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 November 26, 2011 November 26, 2011
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 0-20184
The Finish Line, Inc.
(Exact name of registrant as specified in its charter)
Indiana | 35-1537210 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) | |
3308 North Mitthoeffer Road Indianapolis, Indiana | 46235 | |
(Address of principal executive offices) | (zip code) |
317-899-1022
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report.)
Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter ) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Securities Exchange Act of 1934.
Large accelerated filer | ¨ | Accelerated filer | x | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Shares of common stock outstanding at December 09, 2011:
Class A |
50,821,750 | |||
Class B |
1,117,918 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE FINISH LINE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
November 26, 2011 |
November 27, 2010 |
February 26, 2011 |
||||||||||
(unaudited) | (unaudited) | |||||||||||
ASSETS | ||||||||||||
CURRENT ASSETS: |
||||||||||||
Cash and cash equivalents |
$ | 216,570 | $ | 222,030 | $ | 299,323 | ||||||
Accounts receivable, net |
8,842 | 11,338 | 10,552 | |||||||||
Merchandise inventories, net |
280,409 | 262,160 | 193,505 | |||||||||
Income taxes receivable |
4,097 | 13,417 | | |||||||||
Other |
8,427 | 4,959 | 6,304 | |||||||||
|
|
|
|
|
|
|||||||
Total current assets |
518,345 | 513,904 | 509,684 | |||||||||
PROPERTY AND EQUIPMENT: |
||||||||||||
Land |
1,557 | 1,557 | 1,557 | |||||||||
Building |
41,446 | 41,652 | 41,653 | |||||||||
Leasehold improvements |
223,828 | 226,259 | 223,485 | |||||||||
Furniture, fixtures and equipment |
120,199 | 113,360 | 115,054 | |||||||||
Construction in progress |
5,291 | 2,270 | 2,820 | |||||||||
|
|
|
|
|
|
|||||||
392,321 | 385,098 | 384,569 | ||||||||||
Less accumulated depreciation |
263,978 | 255,007 | 258,059 | |||||||||
|
|
|
|
|
|
|||||||
128,343 | 130,091 | 126,510 | ||||||||||
Deferred income taxes |
23,337 | 27,670 | 23,795 | |||||||||
Goodwill and intangible assets |
8,815 | | | |||||||||
Other assets |
5,585 | 4,427 | 4,856 | |||||||||
|
|
|
|
|
|
|||||||
Total assets |
$ | 684,425 | $ | 676,092 | $ | 664,845 | ||||||
|
|
|
|
|
|
See accompanying notes.
1
THE FINISH LINE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
November 26, 2011 |
November 27, 2010 |
February 26, 2011 |
||||||||||
(unaudited) | (unaudited) | |||||||||||
LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||||||
CURRENT LIABILITIES: |
||||||||||||
Accounts payable |
$ | 95,845 | $ | 114,918 | $ | 72,780 | ||||||
Employee compensation |
18,923 | 18,527 | 18,516 | |||||||||
Accrued property and sales tax |
8,186 | 7,002 | 8,188 | |||||||||
Income taxes payable |
| | 6,776 | |||||||||
Deferred income taxes |
6,407 | 5,750 | 3,170 | |||||||||
Other liabilities and accrued expenses |
18,622 | 16,838 | 16,990 | |||||||||
|
|
|
|
|
|
|||||||
Total current liabilities |
147,983 | 163,035 | 126,420 | |||||||||
Deferred credits from landlords |
30,035 | 36,583 | 34,653 | |||||||||
Other long-term liabilities |
15,335 | 14,194 | 13,527 | |||||||||
SHAREHOLDERS EQUITY: |
||||||||||||
Preferred stock, $.01 par value; 1,000 shares authorized; none issued |
| | | |||||||||
Common stock, $.01 par value |
||||||||||||
Class A: |
||||||||||||
Shares authorized100,000 |
||||||||||||
Shares issued(November 26, 2011 58,811; November 27, 2010 57,856; February 26, 2011 58,001) |
||||||||||||
Shares outstanding(November 26, 2011 50,784; November 27, 2010 51,128; February 26, 2011 51,037) |
588 | 579 | 580 | |||||||||
Class B: |
||||||||||||
Shares authorized10,000 |
||||||||||||
Shares issued and outstanding(November 26, 2011 599; November 27, 2010 1,494; February 26, 2011 1,351) |
6 | 15 | 13 | |||||||||
Additional paid-in capital |
209,592 | 195,095 | 197,036 | |||||||||
Retained earnings |
407,071 | 340,448 | 372,047 | |||||||||
Treasury stock(November 26, 2011 8,027; November 27, 2010 6,728; February 26, 2011 6,964) |
(126,185 | ) | (73,857 | ) | (79,431 | ) | ||||||
|
|
|
|
|
|
|||||||
Total shareholders equity |
491,072 | 462,280 | 490,245 | |||||||||
|
|
|
|
|
|
|||||||
Total liabilities and shareholders equity |
$ | 684,425 | $ | 676,092 | $ | 664,845 | ||||||
|
|
|
|
|
|
See accompanying notes.
2
THE FINISH LINE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
November 26, 2011 |
November 27, 2010 |
November 26, 2011 |
November 27, 2010 |
|||||||||||||
Net sales |
$ | 282,011 | $ | 260,935 | $ | 912,999 | $ | 844,403 | ||||||||
Cost of sales (including occupancy costs) |
191,002 | 179,056 | 602,393 | 568,785 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit |
91,009 | 81,879 | 310,606 | 275,618 | ||||||||||||
Selling, general and administrative expenses |
83,067 | 75,278 | 241,818 | 219,835 | ||||||||||||
Store closing costs |
368 | 87 | 965 | 87 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income |
7,574 | 6,514 | 67,823 | 55,696 | ||||||||||||
Interest income, net |
109 | 151 | 390 | 370 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from continuing operations before income taxes |
7,683 | 6,665 | 68,213 | 56,066 | ||||||||||||
Income tax expense |
2,135 | 2,531 | 25,329 | 21,459 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from continuing operations |
5,548 | 4,134 | 42,884 | 34,607 | ||||||||||||
Loss from discontinued operations, net of income taxes |
| (12 | ) | | (25 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
$ | 5,548 | $ | 4,122 | $ | 42,884 | $ | 34,582 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income per basic share: |
||||||||||||||||
Income from continuing operations |
$ | 0.11 | $ | 0.08 | $ | 0.81 | $ | 0.64 | ||||||||
Loss from discontinued operations |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
$ | 0.11 | $ | 0.08 | $ | 0.81 | $ | 0.64 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Basic weighted average shares |
51,338 | 52,587 | 52,267 | 53,109 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income per diluted share: |
||||||||||||||||
Income from continuing operations |
$ | 0.11 | $ | 0.08 | $ | 0.80 | $ | 0.63 | ||||||||
Loss from discontinued operations |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
$ | 0.11 | $ | 0.08 | $ | 0.80 | $ | 0.63 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted weighted average shares |
52,082 | 53,351 | 53,076 | 53,878 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Dividends declared per share |
$ | 0.05 | $ | 0.04 | $ | 0.15 | $ |
0.12 |
| |||||||
|
|
|
|
|
|
|
|
See accompanying notes.
3
THE FINISH LINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)(Unaudited)
Thirty-Nine Weeks Ended | ||||||||
November 26, 2011 |
November 27, 2010 |
|||||||
OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 42,884 | $ | 34,582 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
19,842 | 19,779 | ||||||
Deferred income taxes |
3,696 | 1,067 | ||||||
Share-based compensation |
3,916 | 2,857 | ||||||
Loss on disposal of property and equipment |
1,225 | 51 | ||||||
Excess tax benefits from share-based compensation |
(5,451 | ) | (1,142 | ) | ||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable, net |
1,710 | (7,571 | ) | |||||
Merchandise inventories, net |
(83,746 | ) | (71,266 | ) | ||||
Other assets |
(1,498 | ) | 10,040 | |||||
Accounts payable |
21,087 | 54,617 | ||||||
Employee compensation |
407 | 2,269 | ||||||
Income taxes payable |
(8,419 | ) | (22,277 | ) | ||||
Other liabilities and accrued expenses |
1,399 | 673 | ||||||
Deferred credits from landlords |
(4,617 | ) | (3,423 | ) | ||||
|
|
|
|
|||||
Net cash (used in) provided by operating activities |
(7,565 | ) | 20,256 | |||||
INVESTING ACTIVITIES: |
||||||||
Payments for sale of discontinued operations |
| (667 | ) | |||||
Additions to property and equipment |
(21,984 | ) | (14,082 | ) | ||||
Payments for intangible assets |
(550 | ) | | |||||
Proceeds from disposals of property and equipment |
40 | 118 | ||||||
Acquisition |
(8,500 | ) | | |||||
|
|
|
|
|||||
Net cash used in investing activities |
(30,994 | ) | (14,631 | ) | ||||
FINANCING ACTIVITIES: |
||||||||
Dividends paid to shareholders |
(7,922 | ) | (6,465 | ) | ||||
Proceeds from issuance of common stock |
12,731 | 3,145 | ||||||
Excess tax benefits from share-based compensation |
5,451 | 1,142 | ||||||
Purchase of treasury stock |
(54,454 | ) | (15,925 | ) | ||||
|
|
|
|
|||||
Net cash used in financing activities |
(44,194 | ) | (18,103 | ) | ||||
|
|
|
|
|||||
Net decrease in cash and cash equivalents |
(82,753 | ) | (12,478 | ) | ||||
Cash and cash equivalents at beginning of period |
299,323 | 234,508 | ||||||
|
|
|
|
|||||
Cash and cash equivalents at end of period |
$ | 216,570 | $ | 222,030 | ||||
|
|
|
|
See accompanying notes.
4
THE FINISH LINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements of The Finish Line, Inc., along with its wholly-owned subsidiaries (individually and collectively referred to as the Company), have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. Preparation of the financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included. Intercompany accounts and transactions have been eliminated in consolidation.
