FINISH LINE INC /DE/, 424B4, 1996-12-16

FINISH LINE INC /DE/
424B4, 1996-12-16
SHOE STORES

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<PAGE>

FILED PURSUANT TO RULE 424(b)(4)
REGISTRATION NO. 333-16259

PROSPECTUS
3,000,000 SHARES

[LOGO OF FINISH LINE(TM)]

CLASS A COMMON STOCK

------------

Of the 3,000,000 shares of Class A Common Stock offered hereby, 2,400,000
shares are being sold by The Finish Line, Inc. (the "Company") and 600,000
shares are being sold by certain stockholders. See "Selling Stockholders." The
Company will not receive any proceeds from the sale of shares by the Selling
Stockholders.

The Company's Class A Common Stock is traded on the Nasdaq National Market
under the symbol "FINL." The reported last sale price of the Company's Class A
Common Stock on the Nasdaq National Market on December 12, 1996 was $23.00 per
share. See "Price Range of Class A Common Stock."

The Company has two classes of authorized Common Stock: Class A Common
Stock, which is offered hereby, and Class B Common Stock. Holders of Class A
Common Stock are entitled to one vote per share and holders of Class B Common
Stock are entitled to ten votes per share. See "Description of Capital Stock--
Common Stock."

SEE "RISK FACTORS" ON PAGES 7 TO 9 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON STOCK.

------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS(2)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share........................ $22.50 $1.125 $21.375 $21.375
- -----------------------------------------------------------------------------------------
Total(3)......................... $67,500,000 $3,375,000 $51,300,000 $12,825,000
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
</TABLE>

(1) For information concerning indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses estimated at $425,000, of which approximately
$400,000 is payable by the Company and approximately $25,000 is payable by
the Selling Stockholders.
(3) The Selling Stockholders have granted the Underwriters a 30-day option to
purchase up to 450,000 additional shares of Class A Common Stock solely to
cover over-allotments, if any. See "Underwriting." If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Selling Stockholders will be $77,625,000,
$3,881,250 and $22,443,750, respectively.

------------

The shares of Class A Common Stock are being offered by the several
Underwriters named herein, subject to prior sales, when, as and if accepted by
them and subject to certain conditions. It is expected that certificates for
the shares of Class A Common Stock offered hereby will be available for
delivery on or about December 18, 1996 at the offices of Smith Barney Inc.,
333 West 34th Street, New York, New York 10001.

------------

SMITH BARNEY INC.
A.G. EDWARDS & SONS, INC.
OPPENHEIMER & CO., INC.
December 12, 1996
<PAGE>

[LOGO APPEARS HERE]

To create and operate a superior athletic specialty retail entity--by
combining conceptual innovation which includes an entertaining and exciting
retail environment, the most current information technologies and systems,
capable and focused management, and a dedicated and motivated work force
empowered with the proper resources--in order to provide customers a
beneficial and unique shopping experience.

- Corporate Mission Statement
2/96

[PICTURES]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN
THE OVER-THE-COUNTER MARKET, OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET
IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES AND EXCHANGE ACT OF 1934.
SEE "UNDERWRITING."
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the information
appearing elsewhere in this Prospectus and the documents and Financial
Statements and Notes thereto and other financial information included elsewhere
or incorporated by reference herein. Except as otherwise indicated, all
information contained in this Prospectus assumes that the Underwriters' over-
allotment option is not exercised. All share and per share data have been
retroactively adjusted to give effect to a two-for-one stock split effective at
the close of business on November 15, 1996. As used in this Prospectus, "fiscal
1992," "fiscal 1993," "fiscal 1994," "fiscal 1995" and "fiscal 1996" refer to
the Company's fiscal years ended February 29, 1992, February 28, 1993,
February 28, 1994, February 28, 1995 and February 29, 1996, respectively.
"Fiscal 1997," "fiscal 1998" and "fiscal 1999" refer to the Company's fiscal
years ending March 1, 1997, February 28, 1998 and February 27, 1999,
respectively.

THE COMPANY

The Finish Line, Inc. (the "Company" or "Finish Line") is one of the largest
specialty retailers of brand name athletic, outdoor and casual footwear,
activewear and accessories in the United States. As of November 30, 1996, the
Company operated 251 stores in 27 states, primarily in enclosed malls. A Finish
Line store generally carries the largest selection of men's, women's and
children's athletic and casual shoes in the mall in which it is located, as
well as a broad assortment of activewear and accessories all at competitive
prices. Brand names offered by the Company include Nike, Fila, adidas, Reebok,
Starter, Champion, Asics, Airwalk, Logo Athletic, Timberland and Converse.

