8 million which was included in accrued expenses at March 3, 2001. The accrued expense was reduced $575,000 in the thirteen weeks ended December 1, 2001 which represented payments of $26,000 and a decrease in the expected future lease store closure obligation of $549,000, which was taken back into income as a change in estimate. The reserve is reviewed periodically to determine its adequacy. Net interest income was $387,000 (.3% of net sales) for the thirteen weeks ended December 1, 2001, compared to net interest income of $328,000 (.2% of net sales) for the thirteen weeks ended November 25, 2000, an increase of $59,000. This increase was the result of increased invested cash balances for the thirteen weeks ended December 1, 2001 compared to the same period of the prior year. The Company had a benefit for income taxes of $1.0 million for the thirteen weeks ended December 1, 2001, as compared to a benefit for income taxes of $1.5 million for the thirteen weeks ended November 25, 2000. The decrease is due to the reduced level of loss before income taxes for the thirteen weeks ended December 1, 2001, along with an decrease in the effective tax rate to 36.0% for the thirteen weeks ended December 1, 2001 from 37.0% for the thirteen weeks ended November 25, 2000. Net loss decreased 26.9% to $1.8 million for the thirteen weeks ended December 1, 2001 compared to $2.5 million for the thirteen weeks ended November 25, 2000. Diluted net loss per share was $.07 for the thirteen weeks ended December 1, 2001 compared to diluted net loss per share of $.10 for the thirteen weeks ended November 25, 2000. Diluted weighted average shares outstanding were 24,549,000 and 24,679,000 respectively, for the thirteen weeks ended December 1, 2001 and November 25, 2000. 8 Thirty Nine Weeks Ended 12/01/01 Compared to Thirty Nine Weeks Ended 11/25/00 Net sales increased 6.0% to $499.9 million for the thirty-nine weeks ended December 1, 2001 from $471.7 million for the thirty-nine weeks ended November 25, 2000. Of this increase, $11.1 million was attributable to a 2.9% increase in the number of stores open during the period from 441 at November 25, 2000 to 454 at December 1, 2001. The balance of the increase was attributable to a $13.2 million increase in net sales from the existing stores open only part of the first thirty-nine weeks of last year along with a comparable store net sales increase of 3.0% for the thirty-nine weeks ended December 1, 2001. Comparable footwear net sales for the thirty-nine weeks ended December 1, 2001, increased approximately 6.0%. Comparable activewear and accessories net sales decreased approximately 9.7% for the comparable period. Activewear and accessories continue to be negatively effected by the transition to new merchandise strategies undertaken by the new apparel buying team. Net sales per square foot increased to $188 from $186 for the same period of the prior year. Gross profit for the thirty-nine weeks ended December 1, 2001 was $134.3 million, an increase of $7.3 million over the thirty-nine weeks ended November 25, 2000. Gross profit was 26.9% of net sales for both comparable periods. For the thirty-nine weeks ended December 1, 2001 product margin increased .1% which was offset by a .1% increase in occupancy costs as a percentage of net sales. Selling, general and administrative expenses increased $7.6 million (6.6%) to $122.0 million (24.4% of net sales) for the thirty-nine weeks ended December 1, 2001 from $114.5 million (24.3% of net sales) for the thirty nine weeks ended November 25, 2000. This dollar increase was primarily attributable to the operating costs related to operating 13 additional stores at December 1, 2001 versus November 25, 2000. In connection with the repositioning plan the Company established a reserve for future lease payments for store closures of $3.8 million which was included in accrued expenses at March 3, 2001. The accrued expense was reduced $1.5 million in the thirty-nine weeks ended December 1, 2001 which represented payments of $309,000 and a decrease in the expected future lease store closure obligation of $1.2 million, which was taken back into income as a change in estimate. The reserve is reviewed periodically to determine its adequacy. Net interest income was $1.3 million (.3% of net sales) for the thirty-nine weeks ended December 1, 2001, compared to net interest income of $720,000 (.2% of net sales) for the thirty-nine weeks ended November 25, 2000, an increase of $605,000. This increase was primarily the result of increased invested cash balances due to the Company's progress with the liquidation of aged inventory. The Company's provision for federal and state income taxes was $5.3 million for the thirty-nine weeks ended December 1, 2001 compared to $4.9 million for the thirty-nine weeks ended November 25, 2000. The provision was effected by the increased level in income before income taxes for the thirty-nine weeks ended December 1, 2001, partially offset by a decrease in the effective tax rate to 36.0% for the thirty-nine weeks ended December 1, 2001 from 37.0% for the thirty-nine weeks ended November 25, 2000. Diluted net income per share increased 11.8% to $.38 for the thirty-nine weeks ended December 1, 2001 compared to diluted net income per share of $.34 for the thirty-nine weeks ended November 25, 2000. Diluted weighted average shares outstanding were 24,660,000 and 24,682,000 respectively for the periods ended December 1, 2001 and November 25, 2000. 9 Liquidity and Capital Resources The Company had a net use of cash of $3.5 million from its operating activities during the thirty-nine weeks ended December 1, 2001 as compared to providing cash from its operating activities of $12.9 million during the thirty- nine weeks ended November 25, 2000. The Company had a net use of cash from its investing activities of $8.5 million and $9.1 million for the thirty-nine week periods ended December 1, 2001 and November 25, 2000, respectively. Of the $8.5 million used in fiscal 2002, $10.5 million was used for new store construction and remodeling of existing stores, which was partially offset by $1.0 million in net maturities and proceeds from marketable securities. At December 1, 2001 the Company had cash equivalents of $30.4 million, marketable securities of $5.5 million and no interest bearing debt. Cash equivalents are primarily invested in taxable instruments with maturities of one to twenty-eight days. Marketable securities range in maturity from 90 days to four years from date of purchase and are primarily invested in tax exempt municipal obligations. Marketable securities are classified as available-for- sale and are available to support current operations. The Company had working capital of $142.1 million at December 1, 2001, an increase of $8.5 million from the working capital of $133.6 million at March 3, 2001. Merchandise inventories were $167.1 million at December 1, 2001 compared to $145.5 million at March 3, 2001. On a per square foot basis, merchandise inventories at December 1, 2001 decreased approximately 7.4% compared to November 25, 2000. Although merchandise inventories as of December 1, 2001 were reduced on a per square foot basis, management believes levels are adequate primarily due to less aged inventory being on hand due to the execution of the Company's repositioning plan. As previously announced, the Company's expansion plans are to increase its retail square footage by approximately 1-2% for fiscal 2003. Management believes that cash on hand and marketable securities, operating cash flow and the Company's existing $60,000,000 bank facility, which expires on September 20, 2003, will provide sufficient capital to complete the Company's fiscal 2003 store expansion program and to satisfy the Company's other capital requirements through fiscal 2003 (which ends March 1, 2003). 10 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 None (b) Reports on Form 8-K None. 11 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: January 3, 2002 By: /s/ Kevin S. Wampler ------------------------ Kevin S. Wampler Senior Vice President - Chief Accounting Officer and Assistant Secretary 12 -----END PRIVACY-ENHANCED MESSAGE-----