The Companys fiscal year ends on the Saturday closest to the last day of February each year. The Companys year ending March 3, 2012 (fiscal 2012) will be a 53-week accounting period in which the forth quarter will include 14 weeks.
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.
These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Companys Annual Report on Form 10-K for the year ended February 26, 2011 (fiscal 2011), as filed with the Securities and Exchange Commission (SEC) on May 6, 2011.
2. Acquisition
On September 1, 2011, the Company acquired substantially all the assets and assumed certain liabilities of the Running Company for a purchase price of $8.5 million which was funded through the Companys existing cash. As of the acquisition date, the Running Company operated 18 specialty running shops in Connecticut, District of Columbia, Florida, Maryland, Massachusetts, New Jersey, New York, and Texas.
The Company has allocated the purchase price based upon the tangible and intangible assets acquired, net of liabilities, of which may be revised as more definitive facts and evidence become available. The Companys results of operations included those of the Running Company beginning with the date of acquisition. Pro forma effects of the acquisition have not been presented, as their effects were not significant to the consolidated results of the Company. The allocation of the purchase price is detailed below:
Allocation of Purchase Price |
||||
(in thousands) | ||||
Net unfavorable lease obligation |
$ | (1,678 | ) | |
Goodwill |
8,265 | |||
Tangible assets, net of liabilities |
1,913 | |||
|
|
|||
Total purchase price |
$ | 8,500 | ||
|
|
The Company determined the estimated fair values based on discounted cash flow analyses and estimates made by management.
5
3. Fair Value Measurements
Fair value measurements are determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants exclusive of any transaction costs. The Company utilizes a fair value hierarchy based upon the observability of inputs used in valuation techniques as follows:
Level 1: | Observable inputs such as quoted prices in active markets; |
Level 2: | Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and |
Level 3: | Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
The Company has cash equivalents in short-term money market funds invested primarily in high-quality tax-exempt municipal instruments. The primary objective of our short-term investment activity is to preserve our capital for the purpose of funding operations and we do not enter into short-term investments for trading or speculative purposes. The fair values are based on unadjusted quoted market prices for the funds in active markets with sufficient volume and frequency (Level 1). Also included in Level 1 assets are mutual fund investments under the non-qualified deferred compensation plan. The Company estimates the fair value of these investments on a recurring basis using market prices that are readily available.
As of November 26, 2011, the Company had no non-financial assets or non-financial liabilities requiring measurement at fair value, other than the fair value measurement of the Companys preliminary purchase price allocation.
4. Recent Accounting Pronouncements
Recently issued accounting pronouncements did not, or are not believed by management to, have a material effect on the Companys present or future consolidated financial statements.
5. Earnings Per Share
Basic earnings from continuing operations per share is calculated by dividing income from continuing operations associated with common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share assumes the issuance of additional shares of common stock by the Company upon exercise of all outstanding stock options and contingently issuable securities if the effect is dilutive, in accordance with the treasury stock method or two class method (whichever is more dilutive) discussed in Accounting Standards Codification (ASC) 260-10, Earnings Per Share.
6
ASC 260-10 requires the inclusion of restricted stock as participating securities, as they have the right to share in dividends, if declared, equally with common shareholders. During periods of net income, participating securities are allocated a proportional share of net income determined by dividing total weighted average participating securities by the sum of total weighted average common shares and participating securities (the two-class method). During periods of net loss, no effect is given to participating securities since they do not share in the losses of the Company. Participating securities have the effect of diluting both basic and diluted earnings per share during periods of net income.
The following is a reconciliation of the numerators and denominators used in computing earnings per share (in thousands, except per share amounts):
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
November 26, 2011 |
November 27, 2010 |
November 26, 2011 |
November 27, 2010 |
|||||||||||||
Income from continuing operations |
$ | 5,548 | $ | 4,134 | $ | 42,884 | $ | 34,607 | ||||||||
Income from continuing operations attributable to participating securities |
45 | 58 | 343 | 494 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from continuing operations available to common shareholders |
$ | 5,503 | $ | 4,076 | $ | 42,541 | $ | 34,113 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Basic earnings from continuing operations per share: |
||||||||||||||||
Weighted-average number of common shares outstanding |
51,338 | 52,587 | 52,267 | 53,109 | ||||||||||||
Basic earnings from continuing operations per share |
$ | 0.11 | $ | 0.08 | $ | 0.81 | $ | 0.64 | ||||||||
Diluted earnings from continuing operations per share: |
||||||||||||||||
Weighted-average number of common shares outstanding |
51,338 | 52,587 | 52,267 | 53,109 | ||||||||||||
Stock options(a) |
744 | 764 | 809 | 769 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted weighted-average number of common shares outstanding |
52,082 | 53,351 | 53,076 | 53,878 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted earnings from continuing operations per share |
$ | 0.11 | $ | 0.08 | $ | 0.80 | $ | 0.63 |
(a) | The computation of diluted earnings from continuing operations per share excludes options to purchase approximately 0.5 million and 1.2 million shares of common stock in the thirteen weeks ended November 26, 2011 and November 27, 2010, respectively, and 0.4 million and 1.3 million shares of common stock in the thirty-nine weeks ended November 26, 2011 and November 27, 2010, respectively, because the impact of such options would have been anti-dilutive. |
6. Common Stock
On July 17, 2008, the Companys Board of Directors authorized a stock repurchase program (the 2008 stock repurchase program) to repurchase up to 5,000,000 shares of the Companys Class A common stock outstanding through December 31, 2011. Throughout the term of the 2008 stock repurchase program, the Company purchased 4,660,697 shares at an average price of $16.06 per share for an aggregate amount of $74.8 million. The 2008 stock repurchase program was terminated on July 21, 2011 and superseded by a new stock repurchase program which became effective as of the same date (the 2011 stock repurchase program).
Under the 2011 stock repurchase program, the Companys Board of Directors authorized the repurchase of up to 5,000,000 shares of the Companys Class A common stock outstanding through December 31, 2014.
Under both the 2008 and 2011 stock repurchase programs, the Company purchased 2,584,603 shares at an average price of $21.07 per share for an aggregate amount of $54.5 million for the thirty-nine weeks ended November 26, 2011.
The Companys treasury shares may be issued upon the exercise of employee stock options, issuance of shares for the Employee Stock Purchase Plan, issuance of restricted stock, or for other corporate purposes. Further purchases will occur from time to time as market conditions warrant and as the Company deems appropriate when judged against other alternative uses of cash.
On October 19, 2011, the Company announced a quarterly cash dividend of $0.05 per share of the Companys Class A and Class B common shares. The Company declared dividends of $2.6 million during the thirteen weeks ended November 26, 2011. The cash dividends of $2.6 million were paid on December 12, 2011 to shareholders of record on November 25, 2011 and was included as of November 26, 2011 in Other liabilities and accrued expenses. Further declarations of dividends remain at the discretion of the Companys Board of Directors.
7
ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
This quarterly report on Form 10-Q may contain certain statements that we believe are, or may be considered to be, forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally can be identified by use of statements that include phrases such as believe, expect, future, anticipate, intend, plan, foresee, may, should, will, estimates, potential, continue or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals also are forward-looking statements. All of these forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those contemplated by the relevant forward-looking statement. The principal risk factors that could cause actual performance and future actions to differ materially from the forward-looking statements include, but are not limited to, the Companys reliance on a few key vendors for a majority of its merchandise purchases (including a significant portion from one key vendor);the availability and timely receipt of products; the ability to timely fulfill and ship products to customers; fluctuations in oil prices causing changes in gasoline and energy prices, resulting in changes in consumer spending as well as increases in utility, freight, and product costs; product demand and market acceptance risks; deterioration of macro-economic and business conditions; the inability to locate and obtain or retain acceptable lease terms for the Companys stores; the effect of competitive products and pricing; the availability of products; loss of key employees; execution of strategic growth initiatives (including actual and potential mergers and acquisitions and other components of our capital allocation strategy); and the other risks detailed in the Companys Securities and Exchange Commission filings. Readers are urged to consider these factors carefully in evaluating the forward-looking statements. The forward-looking statements included in this Form 10-Q are made only as of the date of this report and we undertake no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances.
General
The following discussion and analysis should be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations, including Critical Accounting Policies, contained in the Companys Annual Report on Form 10-K for the year ended February 26, 2011 (fiscal 2011). Unless otherwise noted, all amounts reflect the results of the Companys continuing operations.
