-----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, QibYB3gzO7sqTInAM/4grDPkvGmsj7CFf9rI95T+NN0QTPYpssH/Ok9masf0YFsd nFI9jGm3zU7O4pjCfsP+KQ== 0000898430-98-000013.txt : 19980106 0000898430-98-000013.hdr.sgml : 19980106 ACCESSION NUMBER: 0000898430-98-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971129 FILED AS OF DATE: 19980105 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: SEC FILE NUMBER: 000-20184 FILM NUMBER: 98500532 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 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 November 29, 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 December 26, 1997: Class A 18,167,916 Class B 7,842,232 Page 1 of 12 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS THE FINISH LINE, INC. CONSOLIDATED BALANCE SHEETS (In thousands)
Nov 29, March 1, 1997 1997 --------- --------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 9,061 $ 51,212 Short-term marketable securities 10,470 11,516 Accounts receivable 10,809 4,849 Merchandise inventories 143,004 81,991 Deferred income taxes 1,710 2,785 Other current assets 3,227 3,631 Income taxes recoverable 2,274 -- -------- -------- Total current assets 180,555 155,984 PROPERTY AND EQUIPMENT Land 315 315 Building 7,564 4,238 Leasehold improvements 47,827 32,732 Furniture, fixtures, and equipment 17,842 14,071 Construction in progress 1,447 4,120 -------- -------- 74,995 55,476 Less accumulated depreciation 19,907 15,958 -------- -------- 55,088 39,518 OTHER ASSETS Marketable securities 19,156 20,106 Deferred income taxes 2,119 2,110 Other 237 -- -------- -------- 21,512 22,216 -------- -------- Total assets $257,155 $217,718 ======== ========
See accompanying notes. Page 2 of 12 THE FINISH LINE, INC. CONSOLIDATED BALANCE SHEETS (In thousands)
Nov 29, March 1, 1997 1997 ---------- ---------- (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 53,670 $ 27,589 Employee compensation and related payroll taxes 4,164 4,853 Accrued income taxes -- 5,176 Accrued property and sales tax 3,106 2,448 Other liabilities and accrued expenses 3,790 3,839 -------- -------- Total current liabilities 64,730 43,905 Long-term deferred rent payments 4,478 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 (November 29, 1997 - 18,164; March 1, 1997 - 17,192) 182 172 Class B: Shares authorized - 12,000 Shares issued and outstanding (November 29, 1997 - 7,842; March 1, 1997 - 8,750) 78 87 Additional paid-in capital 119,134 118,132 Retained earnings 68,553 51,484 -------- -------- Total stockholders' equity 187,947 169,875 -------- -------- Total liabilities and stockholders' equity $257,155 $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 Thirty- Nine Weeks Months Nine Weeks Months Ended Ended Ended Ended Nov. 29, Nov. 30, Nov. 29, Nov. 30, 1997 1996 1997 1996 --------- --------- ----------- --------- Net sales $95,928 $73,003 $302,192 $235,753 Cost of sales (including occupancy expenses) 67,557 51,129 208,638 162,884 ------- ------- -------- -------- Gross profit 28,371 21,874 93,554 72,869 Selling, general, and administrative expenses 23,141 17,747 67,968 52,826 ------- ------- -------- -------- Operating income 5,230 4,127 25,586 20,043 Interest (income) expense - net. (624) (189) (2,058) (132) ------- ------- -------- -------- Income before income taxes 5,854 4,316 27,644 20,175 Provision for income taxes 2,240 1,727 10,575 8,071 ------- ------- -------- -------- Net income $ 3,614 $ 2,589 $ 17,069 $ 12,104 ======= ======= ======== ======== Fully diluted net income per share $ .14 $ .11 $ .64 $ .53 ======= ======= ======== ======== Fully diluted weighted average shares 26,555 24,149 26,586 22,975 ======= ======= ======== ========
See accompanying notes. Page 4 of 12 THE FINISH LINE, INC. CONSOLIDATED STATEMENTS OF CASH FLOW (In thousands) (Unaudited)
Thirty-Nine Nine Months Weeks Ended Ended 11/29/97 11/30/96 ------------ ----------- OPERATING ACTIVITIES: Net Income $ 17,069 $ 12,104 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,410 3,845 Deferred income taxes 1,066 (1,501) (Gain) loss on disposal of property and equipment (4) 33 Changes in operating assets and liabilities: Accounts receivable (5,960) (6,005) Merchandise inventories (61,013) (11,459) Other current assets 404 (768) Other assets (237) -- Accounts payable 26,081 611 Employee compensation and related payroll taxes (689) 345 Accrued income taxes payable/recoverable (7,450) 1,431 Other liabilities and accrued expenses 609 2,248 Deferred rent payments 540 540 --------- -------- Net cash provided by (used in) operating