-----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, DWb9cFcVbxrQp0wDCVAa9K5TQ180jt0ZjbDK+ji5s3gGF1/cwn53cNii809JaVCh MTF49vuzzsk1Kzr/jfTEYQ== 0000898430-96-004577.txt : 19961001 0000898430-96-004577.hdr.sgml : 19961001 ACCESSION NUMBER: 0000898430-96-004577 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19960930 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: 96636496 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 DATED AUGUST 31, 1996 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 31, 1996 --------------- 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 September 20, 1996: Class A 6,753,087 Class B 4,934,537 PAGE 1 OF 20 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS THE FINISH LINE, INC. BALANCE SHEETS (In thousands)
Aug 31, Feb 29, 1996 1996 ----------- --------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 31,852 $ 1,686 Short-term investments 4,980 -- Accounts receivable 4,639 1,099 Merchandise inventories 83,046 76,088 Deferred income taxes 2,350 1,608 Other current assets 658 524 -------- -------- Total current assets 127,525 81,005 PROPERTY AND EQUIPMENT Land 315 315 Building 4,168 4,156 Leasehold improvements 29,600 26,898 Furniture, fixtures, and equipment 12,184 11,235 Construction in progress 706 596 -------- -------- 46,973 43,200 Less accumulated depreciation 13,851 11,441 -------- -------- 33,122 31,759 OTHER ASSETS Deferred income taxes 2,368 2,208 -------- -------- Total assets $163,015 $114,972 ======== ========
See accompanying notes. PAGE 2 OF 20 THE FINISH LINE, INC. BALANCE SHEETS (In thousands)
Aug 31, Feb 29, 1996 1996 ----------- --------- (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 39,610 $ 29,717 Notes payable to bank -- 9,500 Employee compensation and related payroll taxes 3,140 3,234 Accrued interest -- 56 Accrued income taxes 3,416 2,074 Accrued property and sales tax 3,332 1,869 Other liabilities and accrued expenses 2,781 2,102 -------- -------- Total current liabilities 52,279 48,552 LONG-TERM LIABILITIES Deferred rent payments 3,632 3,272 STOCKHOLDERS' EQUITY Preferred stock, $.01 par value; 1,000 shares authorized; none issued -- -- Common Stock, $.01 par value Class A: Shares authorized - 20,000 Shares issued and outstanding (August 31, 1996 -6,732; February 29, 1996 - 4,081) 67 41 Class B: Shares authorized - 12,000 Shares issued and outstanding (August 31, 1996- 4,935; February 29, 1996 - 6,235) 49 62 Additional paid-in capital 64,802 30,374 Retained earnings 42,186 32,671 -------- -------- Total stockholders' equity 107,104 63,148 -------- -------- Total liabilities and stockholders' equity $163,015 $114,972 ======== ========
See accompanying notes. PAGE 3 OF 20 THE FINISH LINE, INC. STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited)
Three Months Ended Six Months Ended ------------------ ------------------ August 31, August 31, 1996 1995 1996 1995 -------- -------- -------- -------- Net sales $91,006 $64,584 $162,750 $116,803 Cost of sales (including occupancy expenses) 61,543 44,895 111,755 81,236 ------- ------- -------- -------- Gross profit 29,463 19,689 50,995 35,567 Selling, general, and administrative expenses 19,037 14,015 35,079 26,373 ------- ------- -------- -------- Operating income 10,426 5,674 15,916 9,194 Interest expense (income) - net (137) 229 57 359 ------- ------- -------- -------- Income before income taxes 10,563 5,445 15,859 8,835 Provision for income taxes 4,225 2,178 6,344 3,534 ------- ------- -------- -------- Net income $ 6,338 $ 3,267 $ 9,515 $ 5,301 ======= ======= ======== ======== Fully diluted net income per share $.54 $.31 $.85 $.51 ======= ======= ======== ======== Fully diluted weighted average shares 11,775 10,385 11,234 10,353 ======= ======= ======== ========