The following table sets forth store and square feet information of the Company by brand for each of the following periods:
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
Number of Stores: |
November 26, 2011 |
November 27, 2010 |
November 26, 2011 |
November 27, 2010 |
||||||||||||
Finish Line |
||||||||||||||||
Beginning of period |
647 | 667 | 664 | 666 | ||||||||||||
Opened |
4 | 4 | 4 | 11 | ||||||||||||
Closed |
(3 | ) | (2 | ) | (20 | ) | (8 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
End of period |
648 | 669 | 648 | 669 | ||||||||||||
Running Company |
||||||||||||||||
Beginning of period |
| | | | ||||||||||||
Acquired |
18 | | 18 | | ||||||||||||
Opened |
1 | | 1 | | ||||||||||||
Closed |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
End of period |
19 | | 19 | | ||||||||||||
Total |
||||||||||||||||
Beginning of period |
647 | 667 | 664 | 666 | ||||||||||||
Acquired |
18 | | 18 | | ||||||||||||
Opened |
5 | 4 | 5 | 11 | ||||||||||||
Closed |
(3 | ) | (2 | ) | (20 | ) | (8 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
End of period |
667 | 669 | 667 | 669 | ||||||||||||
|
|
|
|
|
|
|
|
November 26, 2011 |
November 27, 2010 |
|||||||
Square feet information as of: |
||||||||
Finish Line |
||||||||
Square feet |
3,491,396 | 3,586,387 | ||||||
Average store size |
5,388 | 5,361 | ||||||
Running Company |
||||||||
Square feet |
57,302 | | ||||||
Average store size |
3,016 | | ||||||
Total |
||||||||
|
|
|
|
|||||
Square feet |
3,548,698 | 3,586,387 | ||||||
|
|
|
|
8
Results of Operations
The following tables set forth net sales of the Company by major category for each of the following periods (in thousands):
Thirteen Weeks Ended (Unaudited) | ||||||||||||||||
Category |
November 26, 2011 |
November 27, 2010 |
||||||||||||||
Footwear |
$ | 232,623 | 82 | % | $ | 217,071 | 83 | % | ||||||||
Softgoods |
49,388 | 18 | % | 43,864 | 17 | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 282,011 | 100 | % | $ | 260,935 | 100 | % | ||||||||
|
|
|
|
|
|
|
|
Thirty-Nine Weeks Ended (Unaudited) | ||||||||||||||||
Category |
November 26, 2011 |
November 27, 2010 |
||||||||||||||
Footwear |
$ | 788,463 | 86 | % | $ | 729,007 | 86 | % | ||||||||
Softgoods |
124,536 | 14 | % | 115,396 | 14 | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 912,999 | 100 | % | $ | 844,403 | 100 | % | ||||||||
|
|
|
|
|
|
|
|
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 Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
November 26, 2011 |
November 27, 2010 |
November 26, 2011 |
November 27, 2010 |
|||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Net sales |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost of sales (including occupancy costs) |
67.7 | 68.6 | 66.0 | 67.4 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit |
32.3 | 31.4 | 34.0 | 32.6 | ||||||||||||
Selling, general and administrative expenses |
29.5 | 28.9 | 26.5 | 26.0 | ||||||||||||
Store closing costs |
0.1 | | 0.1 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income |
2.7 | 2.5 | 7.4 | 6.6 | ||||||||||||
Interest income, net |
| 0.1 | 0.1 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from continuing operations before income taxes |
2.7 | 2.6 | 7.5 | 6.6 | ||||||||||||
Income tax expense |
0.7 | 1.0 | 2.8 | 2.5 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from continuing operations |
2.0 | 1.6 | 4.7 | 4.1 | ||||||||||||
Loss from discontinued operations, net of income taxes |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
2.0 | % | 1.6 | % | 4.7 | % | 4.1 | % | ||||||||
|
|
|
|
|
|
|
|
9
THIRTEEN AND THIRTY-NINE WEEKS ENDED NOVEMBER 26, 2011 COMPARED TO THIRTEEN AND THIRTY-NINE WEEKS ENDED NOVEMBER 27, 2010
Net Sales
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
November 26, 2011 |
November 27, 2010 |
November 26, 2011 |
November 27, 2010 |
|||||||||||||
(dollars in thousands) (unaudited) |
(dollars in thousands) (unaudited) |
|||||||||||||||
Net sales |
$ | 282,011 | $ | 260,935 | $ | 912,999 | $ | 844,403 | ||||||||
Comparable store sales increase |
7.7 | % | 10.1 | % | 8.5 | % | 7.3 | % |
Net sales increased 8.1% for the thirteen weeks ended November 26, 2011 compared to the thirteen weeks ended November 27, 2010. The increase was attributable to a comparable store sales increase of 7.7% for the thirteen weeks ended November 26, 2011 as well as the Running Company stores contributing $5.3 million of net sales. The 7.7% comparable store sales was a result of a 3.2% increase in average dollar per transaction, a 0.5% increase in store conversion, 0.2% increase in store traffic, and a 60.8% increase in internet sales. Comparable store footwear sales for the thirteen weeks ended November 26, 2011 increased 7.4% while comparable store softgoods sales increased 8.8%.
Net sales increased 8.1% for the thirty-nine weeks ended November 26, 2011 compared to the thirty-nine weeks ended November 27, 2010. The increase was attributable to a comparable store sales increase of 8.5% for the thirty-nine weeks ended November 26, 2011 resulting primarily from a 2.9% increase in average dollar per transaction, a 0.5% increase in store traffic, a 1.4% increase in store conversion, and a 58.7% increase in internet sales, partially offset by reduced sales from 21 fewer stores since November 27, 2010 (not including the acquired Running Company stores). Comparable store footwear sales for the thirty-nine weeks ended November 26, 2011 increased 8.7% while comparable store softgoods sales increased 7.1%.
Cost of Sales (Including Occupancy Costs) and Gross Profit
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
November 26, 2011 |
November 27, 2010 |
November 26, 2011 |
November 27, 2010 |
|||||||||||||
(dollars in thousands) (unaudited) |
(dollars in thousands) (unaudited) |
|||||||||||||||
Cost of sales (including occupancy costs) |
$ | 191,002 | $ | 179,056 | $ | 602,393 | $ | 568,785 | ||||||||
Gross profit |
$ | 91,009 | $ | 81,879 | $ | 310,606 | $ | 275,618 | ||||||||
Gross profit as a percentage of net sales |
32.3 | % | 31.4 | % | 34.0 | % | 32.6 | % |
The 90 basis point increase in gross profit, as a percentage of net sales, for the thirteen weeks ended November 26, 2011 as compared to the thirteen weeks ended November 27, 2010 was due to a 100 basis point decrease in occupancy costs as a percentage of net sales, a 10 basis point decrease in inventory shrink as a percentage of net sales, offset by a 20 basis point decrease in product margin as a percentage of net sales. The occupancy costs decrease of 100 basis points as a percentage of net sales was primarily the result of leveraging the 7.7% comparable store sales increase, and operating 21 net fewer Finish Line stores at November 26, 2011 compared to November 27, 2010, partially offset by the acquired Running Company stores. The 20 basis point decrease in product margin was primarily the result of a reduction in apparel margins resulting from the planned clearance of private label products, as well as a cost increase on licensed fleece products.
The 140 basis point increase in gross profit, as a percentage of net sales, for the thirty-nine weeks ended November 26, 2011 as compared to the thirty-nine weeks ended November 27, 2010 was due to a 120 basis point decrease in occupancy costs as a percentage of net sales along with a 20 basis point increase in product margin as a percentage of net sales. The occupancy costs decrease of 120 basis points as a percentage of net sales was primarily the result of leveraging the 8.5% comparable store sales increase, operating 21 net fewer stores at November 26, 2011 compared to November 27, 2010 (not including the acquired Running Company stores), and receiving $2.0 million in landlord audit settlements. The 20 basis point increase in product margin was the result of increased product sell-throughs at full retail prices.
10
Selling, General and Administrative Expenses
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
November 26, 2011 |
November 27, 2010 |
November 26, 2011 |
November 27, 2010 |
|||||||||||||
(dollars in thousands) (unaudited) |
(dollars in thousands) (unaudited) |
|||||||||||||||
Selling, general and administrative expenses |
$ | 83,067 | $ | 75,278 | $ | 241,818 | $ | 219,835 | ||||||||
Selling, general and administrative expenses as a percentage of net sales |
29.5 | % | 28.9 | % | 26.5 | % | 26.0 | % |
The $7.8 million increase in selling, general and administrative expenses for the thirteen weeks ended November 26, 2011 as compared to the thirteen weeks ended November 27, 2010 was primarily due to the following: 1.) strategic spending in marketing initiatives to drive traffic to our website and our stores; 2.) variable costs in fulfillment, freight, and payroll increased in conjunction with the 60.8% increase in internet sales as well as the increase in store sales; 3.) severance charge of $1.2 million related to previously announced retirement of a company executive; and 4.) additional expenses associated with the Running Company stores.
The $22.0 million increase in selling, general and administrative expenses for the thirty-nine weeks ended November 26, 2011 as compared to the thirty-nine weeks ended November 27, 2010 was primarily due to the following: 1.) strategic spending in marketing initiatives to drive traffic to our website and our stores; 2.) variable costs in fulfillment, freight, and payroll increased in conjunction with the 58.7% increase in internet sales as well as the increase in store sales; 3.) severance charge of $1.2 million related to previously announced retirement of company executive; and 4.) additional expenses associated with the Running Company stores.
Store Closing Costs
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
November 26, 2011 |
November 27, 2010 |
November 26, 2011 |
November 27, 2010 |
|||||||||||||
(dollars in thousands) (unaudited) |
(dollars in thousands) (unaudited) |
|||||||||||||||
Store closing costs |
$ | 368 | $ | 87 | $ | 965 | $ | 87 | ||||||||
Store closing costs as a percentage of net sales |
0.1 | % | | % | 0.1 | % | | % | ||||||||
Number of stores closed |
3 | 2 | 20 | 8 |
Store closing costs represent the non-cash write-off of any property and equipment upon a store closing.
The increase in store closing costs was due to multiple closed stores having a net book value remaining upon closing during the thirteen weeks ended November 26, 2011 compared to closed stores with minimal net book value remaining upon closing during the thirteen weeks ended November 27, 2010.
The increase in store closing costs was due to multiple closed stores having a net book value remaining upon closing during the thirty-nine weeks ended November 26, 2011 compared to closed stores with minimal net book value remaining upon closing during the thirty-nine weeks ended November 27, 2010.
Interest Income, Net
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
November 26, 2011 |
November 27, 2010 |
November 26, 2011 |
November 27, 2010 |
|||||||||||||
(dollars in thousands) (unaudited) |
(dollars in thousands) (unaudited) |
|||||||||||||||
Interest income, net |
$ | 109 | $ | 151 | $ | 390 | $ | 370 | ||||||||
Interest income, net as a percentage of net sales |
| % | 0.1 | % | 0.1 | % | | % |
The decrease of $42,000 was due to lower invested balances during the thirteen weeks ended November 26, 2011 compared to the thirteen weeks ended November 27, 2010.
The increase of $20,000 was due to higher invested balances on average partially offset by lower earned interest rates during the thirty-nine weeks ended November 26, 2011 compared to the thirty-nine weeks ended November 27, 2010.