The Company distinguishes itself from other athletic footwear specialty
retailers through its relatively large, mall-based store format. Finish Line's
stores average approximately 4,300 square feet, and its stores opened this
fiscal year through November 30, 1996 average approximately 6,200 square feet.
The Company strives to create an exciting and entertaining retail environment
by continually updating its unique and highly functional store designs, while
its larger store size permits greater product depth and merchandising
flexibility. Since activewear and accessories generally carry higher gross
margins, Finish Line devotes a greater percentage of its sales area to such
products than typical athletic footwear specialty stores. Activewear and
accessories accounted for approximately 33% of the Company's net sales in
fiscal 1996.

OPERATING STRATEGIES

. EMPHASIS ON CUSTOMER SERVICE AND CONVENIENCE. The Company is committed to
making shopping for athletic footwear and activewear an enjoyable experience
for its customers by providing convenient mall-based store locations with
highly functional store designs, offering competitive prices on brand name
products, maintaining optimal in-stock levels of merchandise and employing
knowledgeable and courteous sales associates.

. INVENTORY MANAGEMENT. The Company's advanced information and distribution
systems enable it to track inventory in each store by SKU on a daily basis,
giving the Company flexibility to merchandise its products effectively. In
addition, these systems allow the Company to respond promptly to changing
customer preferences and to maintain optimal inventory levels. The Company's
inventory management system features automatic replenishment driven by point-
of-sale data capture and a highly automated distribution center, which
enables the Company to ship merchandise to each store every third day.

. PRODUCT DIVERSITY; BROAD DEMOGRAPHIC APPEAL. The Company stocks its stores
with a combination of the newest high profile and brand name merchandise,
unique products manufactured exclusively for the Company, as well as
promotional and opportunistic purchases of other brand-name merchandise.
Product diversity, in combination with the Company's store formats and
commitment to customer service, is intended to attract a broad demographic
cross-section of customers.

3
<PAGE>

EXPANSION STRATEGIES

. NEW STORE OPENINGS. Since its initial public offering in June 1992, Finish
Line has expanded rapidly from 104 stores to 251 stores on November 30, 1996.
The Company has opened 34 of the 35 new stores planned to open in fiscal 1997
and expects to open 45 to 55 new stores in fiscal 1998, which will represent
increases of approximately 16% in fiscal 1997 and 18% to 22% in fiscal 1998.
As a result of the Company's strategy of opening larger stores, including
selected "large format" stores, the Company expects to have increased its
total square footage at an annual rate of approximately 25% in its current
fiscal year. As a result of the success of the Company's large format stores,
continued strengthening of the Company's infrastructure and current operating
results, the Company has recently revised its growth plan to accelerate its
growth in total square footage to 35% in both fiscal 1998 and fiscal 1999
from previously planned increases of 25% in each of those years. The Company
expects that its new stores will be in both new and existing geographic
markets.

. LARGER STORES. Over the past four years, the Company has adopted a strategy
of opening larger stores. This strategy allows for greater product depth and
merchandising flexibility, which the Company believes improves its ability to
compete against both mall-based and non-mall-based athletic retailers, and
will result in Finish Line's total square footage increasing at a faster rate
than its store count. The traditional stores which the Company currently has
firm commitments to open in fiscal 1998 average approximately 5,600 square
feet. Since September 1995, the Company has opened three stores ranging in
size from 20,000 to 25,000 square feet. These large format stores are upscale
athletic specialty stores designed and merchandised into distinct departments
to satisfy the needs of the entire family. These large format stores have
generated encouraging results. The Company believes that it can effectively
implement the merchandising presentation and atmosphere of this large format
concept to stores exceeding 10,000 square feet in order to, among other
things, take advantage of real estate opportunities. Based upon the expansion
of the large format concept, the Company expects to open approximately ten
additional stores utilizing this concept in fiscal 1998.

. COMMITMENT TO CONTINUALLY STRENGTHEN INFRASTRUCTURE. Over the past two years,
Finish Line has made a number of strategic infrastructure investments,
including enhancements to its management, store formats, and distribution and
information systems. Significant management additions and organizational
changes include recruiting additional senior management professionals with
significant industry experience and centralizing supervision of the Company's
footwear and activewear/accessories departments to improve communication and
coordination between the departments. In addition, staffs in both departments
were increased to allow buyers and merchandisers to focus more time and
attention on their product categories. The Company has also invested in its
management information systems and distribution center by implementing EDI
and radio frequency technology and is currently building a 130,000 square
foot addition to the distribution center which is expected to be completed by
June 1997. Management believes these infrastructure investments will improve
the efficiency of the Company's inventory management and its response time
and in-stock position thereby facilitating its continued growth.