See accompanying notes. PAGE 4 OF 20 THE FINISH LINE, INC. STATEMENTS OF CASH FLOW (In thousands) (Unaudited)
Six Months ended August 31, --------------------------- 1996 1995 --------- --------- OPERATING ACTIVITIES: Net Income $ 9,515 $ 5,301 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,616 2,113 Deferred income taxes (902) (259) Gain on disposals of property and equipment (16) (5) Changes in operating assets and liabilities: Accounts receivable (3,540) (133) Merchandise inventories (6,958) (14,552) Other current assets (134) 141 Tax deposits and other assets -- 147 Accounts payable 9,893 12,805 Employee compensation and related payroll taxes (94) (840) Accrued income taxes 1,342 524 Other liabilities and accrued expenses 2,086 924 Deferred rent payments 360 420 -------- -------- Net cash provided by operating activities 14,168 6,586 -------- -------- INVESTING ACTIVITIES: Purchases of property and equipment (3,992) (6,357) Proceeds from disposals of property and equipment 29 72 Investment in short-term investments (4,980) -------- Net cash used in investing activities (8,943) (6,285) -------- -------- FINANCING ACTIVITIES: Proceeds from short-term debt 39,800 49,800 Principal payments on short-term and long-term debt (49,300) (50,325) Net proceeds from public offering 33,559 -- Proceeds and tax benefit from exercise of stock options 882 3 -------- -------- Net cash provided by (used in) financing activities 24,941 (522) -------- -------- Net increase (decrease) in cash and cash equivalents 30,166 (221) Cash and cash equivalents at beginning of period 1,686 978 -------- -------- Cash and cash equivalents at end of period $ 31,852 $ 757 ======== ========
See accompanying notes. PAGE 5 OF 20 THE FINISH LINE, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of Presentation The accompanying unaudited financial statements of The Finish Line, Inc. (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 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. These financial statements should be read in conjunction with the financial statements and notes thereto for the year ended February 29, 1996. 2. Notes Payable to Bank Effective September 1, 1996, the Company amended its unsecured committed Loan Agreement (the "Facility") dated July 20, 1995 with a commercial bank. The amendment extended the maturity to September 1, 1999 and set the credit available at $30,000,000. At August 31, 1996 there were no borrowings outstanding under the Facility. The Facility contains restrictive covenants which limit, among other things, mergers and dividends. In addition, the Company must maintain a fixed charge coverage ratio (as defined) of not less than 1.5 to 1.0 and a tangible net worth of not less than $69,300,000, and funded debt to total capitalization (as defined) may not exceed 40%. As of August 31, 1996, the Company is in compliance with all such covenants. The interest rate on the Facility is, at the Company's election, either the bank's Federal Fund Rate plus .625%, the bank's Libor Rate plus .5% or the bank's prime commercial lending rate. The margin percentage added to the Federal Fund Rate, and Libor Rate is subject to adjustment quarterly based on the fixed charge coverage ratio (as defined). 3. Public Offering The Company completed a secondary offering (the "Secondary Offering") of its Class A Common Stock on June 19, 1996 pursuant to which the Company sold 1,300,000 shares of Class A Common Stock at an offering price of $27.50 per share. Net proceeds to the Company from the Secondary Offering (after deducting the underwriting discount of $1,781,000 and expenses of $410,000 incurred in connection with the Secondary Offering) were $33,559,000. PAGE 6 OF 20 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.