11
Income Tax Expense
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
November 26, 2011 |
November 27, 2010 |
November 26, 2011 |
November 27, 2010 |
|||||||||||||
(dollars in thousands) (unaudited) |
(dollars in thousands) (unaudited) |
|||||||||||||||
Income tax expense |
$ | 2,135 | $ | 2,531 | $ | 25,329 | $ | 21,459 | ||||||||
Income tax expense as a percentage of net sales |
0.7 | % | 1.0 | % | 2.8 | % | 2.5 | % | ||||||||
Effective income tax rate |
27.8 | % | 38.0 | % | 37.1 | % | 38.3 | % |
The decrease in the effective tax rate for the thirteen and thirty-nine weeks ended November 26, 2011 compared to the thirteen and thirty-nine weeks ended November 27, 2010 is the result of the favorable completion of a state income tax audit and the related release of a reserve for uncertain tax positions of approximately $0.9 million.
Income from Continuing Operations
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
November 26, 2011 |
November 27, 2010 |
November 26, 2011 |
November 27, 2010 |
|||||||||||||
(dollars in thousands) (unaudited) |
(dollars in thousands) (unaudited) |
|||||||||||||||
Income from continuing operations |
$ | 5,548 | $ | 4,134 | $ | 42,884 | $ | 34,607 | ||||||||
Income from continuing operations as a percentage of net sales |
2.0 | % | 1.6 | % | 4.7 | % | 4.1 | % | ||||||||
Income from continuing operations per diluted share |
$ | 0.11 | $ | 0.08 | $ | 0.80 | $ | 0.63 |
The $1.4 million increase in income from continuing operations for the thirteen weeks ended November 26, 2011 compared to the thirteen weeks ended November 27, 2010 is attributable to the net sales improvement and leveraging of occupancy, partially offset by strategic investments and variable expenses which increased selling, general and administrative expenses.
The $8.3 million increase in income from continuing operations for the thirty-nine weeks ended November 26, 2011 compared to the thirty-nine weeks ended November 27, 2010 is attributable to net sales improvement and continuing to maximize product margins, partially offset by strategic investments and variable expenses which increased selling, general and administrative expenses.
Liquidity and Capital Resources
The Companys primary source of working capital is cash-on-hand and cash flow from operations. The following table sets forth material balance sheet and liquidity measures of the Company (dollars in thousands):
November 26, 2011 |
November 27, 2010 |
February 26, 2011 |
||||||||||
(unaudited) | (unaudited) | |||||||||||
Cash and cash equivalents |
$ | 216,570 | $ | 222,030 | $ | 299,323 | ||||||
Merchandise inventories, net |
$ | 280,409 | $ | 262,160 | $ | 193,505 | ||||||
Interest-bearing debt |
$ | | $ | | $ | | ||||||
Working capital |
$ | 370,362 | $ | 350,869 | $ | 383,264 |
12
Operating Activities
Net cash used in operating activities during the thirty-nine weeks ended November 26, 2011 was $7.6 million compared to cash provided by operating activities of $20.3 million for the thirty-nine weeks ended November 27, 2010. The change in cash from operating activities was primarily the result of an increase in the cash outflow related to inventory, net of accounts payable of $46.0 million compared to the thirty-nine weeks ended November 27, 2010 to support positive comparable store sales, offset partially by a reduction in the cash outflow related to income taxes payable of $13.8 million compared to the thirty-nine weeks ended November 27, 2010. Cash equivalents are invested in short-term money market funds invested primarily in high-quality tax-exempt municipal instruments with daily liquidity.
Consolidated inventories increased 7.0% at November 26, 2011 compared to November 27, 2010, and were 44.9% higher than at February 26, 2011. Finish Line inventories increased 5.5% at November 26, 2011 compared to November 27, 2010 and increased 42.9% from February 26, 2011. The increase over the prior year is to support the positive comparable store sales. The increase from fiscal 2011 year end is due to seasonality around building inventory for the Holiday season and positive comparable store sales.
Investing Activities
Net cash used in investing activities for the thirty-nine weeks ended November 26, 2011 was $31.0 million compared to $14.6 million for the thirty-nine weeks ended November 27, 2010. The increase in cash use was primarily a result of the acquisition of the Running Company stores of $8.5 million and an increase in capital expenditures of $7.9 million related to the remodeling of existing stores, continued Nike Track Club rollout, e-commerce investments, merchandise system enhancements and IT system investments.
For the fiscal year ending March 3, 2012, the Company does not anticipate opening anymore new stores (4 were opened during the thirty-nine weeks ended November 26, 2011), remodeling 28 to 30 existing stores (25 were remodeled during the thirty-nine weeks ended November 26, 2011), and closing 22 to 30 stores (20 were closed during the thirty-nine weeks ended November 26, 2011). In addition, the Company has various other capital and technology projects that will require capital expenditures. The Company expects capital expenditures for the current fiscal year to approximate $35 to $37 million. The source of funds for these capital expenditures is expected to be the Companys cash-on-hand.
Financing Activities
Net cash used in financing activities for the thirty-nine weeks ended November 26, 2011 was $44.2 million compared to $18.1 million for the thirty-nine weeks ended November 27, 2010. The $26.1 million increase is due to an additional $38.5 million of stock repurchases, and a $1.5 million increase in dividends paid, offset partially by a $9.6 million increase in proceeds received from the issuance of common stock in connection with employee stock programs, and a $4.3 million increase in excess tax benefits from share-based compensation.
On July 17, 2008, the Companys Board of Directors authorized a stock repurchase program (the 2008 stock repurchase program) to repurchase up to 5,000,000 shares of the Companys Class A common stock outstanding through December 31, 2011. Throughout the life of the 2008 stock repurchase program the Company purchased 4,660,697 shares at an average price of $16.06 per share for an aggregate amount of $74.8 million. The 2008 stock repurchase program was terminated on July 21, 2011 and superseded by a new stock repurchase program which became effective as of the same date (the 2011 stock repurchase program).
Under the 2011 stock repurchase program, the Companys Board of Directors authorized the repurchase of up to 5,000,000 shares of the Companys Class A common stock outstanding through December 31, 2014.
Under both the 2008 and 2011 stock repurchase programs, the Company purchased 2,584,603 shares at an average price of $21.07 for an aggregate amount of $54.5 million for the thirty-nine weeks ended November 26, 2011.
The treasury shares may be issued upon the exercise of employee stock options, issuance of shares for the Employee Stock Purchase Plan, issuance of restricted stock, or for other corporate purposes. Further purchases will occur from time to time as market conditions warrant and as the Company deems appropriate when judged against other alternative uses of cash.
On October 19, 2011, the Company announced a quarterly cash dividend of $0.05 per share of the Companys Class A and Class B common shares. The Company declared dividends of $2.6 million during the thirteen weeks ended November 26, 2011. The cash dividends of $2.6 million were paid on December 12, 2011 to shareholders of record on November 25, 2011 and was included as of November 26, 2011 in Other liabilities and accrued expenses. Further declarations of dividends remain at the discretion of the Companys Board of Directors.
13
Contractual Obligations
The Companys contractual obligations primarily consist of operating leases and purchase orders for merchandise inventory. For the thirty-nine weeks ended November 26, 2011, there were no significant changes to the Companys contractual obligations from those identified in the Companys Annual Report on Form 10-K for the fiscal year ended February 26, 2011, other than those which occur in the normal course of business (primarily changes in the Companys merchandise inventory related to purchase obligations, which fluctuate throughout the year as a result of the seasonal nature of the Companys operations, and reduction of operating leases due to store closings, offset by the leases acquired as a result of the acquisition of the Running Company stores.)
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to adopt accounting policies related to estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, management evaluates its accounting policies, estimates and judgments, including those related to inventories, longlived assets and contingencies. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.
There have been no material changes to the critical accounting policies and estimates disclosed in the Companys Annual Report on Form 10-K for the fiscal year ended February 26, 2011.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
For a discussion of the Companys market risk associated with interest rates as of February 26, 2011, see Quantitative and Qualitative Disclosures about Market Risk in Item 7A of Part II of the Companys Annual Report on Form 10-K for the fiscal year ended February 26, 2011. For the thirty-nine weeks ended November 26, 2011, there has been no significant change in related market risk factors.
ITEM 4. | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures. With the participation of our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), as of the end of the period covered by this Report. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures were effective in ensuring that (i) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commissions rules and forms and (ii) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Companys management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting. There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this Report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
14
PART IIOTHER INFORMATION
ITEM 1. | LEGAL PROCEEDINGS |
The Company is subject, from time to time, to certain legal proceedings and claims in the ordinary course of conducting its business. Although it is not possible to predict with certainty the eventual outcome of any litigation, in the opinion of management, the Companys legal proceedings are not expected to have a material adverse effect on the Companys financial position or results of operations.
ITEM 1A. | RISK FACTORS |
Risk factors that affect the Companys business and financial results are discussed in Item 1A: Risk Factors in the Companys Annual Report on Form 10-K for the fiscal year ended February 26, 2011. There has been no significant change to identified risk factors for the thirty-nine weeks ended November 26, 2011.
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
None.
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
ITEM 4. | REMOVED AND RESERVED |
ITEM 5. | OTHER INFORMATION |
None.