The Company believes that its operating and expansion strategies have
contributed to its record of increasing net sales in each year since its
founding. Over the past five years, net sales have increased at a 25% compound
annual growth rate, and in fiscal 1996, net sales increased to $240.2 million,
a 25% improvement over the prior year period. The increase in fiscal 1996
included a 3.4% comparable store net sales gain resulting in an increase in net
sales per square foot to $308. This comparable store net sales growth, together
with improved expense controls and the leveraging of net sales increases over
its established infrastructure, have resulted in increased profits in recent
years. Net income increased to $9.7 million in fiscal 1996, a 15% improvement
over the prior year period.

Net sales for the six months ended August 31, 1996 were $162.8 million, a
39.3% increase over net sales of $116.8 million for the same period in the
prior year. Comparable store sales for the six month period ended August 31,
1996 increased 15.0% over the same period in the prior year. Net income for the
six months ended August 31, 1996 was $9.5 million, which represents a 79.5%
increase over net income of $5.3 million for the same period in the prior year
and approximates net income for the entire previous fiscal year.

The Company was incorporated in Delaware in 1992. The Company's principal
offices are located at 3308 N. Mitthoeffer Road, Indianapolis, Indiana 46236,
and its telephone number is (317) 899-1022.

4
<PAGE>

THE OFFERING

<TABLE>
<S> <C>
Class A Common Stock
Offered by:
Company............... 2,400,000 shares
Selling Stockholders.. 600,000 shares
Shares of Common Stock
Outstanding
after the Offering:(1)
Class A Common Stock.. 16,940,774 shares
Class B Common Stock.. 9,001,474 shares
----------
Total Class A and
Class B............ 25,942,248 shares
==========

Voting Rights........... One vote per share of Class A Common Stock and ten
votes per share of Class B Common Stock
Use of Proceeds......... To finance the accelerated expansion of the Company's
store base as well as for potential acquisitions and
general corporate purposes.
Nasdaq National Market
Symbol................. FINL
</TABLE>
- --------
(1) As of November 30, 1996. Excludes up to 840,852 shares of Class A Common
Stock which are subject to stock options under the Company's 1992 Employee
Stock Incentive Plan and Non-Employee Director Stock Option Plan.

5
<PAGE>

SUMMARY FINANCIAL INFORMATION

(IN THOUSANDS, EXCEPT PER SHARE AND STORE OPERATING DATA)

<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------------------
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1992(1) 1993(1) 1994 1995 1996
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Net sales.......... $98,420 $129,547 $157,011 $191,623 $240,155
Cost of sales
(including
occupancy
expenses)......... 65,246 85,724 107,491 132,726 168,912
------- -------- -------- -------- --------
Gross profit....... 33,174 43,823 49,520 58,897 71,243
Selling, general
and administrative
expenses.......... 22,245 28,457 36,678 44,548 54,254
------- -------- -------- -------- --------
Operating income... 10,929 15,366 12,842 14,349 16,989
Interest expense -
net............... 821 467 184 317 892
------- -------- -------- -------- --------
Income before
income taxes...... 10,108 14,899 12,658 14,032 16,097
Provision for
income taxes...... 4,043 5,960 5,063 5,618 6,439
------- -------- -------- -------- --------
Net income......... $ 6,065 $ 8,939 $ 7,595 $ 8,414 $ 9,658
======= ======== ======== ======== ========
Fully diluted net
income per
share(2).......... $ .34 $ .47 $ .37 $ .41 $ .47
======= ======== ======== ======== ========
Weighted average
shares(2)(3)...... 17,654 18,974 20,634 20,630 20,712
======= ======== ======== ======== ========
SELECTED STORE
OPERATING DATA:
Number of stores:
Opened during
period............ 20 27 35 30 35
Closed during
period............ 4 1 1 4 5
Open at end of
period............ 104 130 164 190 220
Total square
feet(4)........... 340,362 435,784 565,588 691,831 870,340
Average square feet per store(4). 3,273 3,352 3,449 3,641 3,956
Net sales per
square foot for
stores open entire
period............ $ 307 $ 324 $ 316 $ 300 $ 308
Increase (decrease)
in comparable
store net
sales(5)(6)....... 5.2% 8.3% (2.3)% 1.7% 3.4%
<CAPTION>
SIX MONTHS ENDED
---------------------
AUGUST 31, AUGUST 31,
1995 1996
---------- ----------
<S> <C> <C>
INCOME STATEMENT
DATA:
Net sales.......... $116,803 $162,750
Cost of sales
(including
occupancy
expenses)......... 81,236 111,755
---------- ----------
Gross profit....... 35,567 50,995
Selling, general
and administrative
expenses.......... 26,373 35,079
---------- ----------
Operating income... 9,194 15,916
Interest expense -
net............... 359 57
---------- ----------
Income before
income taxes...... 8,835 15,859
Provision for
income taxes...... 3,534 6,344
---------- ----------
Net income......... $ 5,301 $ 9,515
========== ==========
Fully diluted net
income per
share(2).......... $ .26 $ .42
========== ==========
Weighted average
shares(2)(3)...... 20,706 22,468
========== ==========
SELECTED STORE
OPERATING DATA:
Number of stores:
Opened during
period............ 17 17
Closed during
period............ 3 2
Open at end of
period............ 204 235
Total square
feet(4)........... 768,987 993,841
Average square feet per store(4). 3,770 4,229
Net sales per
square foot for
stores open entire
period............ $ 160 $ 182
Increase (decrease)
in comparable
store net
sales(5)(6)....... 2.7% 15.0%
</TABLE>