Three Months Six Months Ended August 31, Ended August 31, 1996 1995 1996 1995 -------- -------- -------- -------- (Unaudited) (Unaudited) Income Statement Data: Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales (including occupancy expenses) 67.6 69.5 68.7 69.5 ----- ----- ----- ----- Gross profit 32.4 30.5 31.3 30.5 Selling, general and administrative expenses 20.9 21.7 21.6 22.6 ----- ----- ----- ----- Operating income 11.5 8.8 9.7 7.9 Interest expense (income) - net (.1) .3 -- .3 ----- ----- ----- ----- Income before income taxes 11.6 8.5 9.7 7.6 Provision for income taxes 4.6 3.4 3.9 3.1 ----- ----- ----- ----- Net income 7.0% 5.1% 5.8% 4.5% ===== ===== ===== =====
SECOND QUARTER ENDED 8/31/96 COMPARED TO SECOND QUARTER ENDED 8/31/95 Net sales increased 40.9% to $91.0 million for the quarter ended August 31, 1996 from $64.6 million for the quarter ended August 31, 1995. This increase in net sales was primarily attributable to sales from new stores and comparable store sales increases. As of August 31, 1996, the number of stores in operation increased 15.2% to 235 from 204 at August 31, 1995. During the quarter ended August 31, 1996, the Company's comparable store sales increased 16.9% compared to the same period in the prior year. Comparable net footwear sales for the quarter ended August 31, 1996 increased approximately 15.4%. Comparable net activewear and accessories sales for the comparable period increased 20.8%. PAGE 7 OF 20 Gross profit for the quarter ended August 31, 1996 was $29.5 million, an increase of $9.8 million over the quarter ended August 31, 1995. During this same period, gross profit increased to 32.4% of net sales versus 30.5% for the prior year. Of this 1.9% increase, 1.2% was due to higher margins for products sold and .7% was due to a decrease in occupancy costs as a percentage of net sales. Selling, general and administrative expenses increased $5.0 million (35.8%) to $19.0 million (20.9% of net sales) for the quarter ended August 31, 1996 from $14.0 million (21.7% of net sales) for the quarter ended August 31, 1995. This dollar increase was primarily attributable to the operating costs related to operating 31 additional stores at the end of August 31, 1996 versus August 31, 1995. Net interest income was $137,000 (.1% of net sales) for the quarter ended August 31, 1996, compared to net interest expense of $229,000 (.3% of net sales) for the quarter ended August 31, 1995, a decrease of $366,000 or 159.8%. This decrease resulted primarily due to the proceeds of the secondary offering being used to repay all existing outstanding indebtedness under its unsecured committed Loan Agreement with the remainder of the proceeds being invested in short term interest bearing instruments. The Company's provision for federal and state income taxes increased $2.0 million for the quarter ended August 31, 1996. The increase is due to the increased level of income before income taxes for the quarter ended August 31, 1996, as the effective tax rate was 40% for each of the comparable quarters. Fully diluted net income per share increased 74.2% to $.54 for the quarter ended August 31, 1996 compared to fully diluted net income per share of $.31 for the quarter ended August 31, 1995. Fully diluted weighted average shares outstanding were 11,775,000 and 10,385,000 respectively during the quarters ended August 31, 1996 and 1995. SIX MONTHS ENDED 8/31/96 COMPARED TO SIX MONTHS ENDED 8/31/95 Net sales increased 39.3% ($45.9 million) to $162.8 million for the six months ended August 31, 1996 from $116.8 million for the six months ended August 31, 1995. Of this increase, $21.9 million was attributable to a 15.2% increase in the number of stores open (35 stores opened less 4 stores closed) during the period from 204 at August 31, 1995 to 235 at August 31, 1996. The balance of the increase was due to a $5.4 million increase in net sales from the 17 stores open only part of the first six months of last year and a comparable store sales increase of 15.0% for the six months ended August 31, 1996. Comparable net footwear sales for the six months ended August 31, 1996 increased approximately 14.8%. Comparable net activewear and accessories increased approximately 15.4% for the comparable period. Net sales per square foot increased to $182 from $160 for the same period of the prior year. Gross profit for