<PAGE>
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 May 31, 1996
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OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to _____________________
Commission File number 0-20184
The Finish Line, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 35-1537210
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(State or other jurisdiction (I.R.S. Employer identification number)
of incorporation or organization)
3308 North Mitthoeffer Road Indianapolis, Indiana 46236
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(Address of principal executive offices) (zip code)
317-899-1022
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(Registrant's telephone number, including area code)
______________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Shares of common stock outstanding at June 21, 1996:
Class A 6,721,012
Class B 4,934,537
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE FINISH LINE, INC.
BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
May 31, Feb 29,
1996 1996
-------- -------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,290 $ 1,686
Accounts receivable 2,220 1,099
Merchandise inventories 73,467 76,088
Deferred income taxes 1,639 1,608
Other 822 524
-------- --------
Total current assets 80,438 81,005
PROPERTY AND EQUIPMENT:
Land 315 315
Building 4,162 4,156
Leasehold improvements 28,786 26,898
Furniture, fixtures, and equipment 11,509 11,235
Construction in progress 478 596
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45,250 43,200
Less accumulated depreciation 12,687 11,441
-------- --------
32,563 31,759
OTHER ASSETS -
Deferred income taxes 2,275 2,208
-------- --------
Total assets $115,276 $114,972
======== ========
</TABLE>
See accompanying notes.
<PAGE>
THE FINISH LINE, INC.
BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
May 31, Feb 29,
1996 1996
-------- -------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable $ 22,234 $ 29,717
Notes payable to bank 14,700 9,500
Employee compensation and related payroll taxes 2,407 3,234
Accrued interest 93 56
Accrued income taxes 1,770 2,074
Accrued property and sales tax 2,026 1,869
Other liabilities and accrued expenses 1,873 2,102
-------- --------
Total current liabilities 45,103 48,552
LONG-TERM LIABILITIES -
Deferred rent payments 3,452 3,272
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,000 shares authorized; none issued -- --
Common Stock, $.01 par value
Class A:
Shares authorized - 20,000
Shares issued and outstanding - (May 31, 1996 - 4,105;
February 29, 1996 - 4,081) 41 41
Class B:
Shares authorized - 12,000
Shares issued and outstanding - (May 31, 1996 - 6,235;
February 29, 1996 - 6,235) 62 62
Additional paid-in capital 30,770 30,374
Retained earnings 35,848 32,671
-------- --------
Total stockholders' equity 66,721 63,148
-------- --------
Total liabilities and stockholders' equity $115,276 $114,972
======== ========
</TABLE>
See accompanying notes.
<PAGE>
THE FINISH LINE, INC.
STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended May 31,
--------------------------
1996 1995
---- ----
<S> <C> <C>
Net sales $71,744 $52,219
Cost of sales (including occupancy expenses) 50,212 36,341
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Gross profit 21,532 15,878
Selling, general, and administrative expenses 16,042 12,358
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Operating income 5,490 3,520
Interest expense 194 130
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Income before income taxes 5,296 3,390
Provision for federal and state income taxes 2,119 1,356
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Net income $ 3,177 $ 2,034
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Fully diluted net income per share $ .30 $ .20
======= =======
Fully diluted weighted average shares 10,668 10,355
======= =======
</TABLE>
See accompanying notes.
<PAGE>
THE FINISH LINE, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months ended May 31,
--------------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 3,177 $ 2,034
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 1,386 1,120
Deferred income taxes (98) 201
Gain on disposal of property and equipment (6) --
Changes in operating assets and liabilities:
Accounts receivable (1,121) (294)
Merchandise inventories 2,621 (6,067)
Other current assets (298) 30
Other assets -- (25)
Accounts payable (7,483) 2,975
Employee compensation and related payroll taxes (827) (976)
Accrued income taxes (304) (1,533)
Other liabilities and accrued expenses (35) (354)
Deferred rent payments 180 210
-------- --------
Net cash used in operating activities (2,808) (2,679)
INVESTING ACTIVITIES:
Purchases of property and equipment (2,197) (2,843)
Proceeds from disposal of property and equipment 13 62
-------- --------
Net cash used in investing activities (2,184) (2,781)
FINANCING ACTIVITIES:
Proceeds from short-term and long-term debt 33,100 28,075
Principal payments on short-term and long-term debt (27,900) (21,625)
Proceeds and tax benefits from exercise of stock options 396
-------- --------
Net cash provided by financing activities 5,596 6,450
-------- --------
Net increase in cash and cash equivalents 604 990
Cash and cash equivalents at beginning of period 1,686 978
-------- --------
Cash and cash equivalents at end of period $ 2,290 $ 1,968
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</TABLE>
See accompanying notes
<PAGE>
THE FINISH LINE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The accompanying unaudited financial statements of The Finish Line, Inc.