<TABLE>
<CAPTION>
AUGUST 31, 1996
--------------------
AS
ACTUAL ADJUSTED(7)
-------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $ 75,246 $126,146
Total assets.............................................. 163,015 213,915
Total debt................................................ -- --
Stockholders' equity...................................... 107,104 158,004
</TABLE>
- -------
(1) Financial information presented for fiscal 1992 and fiscal 1993 includes
pro forma adjustments as reflected in notes 1 through 3 to "Selected
Financial Data."
(2) Adjusted to give effect to the November 15, 1996 two-for-one stock split.
(3) Consists of weighted average common and common equivalent shares
outstanding for the period.
(4) Computed as of the end of each period. Calculation for fiscal 1996 includes
the Circle Centre Mall store which is 20,191 square feet in size.
Calculation for the six months ended August 31, 1996 includes the Circle
Centre Mall store, the Walden Galleria Mall store and the Park Meadows Mall
store which are 20,191, 24,749 and 23,520 square feet in size,
respectively. Without inclusion of these three stores, which are
significantly larger than traditional stores, average square feet per store
would have been 3,882 at February 29, 1996 and 3,989 at August 31, 1996.
(5) Calculated using only those stores that were open for the full current
fiscal period and were also open for the full prior fiscal period.
(6) The increase in comparable store net sales is based on the actual number of
days (generally 365 days) in each year. 1996 and 1992 were leap years with
366 days. If 365 days of sales were used for fiscal 1996, the increase in
comparable store net sales would have been 3.1%. If 365 days of sales were
used for fiscal 1992, the increase in comparable store net sales would have
been 8.9% and 4.6% for fiscal 1993 and 1992, respectively.
(7) Adjusted to give effect to this offering and the application of the net
proceeds therefrom. See "Use of Proceeds."

6
<PAGE>

RISK FACTORS

This Prospectus, including the documents incorporated by reference herein,
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended ("Securities Act"). Also, documents
subsequently filed by the Company with the Securities and Exchange Commission
and incorporated herein by reference will contain forward-looking statements.
Actual results could differ materially from those projected in the forward-
looking statements as a result of the risk factors set forth below and the
matters set forth or incorporated in the Prospectus generally. The Company
cautions the reader, however, that this list of factors may not be exhaustive,
particularly with respect to future filings. In analyzing an investment in the
securities offered hereby, prospective investors should carefully consider,
along with the other matters referred to herein, the risk factors described
below.

DEPENDENCE ON MAJOR SUPPLIERS; PRODUCT AVAILABILITY

The Company purchased approximately 70% and 80% of its merchandise in fiscal
1995 and fiscal 1996, respectively, from its five largest suppliers including
approximately 40% and 50% from Nike in such years. For the first six months of
fiscal 1997, the five largest suppliers represented approximately 90% of all
purchases and Nike represented approximately 67% of all purchases. The Company
expects Nike to continue to account for a larger percentage of its purchases
in fiscal 1997 compared to fiscal 1996. The Company's inability to obtain
merchandise in a timely manner from major suppliers (particularly Nike) could
have a material adverse effect upon the Company's operations and financial
condition. In addition, the Company's ability to implement its accelerated
growth plan could be limited by the lack of such merchandise.