ITEM 6. | EXHIBITS |
(a) Exhibits
10.1 | Resignation and General Release Agreement, effective November 29, 2011, by and between Gary D. Cohen and The Finish Line, Inc. | |
31.1 | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as amended. | |
31.2 | Certification of Chief Financial Officer Pursuant to Rule 13a14(a) and 15d-14(a) of the Securities Exchange Act, as amended. | |
32 | Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101 | The following materials from The Finish Line, Inc.s Form 10-Q for the quarterly period ended November 26, 2011, formatted in an XBRL Interactive Data File: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Cash Flows; and (iv) Notes to Consolidated Financial Statements, tagged as blocks of text.* |
* | Users of the XBRL-related information in Exhibit 101 of this Quarterly Report on Form 10-Q are advised, in accordance with Regulation S-T Rule 406T, that this Interactive Data File is deemed not filed or as a part of a registration statement for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise not subject to liability under these sections. The financial information contained in the XBRL-related documents is unaudited and unreviewed. |
15
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 22, 2011 | By: | /S/ EDWARD W. WILHELM | ||||
Edward W. Wilhelm | ||||||
Executive Vice President, Chief Financial Officer |
16
Exhibit Index
Exhibit Number |
Description | |
10.1 | Resignation and General Release Agreement, effective November 29, 2011, by and between Gary D. Cohen and The Finish Line, Inc. | |
31.1 | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as amended. | |
31.2 | Certification of Chief Financial Officer Pursuant to Rule 13a14(a) and 15d-14(a) of the Securities Exchange Act, as amended. | |
32 | Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101 | The following materials from The Finish Line, Inc.s Form 10-Q for the quarterly period ended November 26, 2011, formatted in an XBRL Interactive Data File: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Cash Flows; and (iv) Notes to Consolidated Financial Statements, tagged as blocks of text.* |
* | Users of the XBRL-related information in Exhibit 101 of this Quarterly Report on Form 10-Q are advised, in accordance with Regulation S-T Rule 406T, that this Interactive Data File is deemed not filed or as a part of a registration statement for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise not subject to liability under these sections. The financial information contained in the XBRL-related documents is unaudited and unreviewed. |
Exhibit 10.1
Resignation and General Release Agreement
This Resignation and General Release Agreement (this Agreement) is entered into between Gary D. Cohen (Executive) and The Finish Line, Inc. (the Company).
RECITALS
A. | Executive is currently employed by the Company as its Chief Administrative Officer and Secretary, pursuant to: (i) an Amended and Restated Employment Agreement entered into by the parties on December 31, 2008; (ii) an Amendment Number One to Amended and Restated Employment Agreement entered into by the parties on February 25, 2010; and (iii) an Amendment Number Two to Amended and Restated Employment Agreement entered into by the parties on February 28, 2011 (and which agreement and amendments are collectively referred to herein as the Employment Agreement). |
B. | Executive has provided notice to the Company that he wishes to voluntarily resign his employment, effective March 29, 2012 (the Resignation Date). |
C. | The Company has agreed to accept Executives resignation from the Company on the Resignation Date. |
D. | The Company and Executive have discussed the terms and conditions of Executives resignation and they have reached an amicable agreement regarding Executives separation from the Companys employ, and the parties wish to enter into this Agreement in order to memorialize their agreement and to further define the obligations that the parties have to one another. |
NOW THEREFORE, in recognition of Executives service with the Company, and in consideration of the mutual understandings, promises, releases, and obligations contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is mutually acknowledged, the parties hereby voluntarily agree as follows:
AGREEMENT
1. | Definitions. Specific terms used in this Agreement have the following meanings: (a) Executive includes the undersigned, Gary D. Cohen, and anyone who has or obtains any legal right or claims through him; (b) Company means The Finish Line, Inc.; (c) Released Parties means the Company, all of their past and present officers, directors, employees, trustees, agents, shareholders, related corporations and entities, divisions, affiliates, principals, insurers, any and all employee benefit plans (and any fiduciary of such plans) sponsored by the aforesaid entities, and each of them, and each entitys subsidiaries, related entities, predecessors, successors, and assigns, and all other entities, persons, and firms; (d) Resignation Date means March 29, 2012; and (e) the Effective Date of this Agreement is the eighth (8th) calendar day after Executive signs it, on the condition that he does not revoke it as described below. |
2. | Resignation. The parties hereby acknowledge and agree that Executive has provided notice to the Company of his decision to resign his employment and terminate the Employment Agreement, effective on the Resignation Date, and the Company has accepted such resignation. Executive acknowledges that he is not yet eligible for Normal Retirement nor shall this Agreement be construed as Alternative Retirement under any Company policy, procedure, or practice. In addition, the Company shall file a Form 8-K within the applicable timeframe mandated that will contain language mutually agreed to by the parties and as required by the relevant laws and regulations for such public filings. The parties agree that Executive will continue in the employ of the Company until the close of business on the Resignation Date, on which date his employment will terminate. Executive relinquishes any and all rights to employment with the Company after the Resignation Date. In addition, Executive agrees to resign from all offices of the Company (including, but not limited to, Chief Administrative Officer and Corporate Secretary) and of all subsidiaries, affiliates, and related entities of the Company and he agrees to sign all documents necessary to effect such resignations at such time(s) as the Company shall request, and the parties agree that all such documents shall be signed and such resignations shall be effective no later than December 1, 2011. Executive agrees that this Agreement replaces and supersedes the Employment Agreement and that certain provisions of the Employment Agreement have been restated herein. |
3. | Executives Duties, Salary and Benefits During Remaining Employment. The parties hereby acknowledge and agree that Executive has been relieved of his duties as of the Effective Date of this Agreement, with the exception of such specific duties as may be requested of him from time to time by an officer of the Company in connection with the transition of business matters within Executives areas of responsibility or knowledge. During Executives remaining employment, he shall respond in a timely and professional manner to any request for assistance that he may receive from a Company officer relating to the transition of the above-described matters; provided, however, the parties agree that Executive shall not be expected to provide anything more than minimal transition assistance during the period of his medical leave which shall begin on a specific date in December of 2011 to be determined. After the Resignation Date, Executive also agrees to provide timely and professional responses to any questions he may receive from a Company officer in regard to his areas of responsibility during his employment or within his knowledge. In addition, effective November 24, 2011, Executive shall no longer be required to attend any Company meetings in person or by telephone, except as may be requested by the Companys CEO. Executives Base Salary through the Resignation Date shall remain at its current level and he shall remain eligible to participate in all Company benefit plans and programs through the Resignation Date, in accordance with the terms and conditions of such plans and programs. In addition, the parties acknowledge that any leave taken by Executive during his medical leave shall be paid through his Reserved Leave Bank, in accordance with the Companys human resources policies and practices. The parties further acknowledge that, as of the Resignation Date, Executives accrued and unused PTO will be 117.2 hours which shall be paid to Executive upon his separation. |
2
4. | Compensation Plans and Programs. |
(a) | The Company acknowledges and agrees that Executives participation in the Finish Line FY 12 Executive Officer Bonus Program (including the superbonus program) (the FY12 EOBP) and the Finish Line 2010 Long Term Incentive Bonus Program (fiscal years 2010-2012) (the 2010 LTIBP) shall not be affected by this Agreement and that Executive shall be paid such bonus payments, if any, as are determined by the Compensation Committee of the Board of Directors of the Company pursuant to the terms of such plans and at the time such bonus payments are made to the other executive officers. |
(b) | Except as otherwise set forth in Section 4(a) or Section 5 of this Agreement, Executive acknowledges and agrees that he is not entitled to any payment or benefit under or pursuant to, and hereby waives any claims or rights with respect to, each and every plan, program or agreement in which Executive was or is a participant or party including, without limitation, any past, present, or future Long Term Incentive Program, bonus, or equity award program. |
(c) | Notwithstanding the foregoing, with respect to the FY12 EOBP, the 2010 LTIBP, and the severance payments described in Section 5 of this Agreement, such payments shall be conditioned on: (i) Executives full cooperation and assistance in the transition of his duties and responsibilities as determined in the reasonable discretion of the CEO; (ii) Executives compliance with this Agreement in all respects; (iii) the execution and delivery by Executive of this Agreement (without revocation) within the period provided to Executive to consider this Agreement; and (iv) the execution and delivery by Executive of the First Reaffirmation of Resignation and General Release Agreement attached as Exhibit A (the First Reaffirmation Agreement) which shall be dated and delivered to the Company by Executive on the Resignation Date and on the condition that the Reaffirmation Agreement is not revoked by Executive as provided therein; and (v) the execution and delivery by Executive of the Second Reaffirmation of Resignation and General Release Agreement attached as Exhibit B (the Second Reaffirmation Agreement) which shall be dated and delivered to the Company by Executive within thirty (30) days following March 29, 2012, and on the condition that the Reaffirmation Agreement is not revoked by Executive as provided therein. |
5. | Severance Payment and Other Consideration. In exchange for the release, promises and other consideration provided by Executive pursuant to this Agreement, the Company agrees as follows: |
(a) | The Company agrees to make the following severance payments to Executive which, in the aggregate, amount to one and one-half (1.5) times his current Base Salary:: (i) an initial severance payment in the amount of Three Hundred Thousand Dollars ($300,000) shall be paid to Executive on March 14, 2012, on the condition that he signs and does not revoke the First Reaffirmation Agreement; and (ii) a subsequent severance payment in the amount of Four |
3
Hundred Eighty Thousand Dollars ($480,000) shall be paid to Executive no later than thirty (30) days after the Resignation Date, on the condition that he signs and does not revoke the Second Reaffirmation Agreement (these payments are collectively referred to herein as the Severance Payments). Required taxes and other appropriate withholdings shall be withheld from the Severance Payments. |
(b) | If Executive properly elects continuation of health insurance benefits pursuant to COBRA, then from the Resignation Date until one (1) year thereafter, Executive will pay the same portion of such premiums as if Executive remained employed for such period and the Company shall be responsible for the remainder and thereafter Executive shall be responsible for paying 100% of such premiums; provided, however, that if Executive becomes reemployed with another employer and is eligible to receive health insurance benefits under another employer-provided plan, the payments by the Company described herein shall cease at such time. |
(c) | In regard to Executives vested stock options, the Company agrees that Executive may exercise such options on the condition that he does so no later than the calendar date(s) that are specified in each applicable award agreement as the date(s) on which Executives right to exercise the options shall expire. By way of example, the stock options granted to Executive on March 11, 2008, shall be exercisable by him until March 11, 2018. |
(d) | The Company acknowledges that during Executives employment with the Company, he was granted certain equity awards. Executives vested equity awards shall be exercisable pursuant to the terms of the applicable stock incentive plans and award agreements. Except for those equity awards set forth on the attached Exhibit C and which are designated in that exhibit as having vested (such designation is indicated by the notation Yes in the fifth column thereof), Executive acknowledges and agrees that he has no right to, and Executive waives any right to, any other equity awards, benefits, or payments under any stock incentive plan or agreement, and he agrees that any other equity awards terminate and are of no further force and effect as of the Effective Date of this Agreement. |
(e) | In regard to any public filings made by the Company that relate to or discuss Executive, the Company shall obtain Executives consent to such filing before it is made, which consent shall not be unreasonably withheld or delayed by Executive, provided, however, that nothing herein shall override the Companys duty to comply with the mandates of any law or regulation requiring the public filing. |
(f) | The Company shall provide reasonable assistance to Executive, consistent with the Companys past practices, in connection with the preparation and filing of Section 16 reports for such period of time as Executive remains subject to Section 16. |
4
(g) | Subject to compliance with Rule 144, upon any transfer of Company stock by Executive, the Company agrees to provide reasonable assistance to Executive in regard to the removal of any restrictive legends or stop orders on the stock. |
(h) | No payment or other consideration under this Section 5 shall be made or provided to Executive prior to the Effective Date of this Agreement. |
In paying the amount specified in this Section 5, the Company makes no representation as to the tax consequences or liability arising from said payment including, without limitation, under Section 409A of the Internal Revenue Code of 1986, as amended (Code). Moreover, the parties understand and agree that Executives tax consequences and/or liability arising from the payment to Executive shall be the sole responsibility of Executive. To this extent, Executive acknowledges and agrees that Executive will pay any and all income tax which may be determined to be due by him in connection with the payment described in this Section 5. Executive also agrees to indemnify the Company for any and all tax liability (including, but not limited to, fines, penalties, interest, and costs and expenses, including attorneys fees) incurred by him arising from or relating to the payment described in this Section 5 and/or imposed by the Internal Revenue Service, the State of Indiana, or any other taxing agency or tribunal as a result of Executives failure to timely pay Executives taxes on said payment or any portion thereof.