(the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair presentation, have been included.
The Company has experienced, and expects to continue to experience,
significant variability in sales and net income from quarter to quarter.
Therefore, the results of the interim periods presented herein are not
necessarily indicative of the results to be expected for any other interim
period or the full year.
These financial statements should be read in conjunction with the
financial statements and notes thereto for the year ended February 29, 1996.
2. Public Offering
The Company completed a secondary public offering (the "Secondary
Offering") of its Class A Common Stock on June 19, 1996 pursuant to which the
Company sold 1,300,000 shares of Class A Common Stock at an offering price of
$27.50 per share. Net proceeds to the Company from the Secondary Offering
(after deducting the underwriting discount of $1,781,000 and expenses estimated
at $401,000 incurred in connection with this Secondary Offering) are estimated
to be $33,568,000. These proceeds were used to repay bank indebtedness of
$15,000,000 and for general corporate purposes. As part of the Secondary
Offering, four selling stockholders (each an officer and director of the
Company) sold an aggregate of 1,300,000 shares of Class A Common Stock (which
were converted from Class B to Class A) at the same per share price of $27.50
less $1,781,000 for the underwriting discount. The Company has not and will not
receive any of the proceeds from the shares sold by the four selling
stockholders. The financial statements and other information reported herein do
not reflect the results of the Secondary Offering since it was completed
subsequent to May 31, 1996.
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table and subsequent discussion sets forth operating data
of the Company as a percentage of net sales for the periods indicated below.
<TABLE>
<CAPTION>
Three Months Ended May 31,
1996 1995
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(Unaudited)
<S> <C> <C>
Net Sales 100.0% 100.0%
Cost of sales (including occupancy expenses) 70.0 69.6
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Gross profit 30.0 30.4
Selling, general and administrative expenses 22.4 23.7
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Operating income 7.6 6.7
Interest expense .3 .2
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Income before federal and state income taxes 7.3 6.5
Provision for federal and state income taxes 2.9 2.6
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Net income 4.4% 3.9%
===== =====
</TABLE>
FIRST QUARTER ENDED 5/31/96 COMPARED TO FIRST QUARTER ENDED 5/31/95
Net sales increased 37.4% to $71.7 million for the quarter ended May 31,
1996 from $52.2 million for the quarter ended May 31, 1995. Of this increase,
$10.3 million was attributable to a 16.2% increase in the number of stores open
during the period from 197 at May 31, 1995 to 229 at May 31, 1996. The balance
of the increase was attributable to a $1.2 million increase in net sales from
the nine existing stores open only part of the first three months of last year
and a comparable store sales increase of 12.6% for the three months ended May
31, 1996 for those stores opened during the entire three months of last year.
Comparable net footwear sales for the quarter ended May 31, 1996 increased 14.0%
versus the quarter ended May 31, 1995. Comparable net activewear and
accessories increased 8.7% for the comparable period. Net sales per square foot
increased to $82 from $74 for the same period of the prior year.
Gross profit for the quarter ended May 31, 1996 was $21.5 million, an
increase of $5.7 million over the quarter ended May 31, 1995. During this same
period, gross profit decreased to 30.0% of net sales versus 30.4% for the prior
year. Of this .4% decrease, .9% was due to lower margins for products sold
which was partially offset by a .5% decrease in occupancy costs as a percentage
of net sales.
<PAGE>
Selling, general and administrative expenses increased $3.7 million
(29.8%) to $16.0 million (22.4% of net sales) for the quarter ended May 31, 1996
from $12.4 million (23.7% of net sales) for the quarter ended May 31, 1995.
This dollar increase was primarily attributable to the operating costs related
to operating 32 additional stores at May 31, 1996 versus May 31, 1995. The
decrease as a percentage of net sales is primarily a result of the comparable
net sales increase of 12.6% for the three month period ended May 31, 1996.
Interest expense increased to $194,000 (.3% of net sales) for the quarter
ended May 31, 1996, from $130,000 (.2% of net sales) for the quarter ended May
31, 1995, an increase of $64,000 or 49.2%. This increase resulted from a higher
average balance outstanding under the Company's bank line of credit due to an
increase in the number of stores in operation, the funding of new store
expansion and related inventory requirements.
The Company's provision for federal and state income taxes increased
$763,000 for the quarter ended May 31, 1996. The increase is due to the
increased level of income before income taxes for the quarter ended May 31,
1996, as the effective tax rate was 40% for each of the comparable quarters.