Certain merchandise that is high profile and in high demand is limited by
the suppliers based upon the suppliers' internal criteria. Although the
Company has been able to purchase sufficient quantities of this merchandise in
the past, there can be no assurance that the Company will continue to be
allocated sufficient amounts of such merchandise in the future. In addition,
because the Company's suppliers have a substantial amount of their product
manufactured in foreign countries, the Company's ability to obtain sufficient
quantities of merchandise on favorable terms may be affected by fluctuations
in currency exchange rates and by governmental regulations and economic, labor
and other conditions in the countries from which the Company's suppliers
obtain their product. The People's Republic of China is a significant ultimate
source of the Company's footwear and apparel merchandise. Revocation by the
United States of the "most favored nation," non-discriminatory trading status
of China could result in a substantial increase in tariff rates on goods
imported from China and, therefore, could adversely affect the Company's
operations. In addition, trade and other sanctions in the form of retaliatory
duties or otherwise, which have and continue to be threatened against China,
could restrict or eliminate certain imports from China and thereby adversely
affect the Company's operations.

MERCHANDISE TRENDS

Because the Company typically orders merchandise up to nine months prior to
delivery, the Company's success depends in part on its ability to anticipate
and respond to changing merchandise trends and consumer demands in a timely
manner. Accordingly, any failure by the Company to identify and respond to
emerging trends could adversely affect consumer acceptance of the merchandise
in the Company's stores, which in turn could adversely affect the Company's
business, financial condition and results of operations. In addition, if the
Company miscalculates either the market for the merchandise in its stores or
its customers' purchasing habits, it may be faced with a significant amount of
unsold inventory, which could have an adverse effect on the Company's
financial condition and results of operations.

FUTURE GROWTH

The Company has experienced significant growth in net sales, from $98.4
million in fiscal 1992 to $240.2 million in fiscal 1996, and from $169.5
million for the nine months ended November 30, 1995 to $235.8 million for the
nine months ended November 30, 1996. Such growth has been a result of the
increase in

7
<PAGE>

the number of Company stores, the success of the Company's large format
stores, continued strengthening of the Company's infrastructure and increases
in sales and net income from existing stores. The future sales growth of the
Company will continue to depend on these factors. There can be no assurance
that the Company will be able to lease favorable store sites on satisfactory
terms and conditions, to hire and retain competent personnel to construct and
open stores on a timely basis, or to operate the stores profitably, or that
sales from existing stores will increase. See "Business--Expansion
Strategies."

RETAIL INDUSTRY; SEASONALITY

The Company's sales could be adversely affected by a weak retail
environment. Footwear and activewear retailers are subject to general economic
conditions and purchases of footwear and activewear may decline during
recessionary periods. In addition, the Company's business tends to be seasonal
with a large percentage of annual sales occurring during the "back-to-school"
and year-end holiday periods and is also affected by adverse weather
conditions. An economic downturn during these periods could adversely affect
the Company to a greater extent than if such downturn occurred at other times
of the year. The Company's ability to achieve a high level of sales is
dependent in part on a high volume of mall traffic. Mall traffic may also be
adversely affected by economic downturns and by poor performance by or the
closing of "anchor" department stores.

DEPENDENCE ON KEY PERSONNEL

The Company's future success depends to a significant extent on the efforts
and abilities of its executive officers. The loss of the services of certain
of these individuals could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company believes
that its future success also will depend significantly upon its ability to
attract, motivate and retain additional highly skilled managerial personnel.
Competition for such personnel is intense, and there can be no assurance that
the Company will be successful in attracting, assimilating and retaining the
personnel it requires to grow and operate profitably. The Company does not
have employment or non-compete agreements with its executive officers. See
"Management--Executive Officers and Directors."

COMPETITION

The retail footwear, activewear and accessories business is highly
competitive. Many of the stores with which the Company competes are units of
large national or regional chains that have substantially greater financial
and other resources than the Company. Among these stores are large athletic
"superstores," some of which are owned by major suppliers of the Company. In
many cases, the Company's stores are located in shopping centers or malls in
which one or more of its competitors also has a store. Many of the items sold
by the Company are sold by department stores, national and regional full line
sporting goods stores, athletic footwear specialty stores, athletic footwear
superstores, discount stores, traditional superstores and mass merchandisers.
A significant change in price, level of promotion or other strategies by the
Company's competitors could have a material adverse effect on the Company's
results of operations. See "Business--Competition."

CONTROL OF COMPANY

The Selling Stockholders (all of whom are officers and directors of the
Company) and their family members own substantially all of the outstanding
Class B Common Stock. As a result, upon the consummation of this offering the
Selling Stockholders and their family members will still have approximately
84% of the aggregate voting power of the Company, which will allow them to
control all actions to be taken by the stockholders, including the election of
all directors to the Board of Directors. See "Selling Stockholders" and
"Description of Capital Stock." This may have the effect of discouraging
offers to acquire the Company.