activities (24,174) 1,424 INVESTING ACTIVITIES: Purchases of property and equipment (20,995) (7,151) Proceeds from disposals of property and equipment 19 29 Purchases of marketable securities (2,630) (4,980) Proceeds from maturity of short-term marketable securities 4,626 -- --------- -------- Net cash used in investing activities (18,980) (12,102) FINANCING ACTIVITIES: Proceeds from short-term debt 12,050 42,200 Principal payments on short-term debt (12,050) (51,700) Net proceeds from public offering -- 33,559 Proceeds and tax benefit from exercise of stock options 657 3,446 Purchase of treasury stock (693) -- Contribution of treasury stock to pension plan 1,039 -- --------- -------- Net cash provided by financing activities 1,003 27,505 --------- -------- Net increase (decrease) in cash and cash equivalents (42,151) 16,827 Cash and cash equivalents at beginning of period 51,212 1,686 --------- -------- Cash and cash equivalents at end of period $ 9,061 $ 18,513 ========= ========
See accompanying notes. Page 5 of 12 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 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. 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 November 29, 1997 includes 91 days versus 91 days for the third quarter of fiscal 1997 which ended on November 30, 1996. The thirty-nine weeks ended November 29, 1997 includes 273 days versus 275 days for the nine months ended November 30, 1996. All results presented herein reflect these differences 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. The following discussion and analysis should be read in conjunction with the unaudited Financial Statements included elsewhere herein.
Thirteen Three Thirty- Nine Weeks Months Nine weeks Months Ended Ended Ended Ended Nov. 29, Nov. 30, Nov. 29, Nov. 30, 1997 1996 1997 1996 --------- --------- ----------- ----------- (Unaudited) (Unaudited) Income Statement Data: Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales (including occupancy expenses) 70.4 70.0 69.0 69.1 ----- ----- ----- ----- Gross profit 29.6 30.0 31.0 30.9 Selling, general and administrative expenses 24.1 24.3 22.5 22.4 ----- ----- ----- ----- Operating income 5.5 5.7 8.5 8.5 Interest (income) expense - net (.6) (.2) (.6) (.1) ----- ----- ----- ----- Income before income taxes 6.1 5.9 9.1 8.6 Provision for income taxes 2.3 2.4 3.5 3.5 ----- ----- ----- ----- Net income 3.8% 3.5% 5.6% 5.1% ===== ===== ===== =====
Page 7 of 12 THIRTEEN WEEKS ENDED 11/29/97 COMPARED TO THIRD QUARTER ENDED 11/30/96 Net sales increased 31.4% to $95.9 million for the thirteen weeks ended November 29, 1997 from $73.0 million for the quarter ended November 30, 1996. This increase in net sales was primarily attributable to net sales from new stores and comparable store sales increases. As of November 29, 1997, the number of stores in operation increased 19.9% to 301 from 251 at November 30, 1996. During the thirteen weeks ended November 29, 1997, the Company's comparable store sales increased 3.0% compared to the same period in the prior year. Comparable footwear net sales for the thirteen weeks ended November 29, 1997 increased approximately 6.4% versus the quarter ended November 30, 1996. Comparable activewear and accessories net sales decreased approximately 2.5% for the comparable period. Net sales per square foot decreased to $72 from $73 for the same period of the prior year. Gross profit for the thirteen weeks ended November 29, 1997 was $28.4 million, an increase of $6.5 million over the quarter ended November 30, 1996. During this same period, gross profit decreased to 29.6% of net sales versus 30.0% for the prior year. Of this .4% decrease, .5% was due to an increase in occupancy costs as a percentage of net sales partially offset by a .1% increase in margins for products sold. Selling, general and administrative expenses increased $5.4 million (30.4%) to $23.1 million (24.1% of net sales) for the thirteen weeks ended November 29, 1997 from $17.7 million (24.3% of net sales) for the quarter ended November 30, 1996. This dollar increase was primarily attributable to the operating costs related to operating 50 additional stores at November 29, 1997 versus November 30, 1996. The decrease as a percentage of net sales is primarily a result of the comparable store net sales increase of 3.0% for the thirteen weeks ended November 29, 1997, along with improved expense controls. Net interest income was $624,000 (.6% of net sales) for the thirteen weeks ended November 29, 1997, compared to net interest income of $189,000 (.2% of