Fully diluted net income per share increased 50% to $.30 for the quarter
ended May 31, 1996 compared to fully diluted net income per share of $.20 for
the quarter ended May 31, 1995. Fully diluted weighted average shares
outstanding were 10,668,000 and 10,355,000 respectively during the quarters
ended May 31, 1996 and 1995.
Liquidity and Capital Resources
The Company had a net use of cash of $2.8 million from its operating
activities during the quarter ended May 31, 1996 as compared to a net use of
cash from operating activities of $2.7 million during the quarter ended May 31,
1995.
The Company had a net use of cash from its investing activities, primarily
in new store construction, of $2.2 million and $2.8 million for the quarters
ended May 31, 1996 and 1995, respectively. The Company borrowed a net $5.2
million from its bank line of credit for the quarter ended May 31, 1996 as
compared to $6.5 million for the same period in 1995. The Company completed a
secondary public offering of its Class A Common Stock on June 19, 1996. Net
proceeds to the Company from the offering after deducting underwriting discount
and expenses is estimated to be $33,568,000. See Note 2 of Notes to Financial
Statements for further discussion.
The Company had positive working capital of $35.3 million at May 31, 1996
which was an increase of $2.8 million from the positive working capital of $32.5
million at February 29, 1996.
Merchandise inventories were $73.5 million at May 31, 1996 compared to
$76.1 million at February 29, 1996. On a per square foot basis, merchandise
inventories at May 31, 1996 decreased 5.3% compared to May 31, 1995, and were
8.7% lower than at February 29, 1996. The Company believes present levels are
appropriate for the selling season.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings
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None.
ITEM 2: Changes in Securities
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None.
ITEM 3: Defaults Upon Senior Securities
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None.
ITEM 4: Submission of Matters to a Vote of Security-Holders
---------------------------------------------------
None.
ITEM 5: Other Information
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None.
ITEM 6: Exhibits and Reports on Form 8-K:
---------------------------------
(a) Exhibits
11 - Computation of Net Income Per Share
27 - Financial Data Schedule
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the quarterly
period ending May 31, 1996; however, the Company did file a report
on Form 8-K on June 5, 1996 with respect to a press release issued
by the Company on June 5, 1996.
<PAGE>
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE FINISH LINE, INC.
Date: June 26, 1996 By: /s/ Steven J. Schneider
------------------------
Steven J. Schneider
Vice President, Finance
and Chief Financial Officer
<PAGE>
EXHIBIT 11
COMPUTATION OF NET INCOME PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended May 31,
---------------------------
1996 1995
-------- --------
<S> <C> <C>
Primary
- -------
Average shares outstanding 10,323 10,315
Net effect of dilutive stock options - based on the treasury stock
method using average market price 280 9
======= =======
Total 10,603 10,324
======= =======
Net income $ 3,177 $ 2,034
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Per share amount $ .30 $ .20
======= =======
Fully Diluted
- -------------
Average shares outstanding 10,323 10,315
Net effect of dilutive stock options - based on the treasury
stock method using the higher of the average market price
for the period or the market price at the end of the period 345 40
======= =======
Total 10,668 10,355
======= =======
Net income $ 3,177 $ 2,034
======= =======
Per share amount $ .30 $ .20
======= =======
</TABLE>
NOTE: Average shares outstanding used for net income per share included in the
Company's financial statements reflect the effect of the stock options
granted since their effect is more than 3% dilutive. Only fully diluted
earnings per share have been disclosed in the Company's financial
statements as primary earnings per share is substantially the same.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE THREE MONTH PERIOD ENDED MAY 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> MAY-31-1996
<CASH> 2,290
<SECURITIES> 0
<RECEIVABLES> 2,220
<ALLOWANCES> 0
<INVENTORY> 73,467
<CURRENT-ASSETS> 80,438
<PP&E> 45,250
<DEPRECIATION> 12,687
<TOTAL-ASSETS> 115,276
<CURRENT-LIABILITIES> 45,103
<BONDS> 0
0
0
<COMMON> 103
<OTHER-SE> 66,680
<TOTAL-LIABILITY-AND-EQUITY> 115,276
<SALES> 71,744
<TOTAL-REVENUES> 71,744
<CGS> 50,212
<TOTAL-COSTS> 50,212
<OTHER-EXPENSES> 16,042
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 194
<INCOME-PRETAX> 5,296
<INCOME-TAX> 2,119
<INCOME-CONTINUING> 3,177
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,177
<EPS-PRIMARY> 0
<EPS-DILUTED> .30
</TABLE>