8
<PAGE>

EMPLOYEE COSTS

Congress recently passed legislation which raised the federal minimum wage
that employers must pay most employees and which will raise such minimum wage
again in 1997. As of October 31, 1996, the Company employed approximately
3,700 employees on a part-time basis and 1,100 employees on a full-time basis.
Management believes that if additional legislation was passed that
substantially raised the minimum wage, the Company would have to raise the
wages for a substantial number of its employees, thereby having an adverse
effect on the Company's results of operations if such increased costs could
not be offset by a reduction in other costs or be passed on to consumers
through retail price increases.

VOLATILITY OF STOCK PRICE

The trading price of the Class A Common Stock could be subject to wide
fluctuations in response to variations in the Company's quarterly operating
results, changes in earnings estimates by analysts, conditions in the
Company's business or general market or economic conditions. In addition, in
recent years the stock market has experienced extreme price and volume
fluctuations. Such market fluctuations could have a material adverse effect on
the market price for the Common Stock.

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
2,400,000 shares of Class A Common Stock offered by it, after deducting the
underwriting discount and offering expenses payable by the Company, are
estimated to be $50,900,000. The Company intends to use the net proceeds of
this offering to finance the accelerated expansion of the Company's store base
as well as for potential acquisitions and general corporate purposes. The
Company will not receive any proceeds from the sale of shares by the Selling
Stockholders.

PRICE RANGE OF CLASS A COMMON STOCK

The Class A Common Stock has been traded on Nasdaq National Market
("Nasdaq") since the Company's initial public offering in June 1992. The
following table sets forth for the periods indicated the range of high and low
sale prices of the Class A Common Stock as reported by Nasdaq, adjusted to
give effect to the Company's two-for-one stock split effective at the close of
business on November 15, 1996.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Fiscal 1995
First Quarter............................................ $ 4.38 $ 2.88
Second Quarter........................................... 5.25 2.94
Third Quarter............................................ 5.50 3.38
Fourth Quarter........................................... 4.00 3.19
Fiscal 1996
First Quarter............................................ $ 4.63 $ 2.88
Second Quarter........................................... 6.38 3.94
Third Quarter............................................ 4.82 4.00
Fourth Quarter........................................... 4.63 3.25
Fiscal 1997
First Quarter............................................ $14.19 $ 4.38
Second Quarter........................................... 16.00 9.88
Third Quarter............................................ 24.63 15.63
Fourth Quarter (through December 12, 1996)............... 26.50 22.75
</TABLE>

9
<PAGE>

On December 12, 1996, the reported last sale price of the Class A Common
Stock, as reported by Nasdaq, was $23.00 per share. As of December 12, 1996,
the approximate number of holders of record of Class A Common Stock was
approximately 260. The Company believes that the number of beneficial holders
of its Class A Common Stock was in excess of 500 as of that date.

DIVIDEND POLICY

Since the Company's initial public offering in June 1992, the Company has
not declared any dividends and does not anticipate paying cash dividends on
its Common Stock in the foreseeable future. The payment of any future
dividends will be at the discretion of the Company's Board of Directors and
will depend upon, among other things, future earnings, operations, capital
requirements, the general financial condition of the Company and general
business conditions. In addition, the Company's unsecured committed loan
agreement contains a provision limiting the Company's ability to pay
dividends.

CAPITALIZATION

The following table sets forth the short-term debt and capitalization of the
Company at August 31, 1996, and as adjusted to give effect to the sale of the
2,400,000 shares of Class A Common Stock offered by the Company hereby and the
application by the Company of the estimated net proceeds therefrom as set
forth under "Use of Proceeds." This table should be read in conjunction with
the Financial Statements and Notes thereto included elsewhere herein.

<TABLE>
<CAPTION>
AUGUST 31, 1996
-------------------------
ACTUAL AS ADJUSTED
----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt....................................... $ -- $ --
=========== ===========
Long-term debt........................................ $ -- $ --
----------- -----------
Stockholders' equity:
Preferred Stock, par value $.01 per share, 1,000,000
shares authorized; none outstanding................ -- --
Common Stock, par value $.01 per share, 42,000,000
shares authorized:
Class A Common Stock, 30,000,000 shares
authorized; 13,464,000 shares outstanding
(16,464,000 as adjusted)(1)(2)................... 135 165
Class B Common Stock, 12,000,000 shares
authorized; 9,869,000 outstanding (9,269,000 as
adjusted)(1)..................................... 99 93
Additional paid-in capital(1)....................... 64,684 115,560
Retained earnings................................... 42,186 42,186
----------- -----------
Total stockholders' equity........................ 107,104 158,004
----------- -----------
Total capitalization............................ $ 107,104 $ 158,004
=========== ===========
</TABLE>
- --------
(1) Adjusted to give pro forma effect to the Company's two-for-one stock split
effective at the close of business on November 15, 1996.
(2) Excludes up to 840,852 shares of Class A Common Stock which are subject to
stock options under the Company's 1992 Employee Stock Incentive Plan and
Non-Employee Director Stock Option Plan.