The obligations assumed by the Company in this Section 5 reflect consideration provided to Executive over and above anything of value to which Executive already is entitled, and will be subject to all applicable taxes, withholdings, and deductions. Executive acknowledges and agrees that no other sums or amounts are or will be due or owing to him and expressly waives any rights or claims to additional sums, amounts, privileges, or benefits not expressly provided for in this Section 5, whether written, oral, express or implied.
6. | General Release and Waiver. In consideration of the opportunities afforded by this Agreement, Executive hereby releases and discharges the Released Parties from any claim, demand, action, or cause of action, known or unknown, which arose at any time from the beginning of time to the date Executive executes this Agreement, and waives all claims relating to, arising out of, or in any way connected with Executives employment with the Company including, without limitation, any claim, demand, action, cause of action, including money damages and claims for attorneys fees, based on but not limited to: (a) the Age Discrimination in Employment Act of 1967, as amended (ADEA), 29 U.S.C. § 621, et seq; (b) the Americans with Disabilities Act of 1990, 42 U.S.C. § 12101, et seq.; (c) the Rehabilitation Act of 1973, as amended, 29 U.S.C. § 701, et seq.; (d) the Family and Medical Leave Act of 1993, 29 U.S.C. § 2601, et seq.; (e) the Civil Rights Act of 1866 and 1964, as amended, 42 U.S.C. § 1981; (f) Executive Retirement Security Act, 29 U.S.C. § 1001, et seq.; (g) Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000(e), et seq.; (h) the Fair Credit Reporting Act, 15 U.S.C. § 1681, et seq.; (i) the Worker Adjustment and Retaining Notification Act, 29 U.S.C. § 2101, et seq.; (j) the Indiana Civil Rights Law, Ind. Code § 22-9-1-1, et seq.; (k) the Indiana wage payment statute, Ind. Code § 22-2-4-1, et seq.; and any other Indiana wage law; (l) any existing or potential entitlement under any Company program or plan, including wages or |
5
other paid leave, except as specifically provided in this Agreement; (m) any existing or potential agreement (including, without limitation, the Employment Agreement), contract, representation, policy, procedure, or statement (whether any of the foregoing are express or implied, oral or written); (n) claims arising under any other federal, state and local fair employment practices law, disability benefits law, and any other employee or labor relations statute, executive order, law or ordinance, and any duty or other employment-related obligation, claims arising from any other type of statute, executive order, law or ordinance, claims arising from contract or public policy, as well as tort, tortious cause of conduct, breach of contract, intentional infliction of emotional distress, negligence, discrimination, harassment, and retaliation, together with all claims for monetary and equitable relief, punitive and compensatory relief and attorneys fees and costs; (o) the Indiana Constitution; and/or (p) the United States Constitution. |
Executive understands and agrees that Executive is releasing the Company from any and all claims by which Executive is giving up the opportunity to recover any compensation, damages, or any other form of relief in any proceeding brought by Executive or on Executives behalf, other than in a proceeding filed by him to enforce this Agreement.
7. | Exclusions. Notwithstanding the release and waiver contained in Section 6 above, this Agreement is not intended to operate as a waiver of Executives retirement or pension benefits that are vested, the eligibility and entitlement to which shall be governed by the terms of the applicable plan. In addition, this Agreement shall not operate to waive or bar any claim or right which by express or unequivocal terms of law may not under any circumstances be waived or barred. Moreover, this Agreement shall not operate to waive rights, causes of action or claims under the ADEA if those rights, causes of action or claims arise after the Effective Date of this Agreement. In addition to the foregoing, Executive acknowledges that this Agreement is not intended to: (a) prevent him from filing a charge or complaint, including a challenge to the validity of this Agreement, with the Equal Employment Opportunity Commission; (b) prevent him from participating in any investigation or proceeding conducted by that agency; or (c) establish a condition precedent or other barrier to exercising these rights. While Executive has the right to participate in an investigation of said agency, he understands that he is waiving his right to any monetary recovery arising from any investigation or pursuit of claim on his behalf. Executive acknowledges that he has the right to file a charge alleging a violation of the ADEA with any administrative agency and/or to challenge the validity of the waiver and release of any claim that he might have under the ADEA without either: (a) paying any amount to the Company that was previously paid by it to him or on his behalf; or (b) paying to the Company any other monetary amounts (such as attorneys fees and/or damages). |
The parties also understand and agree that nothing in this Agreement shall be interpreted as prohibiting Executive from filing a claim for unemployment compensation with any state agency, and he is not waiving or releasing any right that he may have to unemployment compensation. However, Executive understands and agrees that his eligibility for such benefits shall be determined by the appropriate governmental agency, and that the receipt of or eligibility for such benefits is not a condition of this Agreement. Similarly, Executive understands that although he or his heirs may be eligible to apply for
6
benefits under any Company-sponsored benefit plan, including, without limitation, its health insurance benefit plan, disability insurance benefit plan, and life insurance plan, Executive understands and agrees that the receipt of benefits under any such plan cannot be and is not guaranteed by the Company because the determination as to such receipt depends on the specific terms and conditions of such plans and determinations made by third-party plan administrators. Accordingly, Executives or his heirs receipt of or eligibility for such benefits is not a condition of this Agreement.
8. | Mutual Disclaimer. This Agreement is entered into to provide Executive with separation benefits and to terminate the parties relationship on an amicable basis and shall not be construed as an admission of liability by either party. Accordingly, Executive states under penalties of perjury that, as of the date he executed this Agreement, he is not aware of any facts or incidents of wrongdoing, liability, or discrimination by the Company from the beginning of time up to the date Executive signs the Agreement. The parties further understand that the separation benefits described in this Agreement create no precedent for the Company in dealing with any future separations. |
9. | Return of Property. On the Resignation Date, and otherwise upon the request of the Company, Executive agrees to: (a) immediately destroy, delete, or return to the Company, at the Companys option, all originals and copies in any form or medium (including, but not limited to, memoranda, books, papers, plans, computer files, letters, and other data) in Executives possession, custody, or control (including any of the foregoing stored or located in his office, home, laptop, computer, or other electronic device, whether or not Company property) that contain Confidential Information (as defined in Section 11) or otherwise relate to the business of the Company, its affiliates and subsidiaries, except that Executive may retain only those portions of any personal notes, notebooks, or diaries that do not contain any Confidential Information; and (b) notify and fully cooperate with the Company regarding the delivery or destruction of any other Confidential Information of which Executive becomes aware. On the Resignation Date Executive shall also return to the Company all other Company property in his possession, custody, or control including, but not limited to, all tangible personal property (such as keys, access cards, credit cards, computers, handheld devices, cell phones, PDAs, etc.). |
10. | Agreement Not to Sue. Except for those claims, causes of action or rights explicitly excluded from Executives waiver and release, as set forth in Section 7 above, Executive agrees that Executive will never file or accept anything of value from a lawsuit concerning any claim, issue, or matter relating to or arising out of employment with the Company, the cessation of employment, or the compensation or benefits payable in connection with employment or termination of employment. Should Executive violate any aspect of this Section 10, he agrees: (a) that the lawsuit is null and void, and must be summarily withdrawn and/or dismissed; (b) to pay all costs, expenses, and damages incurred by the Company in responding to or as a result of any lawsuit brought by Executive that breaches this Agreement, including, without limitation, reasonable attorneys fees; and (c) to return the amount paid to him or on his behalf pursuant to Section 4(a), Section 5(a), and Section 5(b) save $1.00 within fourteen (14) days after |
7
a final determination has been made by a court or other legal authority that Executive has violated this Section 10 of the Agreement. In the event this reimbursement provision is triggered, Executive agrees that the remaining provisions of this Agreement shall remain in full force and effect; provided, however, that if Executive violates this Agreement by suing the Released Parties (or any of them) for any claim released by him herein (other than those described in Section 7), or if he violates it in any other respect, the Company shall be relieved of its obligations to him under this Agreement. |
11. | Confidentiality; Intellectual Property. |
(a) | The parties agree that, as a material and essential condition of this Agreement, the fact of and terms and conditions of this Agreement are to remain strictly confidential. The Company shall not disclose this Agreement to any person, other than to the Companys officers and attorneys, and to employees who have a need to know (and in regard to non-officer employees, any disclosure shall be limited to the information that must be disclosed to them for legitimate business reasons), or as required by law or lawfully-issued subpoena, provided that, Executive acknowledges that the Company is required by law to file a copy of this Agreement with its Q3 10Q and that the Company plans to comply with this requirement. Executive shall not disclose this Agreement to any person, other than to his spouse, his financial advisor(s), his attorneys, or as required by law or lawfully-issued subpoena. |
(b) | Executive acknowledges that in the course of his employment with the Company, Executive has had access to confidential information and trade secrets of the Company, and he hereby represents that he has not disclosed any such information or trade secrets except in the strict performance of his duties with the Company. In addition, the parties acknowledge that certain confidential information to which Executive had access is protected by the attorney-client privilege and may not be disseminated by him unless authorized in writing by a duly-authorized representative of the Company. |
(c) | Executive agrees that he shall not at any time (whether during or after his employment with the Company): (i) retain or use for the benefit, purposes, or account of Executive or any other person (other than the Company); or (ii) disclose, divulge, reveal, communicate, share, transfer, or provide access to any person outside the Company any non-public, proprietary or confidential information including, but not limited to, trade secrets, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, store site selection, new store openings, government and regulatory activities and approvals, concerning the past, current, or future business, activities, and operations of the Company, its subsidiaries or affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis (the Confidential Information) without the prior |
8
written authorization of the CEO of the Company. The parties agree that Confidential Information does not include any information that: (i) is generally known to the industry or the public other than as a result of Executives breach of this covenant; (ii) was made legitimately available to Executive without a confidentiality restriction by a third party without breach of any confidentiality obligation of that third party; or (iii) is required by law to be disclosed; provided, however, that Executive shall give prompt written notice to the Company of such requirement, disclose no more information than is so required, and cooperate with any attempts by the Company to obtain a protective order or similar treatment. |