the six months ended August 31, 1996 was $51.0 million, an increase of $15.4 million over the six months ended August 31, 1995. During this same period, gross profit increased to 31.3% of net sales versus 30.5% for the prior year. Of this .8% increase, .6% was due to a decrease in occupancy expenses as a percentage of net sales and a .2% increase in margins for products sold. PAGE 8 OF 20 Selling, general and administrative expenses increased $8.7 million (33.0%) to $35.1 million (21.6% of net sales) for the six months ended August 31, 1996 from $26.4 million (22.6% of net sales) for the six months ended August 31, 1995. This dollar increase was primarily attributable to the operating costs related to operating 31 additional stores at August 31, 1996 versus August 31, 1995. Net interest expense decreased to $57,000 (.0% of net sales) for the six months ended August 31, 1996, from $359,000 (.3% of net sales) for the six months ended August 31, 1995, a decrease of $302,000 or 84.1%. This decrease resulted from the proceeds of the secondary offering being used to repay all existing outstanding indebtedness under its unsecured committed Loan Agreement with the remainder of the proceeds being invested in short term interest bearing instruments. The Company's provision for federal and state income taxes increased $2.8 million for the six months ended August 31, 1996. The increase is due to the increased level of income before income taxes for the six months ended August 31, 1996, as the effective tax rate was 40% for each of the comparable six month periods. Fully diluted net income per share increased 66.7% to $.85 for the six months ended August 31, 1996 compared to fully diluted net income per share of $.51 for the six months ended August 31, 1995. Weighted average shares outstanding were 11,234,000 and 10,353,000 respectively for the six months ended August 31, 1996 and 1995. LIQUIDITY AND CAPITAL RESOURCES The Company generated cash of $14.2 million from its operating activities during the six months ended August 31, 1996 as compared to $6.6 million during the six months ended August 31, 1995. The increase in cash generated from operating activities was primarily the result of increased net income before depreciation along with an increase in accounts payable (net of merchandise inventory). The Company had a net use of cash from its investing activities, of $8.9 million and $6.3 million for the six months ended August 31, 1996 and 1995, respectively. Of the $8.9 million in 1996, $4.0 million was due to new stores construction and $4.9 million was for short-term investments. The Company had positive working capital of $75.2 million at August 31, 1996 which was an increase of $42.7 million from the working capital of $32.5 million at February 29, 1996. This increase was primarily the result of the Company's completion of its secondary public offering on June 19, 1996 which provided net proceeds of $33.6 million plus net income of $9.5 million for the six month period ended August 31, 1996 which was reinvested in working capital. On September 1, 1996, the Company amended its unsecured Loan Agreement with a commercial bank extending the maturity to September 1, 1999 and set the credit available at $30,000,000. See also Note 2 of Notes to Financial Statements. PAGE 9 OF 20 At August 31, 1996 the Company had cash and cash equivelants of $31.9 million and short-term investments of $5.0 million and no interest bearing debt. The short-term investments range in maturity from 90 days to 180 days while the majority of cash equiveleants are invested in tax exempt instruments with maturities of one to seven days. Merchandise inventories were $83.0 million at August 31, 1996 compared to $76.1 million at February 29, 1996. On a per square foot basis, merchandise inventories at August 31, 1996 decreased 8.3% compared to August 31, 1995, and were 4.4% lower than at February 29, 1996. The Company believes present levels are appropriate for the selling season and reflects a reduction of aged inventory. Recently, 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 10 OF 20 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 --------------------------------------------------- (a) The Annual Meeting of Stockholders was held on July 18, 1996. (b) The following directors were elected to serve until the 1997 Annual Meeting of Stockholders or until their successors have been duly elected and qualified. Of the 4,105,362 shares (1 vote per share) of Class A common stock and the 6,234,537 shares (10 votes per share) of Class B common stock represented at the meeting, the directors were elected by the following votes:
Number Of Votes Received ------------------------ Withheld Name For Authority ------------ -------- --------- Alan H. Cohen 65,934,167 1,361 David I. Klapper 65,934,172 1,356 David M. Fagin 65,934,172 1,356 Larry J. Sablosky 65,934,172 1,356 Jonathan K. Layne 65,934,169 1,359 Jeffrey H. Smulyan 65,934,172 1,356
ITEM 5: Other Information ----------------- None. PAGE 11 OF 20 ITEM 6: Exhibits and Reports on Form 8-K: --------------------------------- (a) Exhibits 10.24.1 First Amendment to Loan Agreement among NBD Bank, NA. and The Finish Line, Inc. dated September 1, 1996. 10.24.2 Amended and Restated Promissory Note (unsecured) in the amount of $30,000,000 dated September 1, 1996 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 June 5, 1996 with respect to a press release issued by the Company on June 5, 1996. PAGE 12 OF 20 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 26, 1996 By: /s/ Steven J. Schneider ------------------------ Steven J. Schneider Vice President - Finance and Chief Financial Officer PAGE 13 OF 20 EX-10.24.1 2 FIRST AMENDMENT TO LOAN AGREEMENT DATED 9/1/96 EXHIBIT 10.24.1 FIRST AMENDMENT TO LOAN AGREEMENT --------------------------------- THIS FIRST AMENDMENT is entered into as of September 1, 1996 by and between THE FINISH LINE, INC. (the "Borrower") and NBD BANK, N.A. (the "Bank") WITNESSETH: 1. Standby Fee" originally set forth in the Agreement are replaced in their entirety as follows: "Applicable Commitment Fee" means the per annum percentage of the unused portion of the Commitment to be paid to the Bank pursuant to Section 2.7 hereof, determined by reference to the WHEREAS, the Borrower and the Bank have entered into a certain Loan Agreement dated July 20, 1995 (the "Agreement"); and WHEREAS, the Borrower and the Bank desire to confirm certain modifications to the Agreement; NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: The definition of the terms "Applicable Commitment Fee", "Applicable Margin" and "Applicable Borrower's Fixed Charge Coverage Ratio, in accordance with the following table:
FIXED CHARGE COVERAGE RATIO APPLICABLE COMMITMENT FEE Greater than 2.5 0.100% 2.25 to 2.5 0.125% 2.0 to 2.24 0.150% 1.75 to 1.99 0.200% 1.5 to 1.74 0.250%
The Applicable Commitment Fee will accrue and be payable with respect to any fiscal quarter on the basis of the Applicable Commitment Fee determined as of the end of the immediately preceding quarter, as derived from the Fixed Charge Coverage Ratio determined from financial statements of the Borrower delivered by the Bank pursuant to Section 5.4. The Applicable Commitment Fee shall be adjusted if appropriate, quarterly, within ten (10) days following the delivery of the financial statements of the Borrower for a fiscal quarter furnished to the Bank pursuant to the requirements of Section 5.4 which indicates the Borrower's Fixed Charge Coverage Ratio has changed as of the end of any fiscal quarter. In the event the Borrower fails to provide the quarterly financial statements pursuant to the requirements of Section 5.4, the Fixed Charge Coverage Ratio will be presumed to be the lowest ratio set forth in the above table. PAGE 14 OF 20 "Applicable Margin" means that per annum percentage to be added to each of the LIBOR Rate or Federal Funds Rate at which interest will accrue on the Advances, determined by reference to the Borrower's Fixed Charge Coverage Ratio, as calculated from the Borrower's quarterly financial statements, all in accordance with the following table:
FIXED CHARGE COVERAGE RATIO LIBOR MARGIN FEDERAL FUNDS MARGIN Greater than 2.5 0.375% 0.500% 2.25 to 2.5 0.500% 0.625% 2.0 to 2.24 0.750% 0.875% 1.75 to 1.99 1.000% 1.125% 1.5 to 1.74 1.250% 1.375%