10
<PAGE>

SELECTED FINANCIAL DATA

(IN THOUSANDS, EXCEPT PER SHARE AND STORE OPERATING DATA)

The selected financial data in the following table for the five years in the
period ended February 29, 1996 are derived from the financial statements of
the Company, which have been audited by Ernst & Young LLP, independent
auditors. The selected financial data for the six months ended August 31, 1995
and 1996 have been derived from the Company's unaudited financial statements.
The selected store operating data and the pro forma income statement data for
the periods set forth below are unaudited. The data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Financial Statements and Notes thereto and
other financial information included elsewhere herein.

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
----------------------------------------------------------------- ---------------------
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 29, AUGUST 31, AUGUST 31,
1992 1993 1994 1995 1996 1995 1996
------------ ------------ ------------ ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.............. $98,420 $129,547 $157,011 $191,623 $240,155 $116,803 $162,750
Cost of sales
(including occupancy
expenses)............. 65,246 85,724 107,491 132,726 168,912 81,236 111,755
------- -------- -------- -------- -------- -------- --------
Gross profit........... 33,174 43,823 49,520 58,897 71,243 35,567 50,995
Selling, general and
administrative
expenses(1)........... 23,642 28,667 36,678 44,548 54,254 26,373 35,079
------- -------- -------- -------- -------- -------- --------
Operating income....... 9,532 15,156 12,842 14,349 16,989 9,194 15,916
Interest expense - net. 821 467 184 317 892 359 57
------- -------- -------- -------- -------- -------- --------
Income before income
taxes................. 8,711 14,689 12,658 14,032 16,097 8,835 15,859
Provision for income
taxes................. 97 2,812(2) 5,063 5,618 6,439 3,534 6,344
------- -------- -------- -------- -------- -------- --------
Net income............. $ 8,614 $ 11,877 $ 7,595 $ 8,414 $ 9,658 $ 5,301 $ 9,515
======= ======== ======== ======== ======== ======== ========
PRO FORMA INCOME
STATEMENT DATA(3):
Pro forma income before
income taxes.......... $10,108 $ 14,899
Pro forma provision for
income taxes.......... 4,043 5,960
------- --------
Pro forma net income... $ 6,065 $ 8,939
======= ========
SHARE DATA:
Fully diluted net
income per share (pro
forma for fiscal 1992
and 1993)(3)(4)....... $ .34 $ .47 $ .37 $ .41 $ .47 $ .26 $ .42
======= ======== ======== ======== ======== ======== ========
Weighted average
shares(4)(5).......... 17,654 18,974 20,634 20,630 20,712 20,706 22,468
======= ======== ======== ======== ======== ======== ========
SELECTED STORE OPERATING
DATA:
Number of stores:
Opened during period.. 20 27 35 30 35 17 17
Closed during period.. 4 1 1 4 5 3 2
Open at end of period. 104 130 164 190 220 204 235
Total square feet(6)... 340,362 435,784 565,588 691,831 870,340 768,987 993,841
Average square feet per
store(6).............. 3,273 3,352 3,449 3,641 3,956 3,770 4,229
Net sales per square
foot for stores open
entire period......... $ 307 $ 324 $ 316 $ 300 $ 308 $ 160 $ 182
Increase (decrease) in
comparable store net
sales(7)(8)........... 5.2% 8.3% (2.3)% 1.7% 3.4% 2.7% 15.0%
BALANCE SHEET DATA:
Working capital........ $ 7,061 $ 24,066 $ 28,132 $ 30,050 $ 32,453 29,635 $ 75,246
Total assets........... 41,102 60,688 72,884 88,535 114,972 107,147 163,015
Total debt............. 9,555 2,612 2,000 5,025 9,500 4,500 --
Redeemable common
stock................. 1,997 -- -- -- -- -- --
Stockholders' equity... 14,086 37,461 45,073 53,487 63,148 58,791 107,104
</TABLE>