(d) | As of the Resignation Date, Executive shall cease and not thereafter commence use of any Confidential Information or intellectual property (including, but not limited to, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name, or other source indicator) used by the Company, its subsidiaries or affiliates. |
12. | Non-Competition and Non-Solicitation. Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and its subsidiaries and affiliates. In addition, as an inducement for the Company to enter into this Agreement (which consideration Executive acknowledges), Executive agrees that during his remaining employment with the Company and during the twelve (12) month period after the Resignation Date, Executive will not: |
(a) | directly or indirectly, have any ownership interest in, or in a competitive capacity, directly or indirectly, engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation, financing, or control of, be employed by, work for, advise, be associated with, or in any manner connected with, lend Executives name or any similar name to, lend Executives credit to, or render services or advice to, except while employed by the Company to and for the benefit of the Company, any business that, directly or indirectly, provides or offers to provide business, goods or services of the type being provided, conducted, marketed or rendered by the Company in its business including, without limitation, the business of athletic specialty and/or sporting goods retail industry (the Business) in the United States of America (the Geographic Area); provided, however, that Executive may purchase or otherwise acquire up to (but not more than) one percent (1%) of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934 and only if Executive is a passive investor; and/or |
(b) | directly or indirectly, either for Executive or any other person or entity, (i) induce or attempt to induce any employee of the Company to leave the employ of the Company or hire any such employee, (ii) in any way interfere with the relationship between the Company and any employee of the Company, or (iii) |
9
employ, or otherwise engage as an employee, independent contractor, or otherwise, any employee of the Company; and/or |
(c) | directly or indirectly, either for Executive or any other person or entity, induce or attempt to induce any current or prospective customer, dealer, supplier, licensee, vendor or business relation of the Company to not do business with the Company or, in a competitive capacity, to do business with the any other person or entity, or in any way interfere with the relationship between any current or prospective customer, dealer, supplier, licensee, vendor or business relation of the Company. |
The parties agree that it is very important for the Company to protect its legitimate business interests by restricting Executives ability to compete with the Company in the manner and in the area described in this Section 12. The parties expressly agree that the terms of this limited non-competition provision under this Section 12 are reasonable, enforceable, and necessary to protect the Companys interests, and are valid and enforceable. Therefore, this Section 12 is drafted so narrowly as to safeguard the Companys legitimate business interests while not unreasonably interfering with Executives ability to obtain other employment. The Company does not intend, and Executive acknowledges, that the covenants contained in this Section 12 are not an attempt to, prevent Executive from obtaining other employment in violation of Indiana Code § 22-5-3-1. In the unlikely event, however, that a court of competent jurisdiction was to determine that any portion of this limited provision is unenforceable, then the parties agree that the remainder of the limited provision shall remain valid and enforceable to the maximum extent possible. In the event of a breach by Executive of any covenant set forth in this Section 12, the term of such covenant will be extended by the period of the duration of such breach.
13. | Damages; Specific Enforcement/Injunctive Relief. Executive acknowledges that the Company engages, or is capable of engaging in, the Business anywhere in the Geographic Area and that engaging in the Business in such Geographic Area is competitive with the business of the Company and the provisions of Section 12 are reasonable and necessary to protect and preserve the Companys interests. Executive agrees that it would be difficult to measure damages to the Company from any breach of the covenants contained in Section 11 and Section 12, but that such damages from any breach would be great, incalculable and irremediable, and that damages would be an inadequate remedy. Accordingly, Executive waives any defense that the Company has an adequate remedy at law and agrees that upon a breach or threatened breach of any of the covenants contained in Section 11 or Section 12 the Company may have specific performance of the terms of this Agreement in any court permitted by this Agreement (without the necessity of posting bond or other security) and, if Company prevails, that the Company will be entitled to recovery of any loss, liability, claim, damage (including incidental and consequential damages), expense (including costs of investigation and defense and reasonable attorneys fees) or diminution of value, from Executive. The parties agree, however, that specific performance and the other remedies described herein shall not be the exclusive remedies, and the Company may enforce any other remedy or remedies available to it either in law or in equity including, but not limited to, temporary, |
10
preliminary, and/or permanent injunctive relief (all without any requirement to post bond or other security) to restrain any breach or threatened breach or otherwise to specifically enforce the provisions of Section 11 and Section 12. |
14. | Successors and Assigns. This Agreement shall apply to Executive, and inure to the benefit of Executive, as well as to his heirs, executors, beneficiaries, administrators, and agents. This Agreement also shall apply to, and inure to the benefit of all of the Released Parties. This Agreement may be assigned by the Company without notice to or the consent of Executive. However, this Agreement is personal to Executive and may not be assigned by him. |
15. | Severability. The parties explicitly acknowledge and agree that the provisions of this Agreement are both reasonable and enforceable. However, the provisions of this Agreement are severable, and the invalidity of any one or more provisions shall not affect or limit the enforceability of the remaining provisions. Should any provision be held unenforceable for any reason, then such provision shall be enforced to the maximum extent permitted by law. |
16. | Applicable Law and Jurisdiction. This Agreement shall be interpreted, enforced, and governed under the laws of the State of Indiana, without regard to conflict of laws principles thereof. Moreover, while the parties do not contemplate any future disputes, Executive agrees that any action or claim regarding this Agreement or otherwise brought against the Company by or on behalf of Executive that relate to Executives employment or the termination thereof shall be maintained in the State of Indiana. If brought in state court, the action shall be filed in Marion County; if brought in federal court, the action shall be filed in the Southern District of Indiana, Indianapolis Division. By signing this Agreement, Executive expressly consents to personal jurisdiction in the State of Indiana. Both parties waive the right to a jury trial. |
17. | Non-Waiver. The waiver by either party of compliance by any other party with any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement (whether or not similar), or a continuing waiver or a waiver of any subsequent breach by a party of a provision of this Agreement. Performance by any party of any act not required of it under the terms and conditions of this Agreement shall not constitute a waiver of the limitations on its obligations under this Agreement, and no performance shall prohibit that party from asserting those limitations as to any further or future performance of its obligations. |
18. | Indemnification. Executive shall be indemnified by the Company against claims arising in connection with Executives status as an employee, officer, director or agent of the Company in accordance with the Companys indemnity policies and programs for its executives, subject to applicable law. |
11
19. | Knowledge and Understanding. Executive acknowledges that, in accordance with the ADEA, Executive: |
(d) | has been, and is hereby, advised to consult with an attorney prior to executing this Agreement and has had the opportunity to do so; |
(e) | has been given a period of twenty-one (21) days within which to consider this Agreement, which allows Executive to make a knowing, voluntary, and fully informed choice about whether to sign this Agreement; |
(f) | has availed Executive of all opportunities Executive deems necessary to make a voluntary, knowing, and fully informed decision; and |
(g) | is fully aware of Executives rights, and has carefully read and fully understands all provisions of this Agreement before signing. |
20. | Period to Consider and Period to Revoke Agreement. Executive understands that, as required by the ADEA, he has been given twenty one (21) calendar days from the day that he received this Agreement, not counting the day upon which he received it, to consider whether he wishes to sign it. Executive further understands that if he signs this Agreement before the end of the twenty-one (21) calendar day period, it will be his personal and voluntary decision to do so. This Agreement may only be accepted during the aforesaid twenty-one (21) day period. In addition, as required by the ADEA, Executive may revoke this Agreement within seven (7) calendar days after the date he signed it. Any revocation shall be in writing and delivered via facsimile (facsimile number (317) 613-6717) to the attention of Chris Eck. This Agreement shall not become effective, therefore, until Executive has executed the Agreement and the seven (7) calendar day revocation period has expired without revocation by him. |
21. | Complete Agreement. This Agreement sets forth the complete agreement between the parties relating to the subjects herein. Executive acknowledges and agrees that, in executing this Agreement, Executive does not rely and has not relied upon any representations or statements not set forth herein made by the Company with regard to the subject matter, basis, or effect of this Agreement or otherwise. This Agreement supersedes all prior agreements and understandings (including, but not limited to, oral agreements) between Executive and the Company and/or its subsidiaries and affiliates regarding the terms of Executives employment with the Company and/or its subsidiaries and affiliates. |
22. | Cooperation. Executive shall provide his reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executives employment with the Company. |
23. | Prevailing Party Fees and Expenses. If either party files any legal action or proceeding to enforce any provision of this Agreement, or because of an alleged dispute, breach, default, or misrepresentation in connection with any provision of this Agreement, the prevailing party shall be entitled to recover any reasonable attorneys fees, court costs, and all expenses, even if not taxable as court costs (including, but not limited to, all such |
12
fees, costs, and expenses incident to appeals) incurred in that action or proceeding by such party, in addition to any other relief to which such party may be entitled. |
24. | Counterparts and Amendments. This Agreement may be executed in counterparts, including facsimile, pdf, or photocopy counterparts, each of which shall be deemed an original but all of which taken together shall constitute one and the same Agreement. This Agreement may not be modified, altered, amended or waived in any manner except by written instrument duly executed by the Companys CEO and by Executive. |
25. | Interpretation of Agreement. The headings in this Agreement have been inserted solely for ease of reference and shall not be considered in the interpretation, construction or enforcement of this Agreement. In addition, this Agreement shall be deemed to have been drafted jointly by the parties, and in the event of an ambiguity in this Agreement, the same shall not be construed against any party. |
BY SIGNING THIS AGREEMENT, WHICH CONTAINS A RELEASE, EXECUTIVE STATES THAT: HE HAS READ IT; HE UNDERSTANDS IT; HE KNOWS THAT HE IS GIVING UP IMPORTANT RIGHTS AND POSSIBLE LEGAL AND/OR ADMINISTRATIVE CLAIMS; HE AGREES TO ALL THE TERMS AND CONDITIONS CONTAINED IN THIS AGREEMENT; HE IS AWARE OF HIS RIGHT TO CONSULT WITH AN ATTORNEY BEFORE SIGNING IT AND HE HAS BEEN ADVISED BY THE COMPANY TO DO SO AND HE HAS HAD THE OPPORTUNITY TO DO SO; AND HE HAS SIGNED IT KNOWINGLY AND VOLUNTARILY.