The Applicable Margin shall be adjusted if appropriate, quarterly, within ten (10) days following the delivery of the financial statements of the Borrower for a fiscal quarter furnished to the Bank pursuant to the requirements of Section 5.4 which indicates the Borrower's Fixed Charge Coverage Ratio has changed as of the end of any fiscal quarter. Interest will accrue and be payable in any fiscal quarter on the basis of the Applicable Margin in effect at the end of the preceding fiscal quarter unless prior to the commencement of such fiscal quarter the Borrower has delivered its financial statements for a preceding fiscal quarter which reflect a change in the calculated Fixed Charge Coverage Ratio as of the end of a preceding quarter. In the event the Borrower fails to provide the quarterly financial statements pursuant to the requirements of Section 5.4, the Fixed Charge Coverage Ratio will be presumed to be the lowest ratio set forth in the above table. "Applicable Standby Fee" means the per annum percentage of the amount of any standby letter of credit issued by Bank for the account of Borrower under the Commitment to be paid to the Bank pursuant to Section 2.1 (G) hereof, determined by reference to the Borrower's Fixed Charge Coverage Ratio, in accordance with the following table:
FIXED CHARGE COVERAGE RATIO APPLICABLE STANDBY FEE Greater than 2.5 0.375 2.25 to 2.5 0.50% 2.0 to 2.24 0.75% 1.75 to 1.99 1.00% 1.5 to 1.74 1.25%
The standby letter of credit commission will be determined and payable with respect to any standby letter of credit issued at any time on the basis of the Fixed Charge Coverage Ratio determined as of the end of the most recently ended fiscal quarter (the "Determination Quarter"). The Applicable Standby Fee shall be adjusted if appropriate, quarterly, within ten (10) days following the delivery of the financial statements of the Borrower for a fiscal quarter furnished to the Bank pursuant to the requirements of Section 5.4 which indicates the Borrower's Fixed Charge Coverage Ratio has changed as of the end of any fiscal quarter. In the event the Borrower fails to provide the quarterly financial statements pursuant to the requirements of Section 5.4, the Fixed Charge Coverage Ratio will be presumed to be the lowest ratio set forth in the above table. 2. A new definition is added to the Agreement as follows: "Base Minimum Rental Expense" means the base rental expense that Borrower incurs with respect to operating leases for store locations operated by it, but excluding any part of such expense that Borrower would not be obligated to pay if it was not actually operating at such location ( i.e. percentage rent based on sales). PAGE 15 OF 20 3. The original definition of the term "Fixed Charge Coverage Ratio" is replaced as follows "Fixed Charge Coverage Ratio" means the ratio of earnings before taxes, interest expense and Base Minimum Rental Expense to interest expense plus Base Minimum Rental Expense, as calculated on a rolling four quarter basis as measured as of the end of the quarter most recently ended on the date of determination. 4. The parties agree that the Applicable Margin as of the date of this First Amendment is based on the Borrower's financial statements for the fiscal quarter ending May 31, 1996, and is based on a Fixed Charge Coverage Ratio of 2.13 as of the quarter ending May 31, 1996. The next calculation of the Applicable Margin will be made upon receipt of the Borrower's financial statements for the quarter ending August 31, 1996. 5. The definitions "CD Advance", "CD Base Rate", "CD Loan", "CD Rate", and "CD Reserve Percentage" are deleted from the Agreement. The option to procure Advances with pricing indexed to a CD Base Rate is eliminated from the Agreement. All future Advances under the Agreement shall either be Prime Rate Advances, Federal Funds Rate Advances or LIBOR Advances". 6. The parties confirm that the amount of the activated Commitment of the Bank under Section 2.1 (A) of the Agreement has been increased from $25,000,000 to $30,000,000. Borrower shall execute and deliver an Amended and Restated Promissory Note in the amount of the increased Commitment in the form of Exhibit A attached hereto, which shall then become the "Note" under the Agreement. 7. The maturity date of September 1, 1997 originally set forth in Sections 2.1 (A) and (F) is hereby extended from September 1, 1997 to September 1, 1999. 