net sales) for the quarter ended November 30, 1996, an increase of $435,000. This increase was a result of using the proceeds of the secondary offering completed on June 19, 1996 to repay all existing outstanding indebtedness under its unsecured committed Loan Agreement with the remainder of the 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 to $2.2 million for the thirteen weeks ended November 29, 1997, from $1.7 million for the quarter ended November 30, 1996. The increase is due to the increased level of income before income taxes for the thirteen weeks ended November 29, 1997, partially offset by a decrease in the effective tax rate to 38.25% for the thirteen weeks ended November 29, 1997 from 40.0% for the quarter ended November 30, 1996. The decrease in effective tax rate is a result of the Company's significant investment in tax exempt instruments along with the implementation of tax planning initiatives. Fully diluted net income per share increased 27.3% to $.14 for the thirteen weeks ended November 29, 1997 compared to fully diluted net income per share of $.11 for the quarter ended November 30, 1996. Fully diluted weighted average shares outstanding were 26,555,000 and 24,149,000 respectively, for the periods ended November 29, 1997 and November 30, 1996. The increase in shares outstanding resulted from the completion of a public stock offering in December 1996. Page 8 of 12 THIRTY NINE WEEKS ENDED 11/29/97 COMPARED TO NINE MONTHS ENDED 11/30/96 Net sales increased 28.2% to $302.2 million for the thirty nine weeks ended November 29, 1997 from $235.8 million for the nine months ended November 30, 1996. Of this increase, $38.6 million was attributable to a 19.9% increase in the number of stores open during the period from 251 at November 30, 1996 to 301 at November 29, 1997. The balance of the increase was attributable to a $20.9 million increase in net sales from the 34 existing stores open only part of the first nine months of last year and a comparable store increase of 3.3% for the thirty nine weeks ended November 29, 1997. Comparable footwear net sales for the thirty nine weeks ended November 29, 1997 increased approximately 5.0%. Comparable activewear and accessories net sales decreased approximately .8% for the comparable period. Net sales per square foot decreased to $246 from $254 for the same period of the prior year. Gross profit for the thirty nine weeks ended November 29, 1997 was $93.6 million, an increase of $20.7 million over the nine months ended November 30, 1996. During this same period, gross profit increased to 31.0% of net sales versus 30.9% for the prior year. Of this .1% increase, .6% was due to higher margins for products sold, offset by a .5% increase in occupancy costs as a percentage of net sales. Selling, general and administrative expenses increased $15.1 million (28.7%) to $68.0 million (22.5% of net sales) for the thirty nine weeks ended November 29, 1997 from $52.8 million (22.4% of net sales) for the nine months ended November 30, 1996. This dollar increase was primarily attributable to the operating costs related to operating 50 additional stores at November 29, 1997 versus November 30, 1996. Net interest income was $2.1 million (.6% of net sales) for the thirty nine weeks ended November 29, 1997, compared to net interest income of $132,000 (.1% of net sales) for the nine months ended November 30, 1996, an increase of $1.9 million. This increase was a result of using the proceeds of the secondary offering completed on June 19, 1996 to repay all existing outstanding indebtedness under its unsecured committed Loan Agreement with the remainder of the 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 $2.5 million for the thirty nine weeks ended November 29, 1997. The increase is due to the increased level in income before income taxes for the thirty nine weeks ended November 29, 1997, partially offset by a decrease in the effective tax rate to 38.25% for the thirty nine weeks ended November 29, 1997 from 40.0% for the quarter ended November 30, 1996. The decrease in effective tax rate is a result of the Company's significant investment in tax exempt instruments along with the implementation of tax planning initiatives. Fully diluted net income per share increased 20.8% to $.64 for the thirty nine weeks ended November 29, 1997 compared to fully diluted net income per share of $.53 for the nine months ended November 30, 1996. Fully diluted weighted average shares outstanding were 26,586,000 and 22,975,000 respectively for the periods ended