AGREED TO BY:
The Finish Line, Inc. | ||||||||
|
By: |
| ||||||
Gary D. Cohen | ||||||||
Printed: |
| |||||||
Its: |
| |||||||
Dated: |
|
Dated: |
|
13
EXHIBIT A
First Reaffirmation of Resignation and Separation Agreement
I, Gary D. Cohen, hereby reaffirm the terms of the Resignation and General Release Agreement previously entered into between The Finish Line, Inc. (Company), an Indiana corporation, and me on November , 2011, (the Resignation and General Release Agreement), a copy of which is attached hereto as Exhibit A and is incorporated by reference into this subsequent First Reaffirmation of the Resignation and General Release Agreement (First Reaffirmation). I hereby reaffirm that I have complied with all the terms of the Resignation and General Release Agreement and that I will continue to do so. I also reaffirm and agree to all the terms of the Resignation and General Release Agreement. This Reaffirmation shall not apply to rights or claims that may arise after the date the parties sign this First Reaffirmation.
BY SIGNING THIS FIRST REAFFIRMATION, I STATE THAT: I HAVE READ IT; I UNDERSTAND IT AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS AND POSSIBLE LEGAL AND/OR ADMINISTRATIVE CLAIMS; I AGREE TO ALL THE TERMS AND CONDITIONS CONTAINED WITHIN THE RESIGNATION AND GENERAL RELEASE AGREEMENT; I AM AWARE OF MY RIGHT TO CONSULT AN ATTORNEY BEFORE SIGNING IT AND THE COMPANY HAS ADVISED ME THAT I SHOULD DO SO AND I HAVE HAD THE OPPORTUNITY TO DO SO; I HAVE SEVEN (7) DAYS AFTER SIGNING TO REVOKE THIS REAFFIRMATION; AND I HAVE SIGNED THIS FIRST REAFFIRMATION KNOWINGLY AND VOLUNTARILY.
The Parties have each executed this First Reaffirmation on the dates indicated below.
AGREED TO BY:
The Finish Line, Inc. | ||||||||
|
By: |
| ||||||
Gary D. Cohen | ||||||||
Printed: |
| |||||||
Its: |
| |||||||
Dated: |
|
Dated: |
| |||||
|
||||||||
Witness |
|
|||||||
Dated: |
|
A-1
EXHIBIT B
Second Reaffirmation of Resignation and Separation Agreement
I, Gary D. Cohen, hereby reaffirm the terms of the Resignation and General Release Agreement previously entered into between The Finish Line, Inc. (Company), an Indiana corporation, and me on November , 2011, (the Resignation and General Release Agreement), a copy of which is attached hereto as Exhibit A and is incorporated by reference into this subsequent Second Reaffirmation of the Resignation and General Release Agreement (Second Reaffirmation). I hereby reaffirm that I have complied with all the terms of the Resignation and General Release Agreement and that I will continue to do so. I also reaffirm and agree to all the terms of the Resignation and General Release Agreement. This Second Reaffirmation shall not apply to rights or claims that may arise after the date the parties sign this Second Reaffirmation.
BY SIGNING THIS SECOND REAFFIRMATION, I STATE THAT: I HAVE READ IT; I UNDERSTAND IT AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS AND POSSIBLE LEGAL AND/OR ADMINISTRATIVE CLAIMS; I AGREE TO ALL THE TERMS AND CONDITIONS CONTAINED WITHIN THE RESIGNATION AND GENERAL RELEASE AGREEMENT; I AM AWARE OF MY RIGHT TO CONSULT AN ATTORNEY BEFORE SIGNING IT AND THE COMPANY HAS ADVISED ME THAT I SHOULD DO SO AND I HAVE HAD THE OPPORTUNITY TO DO SO; I HAVE SEVEN (7) DAYS AFTER SIGNING TO REVOKE THIS SECOND REAFFIRMATION; AND I HAVE SIGNED THIS SECOND REAFFIRMATION KNOWINGLY AND VOLUNTARILY.
The Parties have each executed this Second Reaffirmation on the dates indicated below.
AGREED TO BY:
The Finish Line, Inc. | ||||||||
|
By: |
| ||||||
Gary D. Cohen | ||||||||
Printed: |
| |||||||
Its: |
| |||||||
Dated: |
|
Dated: |
| |||||
|
||||||||
Witness |
|
|||||||
Dated: |
|
B-1
Exhibit C
All Outstanding Vested, Unvested, and Unexercised Equity Awards
Unvested, Unexercised Options Would Vest 100% if Terms of Separation Agreement are met |
Grant Date | Expiration Date | Shares | Exercise Price | Vested ? | |||||
03/11/08 | 03/11/18 | 14,000 | 4.510 | Yes | ||||||
03/26/09 | 03/26/19 | 18,229 | 6.295 | Yes | ||||||
03/26/09 | 03/26/19 | 24,308 | 6.295 | Yes | ||||||
03/11/10 | 03/11/20 | 5,500 | 13.105 | Yes | ||||||
03/11/10 | 03/11/20 | 8,251 | 13.105 | Yes | ||||||
03/11/10 | 03/11/20 | 11,001 | 13.105 | No | ||||||
03/28/11 | 03/28/21 | 3,009 | 18.895 | Yes | ||||||
03/28/11 | 03/28/21 | 6,018 | 18.895 | Yes | ||||||
03/28/11 | 03/28/21 | 9,027 | 18.895 | No | ||||||
03/28/11 | 03/28/21 | 12,036 | 18.895 | No | ||||||
Vested, Unexercised Options Are Vested Irrespective of Separation |
Grant Date | Expiration Date | Shares | Exercise Price | Vested ? | |||||
03/04/04 | 03/04/14 | 35,000 | 17.625 | Yes | ||||||
08/31/05 | 08/31/15 | 20,000 | 14.290 | Yes | ||||||
03/29/06 | 03/29/16 | 20,000 | 16.070 | Yes | ||||||
03/19/07 | 03/19/17 | 10,000 | 12.030 | Yes | ||||||
03/11/08 | 03/11/18 | 21,000 | 4.510 | Yes | ||||||
03/11/08 | 03/11/18 | 21,000 | 4.510 | Yes | ||||||
03/26/09 | 03/26/19 | 18,229 | 6.295 | Yes | ||||||
03/11/10 | 03/11/20 | 2,750 | 13.105 | Yes | ||||||
Time Based Restricted Shares Would Vest 100% if Terms of Separation Agreement are met |
Grant Date | Original Vest Date | Shares | Vested ? | ||||||
07/23/09 | 03/26/12 | 12,208 | Yes | |||||||
03/11/10 | 03/11/13 | 6,253 | Yes | |||||||
03/11/10 | 03/11/13 | 1 | Yes | |||||||
03/28/11 | 03/28/14 | 6,880 | No |
C-1
Exhibit 31.1
CERTIFICATION
I, Glenn S. Lyon, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of The Finish Line, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report), that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: December 22, 2011 | ||
By: |
/s/ Glenn S. Lyon | |
Glenn S. Lyon Chairman and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Edward W. Wilhelm, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of The Finish Line, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter fiscal in the case of an annual report), that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: December 22, 2011 | ||
By: |
/s/ Edward W. Wilhelm | |
Edward W. Wilhelm Executive Vice President, Chief Financial Officer |
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Each of the undersigned hereby certifies, in his capacity as an officer of The Finish Line, Inc. (the Company), for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
| The Quarterly Report of the Company on Form 10-Q for the thirteen and thirty-nine weeks ended November 26, 2011 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78); and |
| The information contained in such report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
Dated: December 22, 2011 | ||
By: |
/s/ Glenn S. Lyon | |
Glenn S. Lyon Chairman and Chief Executive Officer |
By: |
/s/ Edward W. Wilhelm | |
Edward W. Wilhelm Executive Vice-President, Chief Financial Officer |
A signed original of this written statement required by Section 906 has been provided to The Finish Line, Inc. and will be retained by The Finish Line, Inc. and forwarded to the Securities and Exchange Commission or its staff upon request.
Recent Accounting Pronouncements
|
9 Months Ended |
---|---|
Nov. 26, 2011
|
|
Recent Accounting Pronouncements | 4. Recent Accounting Pronouncements Recently issued accounting pronouncements did not, or are not believed by management to, have a material effect on the Company’s present or future consolidated financial statements. |