8. The financial covenant contained in Section 5.3 (A) of the Agreement is replaced as follows: (A) Tangible Net Worth. The Borrower, on a consolidated basis, will at ------------------- all times until February 28, 1997, maintain a Tangible Net Worth of not less than $69,300,000, which minimum amount (1) will increase as of February 28, 1997 and as of the end of each fiscal year thereafter by an amount equal to the sum of 50% of net income for such fiscal year, rounded upward to the nearest $100,000 (with no downward adjustment for net losses in any year) and (2) will increase by an amount equivalent to 80% of net proceeds received by the Borrower from equity offerings, rounded upward to the nearest $100,000 and effective as of the date of receipt of such proceeds. 9. The termination date set forth in Section 8.12 of the Agreement is changed to September 1, 1999. 10. Borrower hereby represents and warrants to Bank that there does not presently exist any default under the Agreement or any event which with the notice or lapse of time or both would constitute a default under the Agreement and that each of the representations and warranties set forth in the Agreement remain true and correct as of the date hereof, except to the extent said representations and warranties specifically apply to those items explicitly modified by or otherwise disclosed in this Modification, and each of said representations and warranties is hereby incorporated herein by reference and modified as necessary to apply to and cover the undertakings of the Borrower evidenced or contemplated by this Modification. 11. All other terms, conditions, provisions, representations and warranties set forth in the Agreement not specifically relating to those items explicitly modified by or otherwise disclosed in this Modification shall remain unchanged and shall continue in full force and effect. This Modification shall, whenever possible, be construed in a manner consistent with the Agreement; provided, however, in the event of any irreconcilable inconsistency between the terms of this Modification and the terms of the Agreement, the terms of this Modification shall control. PAGE 16 OF 20 12. No provision hereof shall constitute a waiver of any of the terms or conditions of the Agreement other than those terms or otherwise disclosed in this Modification. Borrower hereby represents, warrants, covenants, and agrees that there exists no offsets, counterclaims or defenses to payment or performance of the obligations set forth in the Agreement. IN WITNESS WHEREOF, Borrower and Bank have executed this First Amendment by their duly authorized representatives effective as of September 1, 1996. THE FINISH LINE, INC. By: _______________________________ _______________________________ Printed Name - Title NBD BANK, N.A. By: ______________________________ ______________________________ Printed Name - Title PAGE 17 OF 20 EX-10.24.2 3 AMENDED & RESTATED PROMISSORY NOTE DATED 9/1/96 EXHIBIT 10.24.2 REVOLVING LINE OF CREDIT AMENDED AND RESTATED PROMISSORY NOTE (UNSECURED) ----------------------------------------------- $30,000,000.00 INDIANAPOLIS, INDIANA September 1, 1996 FOR VALUE RECEIVED, The Finish Line, Inc. ("Borrower"), a Delaware corporation, having its principal offices at 3308 Mifthoeffer Road, Indianapolis, Indiana 46236 unconditionally promises to pay to the order of NBD Bank, N.A. (the "Bank"), a national banking association, having its principal banking offices at One Indiana Square, Indianapolis, Indiana 46266, the lesser of (i) principal sum of THIRTY MILLION DOLLARS ($30,000,000.00) or (ii) the aggregate unpaid principal amount of all Advances made by the Bank to Borrower pursuant to the provisions of that certain Loan Agreement dated as of July 20, 1 995, as amended, by and between Borrower and the Bank (the "Loan Agreement"), in lawful money of the United States of America. Interest on the balance of the principal remaining unpaid from time to time shall be payable at the rate per annum equal to the rates of interest as provided in the Loan Agreement and with interest after maturity at two percent (2%) per annum in excess of the applicable interest rates, until paid, all without relief from valuation and appraisement laws. Interest at the specified rate shall be due and payable on the dates as provided in the Loan Agreement. If not sooner paid, the balance of the unpaid principal and all accrued and unpaid interest shall be due and payable on the 1st day of September, 1999. Payments of principal and interest shall be made at One Indiana Square, Indianapolis, Indiana 46266. This Note is given to evidence a Loan made to Borrower pursuant to the Loan Agreement. This