November 29, 1997 and November 30, 1996. The increase in shares outstanding resulted from the completion of two public stock offerings in fiscal 1997. Page 9 of 12 Liquidity and Capital Resources The Company used cash of $24.2 million in its operating activities during the thirty nine weeks ended November 29, 1997 as compared to generating cash from its operating activities of $1.4 million during the nine months ended November 30, 1996. The increase in cash used in operating activities was primarily the result of increased inventory levels (net of accounts payable) partially offset by increased net income. The Company had a net use of cash from its investing activities, of $18.9 million and $12.1 million for thirty nine weeks ended November 29, 1997 and the nine months ended November 30, 1996, respectively. Of the $18.9 million in 1997, $21.0 million was used for new store construction, which was partially offset by $2.0 million net maturities of marketable securities. The Company anticipates that total capital expenditures for fiscal 1998 will be approximately $30 - $33 million primarily for the opening of 53 new stores, the remodeling of 19 stores and additions to the corporate offices and distribution center. Management believes that cash and cash equivalents on hand, operating cash flow and available borrowings under the Company's existing credit facility will be sufficient to complete the Company's fiscal 1998 and 1999 store expansion program and to satisfy the Company's other capital requirements through fiscal 1999. The Company had positive working capital of $115.8 million at November 29, 1997, an increase of $3.7 million from the working capital of $112.1 million at March 1, 1997. Merchandise inventories were $143.0 million at November 29, 1997 compared to $82.0 million at March 1, 1997. On a per square foot basis, merchandise inventories at November 29, 1997 increased approximately 12% compared to November 30, 1996, and were approximately 20% higher than at March 1, 1997. The increase in inventory per square foot is a result of early receipts of holiday season merchandise as well as build up due to delayed opening of stores during the third quarter. The Company believes present levels are appropriate for the selling season. At November 29, 1997 the Company had cash and cash equivalents of $9.1 million and short-term investments of $10.5 million and no interest bearing debt. The short-term investments range in maturity from 90 days to 180 days while the majority of cash equivalents are invested in tax exempt instruments with maturities of one to seven days. 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 10 of 12 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 None. Page 11 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: December 29, 1997 By: /s/ Steven J. Schneider ------------------------- Steven J. Schneider Sr. Vice President - Finance, Chief Financial Officer and Secretary Page 12 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 Thirty- Nine Weeks Months Nine Weeks Months Ended Ended Ended Ended Nov. 29, Nov. 30, Nov. 29, Nov. 30, 1997 1996 1997 1996 -------- -------- ---------- -------- Primary Average shares outstanding 25,943 23,480 25,955 22,308 Net effect of dilutive stock options - based on the treasury stock method using average market price 599 663 596 582 ------- ------- ------- ------- Total 26,542 24,143 26,551 22,890 ======= ======= ======= ======= Net income $ 3,614 $ 2,589 $17,069 $12,104 ======= ======= ======= ======= Per share amount $ .14 $ .11 $ .64 $ .53 ======= ======= ======= ======= Fully Diluted Average shares outstanding 25,943 23,480 25,955 22,308 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 612 699 631 667 ------- ------- ------- ------- Total 26,555 24,149 26,586 22,975 ======= ======= ======= ======= Net Income $ 3,614 $ 2,589 $17,069 $12,104 ======= ======= ======= ======= Per share amount $ .14 $ .11 $ .64 $ .53 ======= ======= ======= =======
Note: Only fully diluted earnings per share have been disclosed in the Company's financial statements as primary earnings per share are substantially the same. EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE THIRTY-NINE WEEK PERIOD ENDED NOV. 29, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS FEB-28-1998 MAR-02-1997 NOV-29-1997 9,061 10,470 10,809 0 143,004 180,555 74,995 19,907 257,155 64,730 0 0 0 260 187,687 257,155 302,192 302,192 208,638 208,638 67,968 0 (2,058) 27,644 10,575 17,069 0 0 0 17,069 0 $0.64
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