Note is referred to in, and is entitled to the benefits and further security of the Loan Agreement. This Note is subject to the terms and conditions of the Loan Agreement including those which determine the interest rates when payment of this Note may be accelerated and all amounts hereunder declared immediately due and payable, and when payments of principal and interest may be made. If not defined herein, all capitalized terms shall have the meaning as defined in the Loan Agreement. This Note amends and restates a prior promissory note delivered pursuant to the Agreement and evidences a continuation of the indebtedness described in such prior note. Upon the occurrence of an Event of Default under the Loan Agreement, the whole sum of principal and accrued interest shall, at the option of the Bank, immediately become due and payable. Said option shall continue until such defaults have been cured. Borrower expressly waives demand, presentment, protest, notice of protest, and notice of nonpayment or dishonor of the Note, and consents that the Bank may extend the time of payment or otherwise modify the terms of payment of any part of the whole of the debt evidenced by this Note, at the request of any other person liable hereon, and such consent shall not alter nor diminish the liability of any person. No delay or omission on the part of the Bank in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Bank of any right or remedy shall preclude other or further exercise thereof or of any other right or remedy. PAGE 18 OF 20 Borrower agrees to pay all costs of collection, including reasonable attorneys' fees, in case the principal of this Note or any payment on the principal or any interest thereon is not paid at the respective maturity thereof and to pay all costs including reasonable attorney's fees, in case it becomes necessary to protect the security hereof, regardless of whether suit be brought. Whenever used in this Note, the singular includes the plural and the plural includes the singular, the masculine includes the feminine and the neuter, and the terms "Borrower" and the "Bank", are deemed to include those persons named in the opening paragraph of this Note and their respective successors and assigns. Notwithstanding any provisions herein or in any instrument now or hereafter securing this Note, the total liability for payments in the nature of interest shall not exceed the limits imposed by the usury laws of the State of Indiana. This Note shall be construed according to the laws of the State of Indiana. IN WITNESS WHEREOF, the undersigned Borrower has caused this Note to be executed by its duly authorized representatives the day and year first above written. THE FINISH LINE, INC. By: ___________________ Its: ___________________ PAGE 19 OF 20 EX-11 4 COMPUTATION OF NET INCOME PER SHARE EXHIBIT 11 COMPUTATION OF NET INCOME PER SHARE (In thousands, except per share amounts)
Three Months Six Months ---------------- ----------------- Ended August 31, Ended August 31, ------------------ ------------------ 1996 1995 1996 1995 ------- ------- ------- ------- Primary Average shares outstanding 11,404 10,315 10,864 10,315 Net effect of dilutive stock options - based on the treasury stock method using average market price 339 70 310 38 ------- ------- ------- ------- Total 11,743 10,385 11,174 10,353 ======= ======= ======= ======= Net income $ 6,338 $ 3,267 $ 9,515 $ 5,301 ======= ======= ======= ======= Per share amount $ .54 $ .31 $ .85 $ .51 ======= ======= ======= ======= Fully Diluted Average shares outstanding 11,404 10,315 10,864 10,315 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 371 70 370 38 ------- ------- ------- ------- Total 11,775 10,385 11,234 10,353 ======= ======= ======= ======= Net Income $ 6,338 $ 3,267 $ 9,515 $ 5,301 ======= ======= ======= ======= Per share amount $ .54 $ .31 $ .85 $ .51 ======= ======= ======= =======
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 more than 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 20 OF 20 EX-27 5 ARTICLE 5 - FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS FEB-28-1997 MAR-01-1996 AUG-31-1996 31,852 4,980 4,639 0 83,046 127,525 46,973 13,851 163,015 52,279 0 0 0 116 106,988 163,015 162,750 162,750 111,755 111,755 35,079 0 57 15,859 6,344 9,515 0 0 0 9,515 0 .85
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