11
<PAGE>

- --------
(1) Includes executive compensation expense for the Selling Stockholders of
$2,647, $1,454, $1,147, $1,348 and $1,159, in fiscal 1992, 1993, 1994,
1995 and 1996, respectively, and $576 and $498 in the six months ended
August 31, 1995 and August 31, 1996, respectively.
(2) Reflects the effect of the Company's treatment as a C corporation rather
than an S corporation after June 11, 1992, including a one-time deferred
tax credit of $1,108.
(3) Reflects the effect on the historical income statement data for fiscal
1992 and fiscal 1993 as if the Company (i) had paid its four Selling
Stockholders (who are also executive officers) annual executive
compensation aggregating $1,250 and (ii) had been treated as a
C corporation rather than an S corporation for income tax purposes, with
an assumed effective tax rate of 40%.
(4) Adjusted to give effect to the November 15, 1996 two-for-one stock split.
(5) Consists of weighted average common and common equivalent shares
outstanding for the period.
(6) Computed as of the end of each period. Calculation for fiscal 1996
includes the Circle Centre Mall store which is 20,191 square feet in size.
Calculation for the six months ended August 31, 1996 includes the Circle
Centre Mall store, the Walden Galleria Mall store and the Park Meadows
Mall store which are 20,191, 24,749 and 23,520 square feet in size,
respectively. Without inclusion of these three stores, which are
significantly larger than traditional stores, average square feet per
store would have been 3,882 at February 29, 1996 and 3,989 at August 31,
1996.
(7) Calculated using only those stores that were open for the full current
fiscal period and were also open for the full prior fiscal period.
(8) The increase in comparable store net sales is based on the actual number
of days (generally 365 days) in each year. 1996 and 1992 were leap years
with 366 days. If 365 days of sales were used for 1996, the increase in
comparable store net sales would have been 3.1%. If 365 days of sales were
used for 1992, the increase in comparable store net sales would have been
8.9% and 4.6% for fiscal 1993 and 1992, respectively.

RECENT DEVELOPMENTS

On December 4, 1996, the Company announced net sales results for the third
quarter ended November 30, 1996. The Company reported net sales of $73.0
million for the third quarter of fiscal 1997, an increase of 38% over net
sales of $52.7 million for the same quarter of the prior year. The Company's
comparable store net sales for the third quarter of fiscal 1997 increased 17%
versus a 1% increase for the same period of the prior year. Comparable
footwear net sales increased approximately 16% and comparable
activewear/accessories net sales increased 19% during the same period.

The Company has experienced, and expects to continue to experience,
significant variability in net sales and comparable net sales from quarter to
quarter. Therefore, the results of the periods presented in the prior
paragraph are not necessarily indicative of the results to be expected for any
other period or the full fiscal year.

12
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the
information set forth under "Selected Financial Data" and the Financial
Statements and Notes thereto included elsewhere herein.

RESULTS OF OPERATIONS

The Company's net sales grew from $98.4 million in fiscal 1992 to $240.2
million in fiscal 1996 as a result of the Company's store expansion program
and increased sales from existing stores. During that period, the number of
stores increased from 104 to 220, total square feet increased from 340,362 to
870,340 and sales per square foot ranged from $307 in fiscal 1992, to a high
of $324 in fiscal 1993 and was $308 in fiscal 1996. The Company believes the
growth in sales per square foot through fiscal 1993 was attributable to
several factors including improvements in the Company's management and control
systems, increased availability and demand for higher priced athletic
footwear, and greater emphasis on opening stores in higher traffic mall
locations, which resulted in greater sales from less square footage.

The decrease in sales per square foot in fiscal 1994 was a result of a
decrease in the average selling price of footwear, a more competitive and
promotional retail environment and a 2.9% increase in the average square feet
per store from 3,352 in fiscal 1993 to 3,449 in fiscal 1994. The decrease in
the average selling price of footwear in fiscal 1994 was in part a reflection
of an apparent trend in the fashion portion of the business toward a non-
athletic look and by a more competitive and promotional retail environment.
These factors also negatively affected the Company's gross margin in fiscal
1994. The continued decrease in sales per square foot in fiscal 1995 was a
result of the continued competitive and promotional retail environment along
with a 5.6% increase in the average square feet per store from 3,449 in fiscal
1994 to 3,641 in fiscal 1995. The increase in sales per square foot in fiscal
1996 was a result of the 3.4% increase in comparable store net sales along
with improved performance from the 30 existing stores open only part of fiscal
1995.

The Company's comparable store net sales growth was 5.2%, 8.3%, (2.3)%, 1.7%
and 3.4% in fiscal 1992, 1993, 1994, 1995, and 1996, respectively. The
comparable store net sales increase of 3.4% in fiscal 1996 consisted of an
increase of 1.0% in footwear and 8.9% in activewear/accessories. On a
quarterly basis, comparable store sales increases (decreases) for fiscal 1996
were 6.8%, (0.6)%, 0.6% and 7.0% for the first, second, third and fourth
quarters, respectively. The comparable store sales increases for the first and
second quarter of fiscal 1997 were 12.6% and 16.9%, respectively.

The table below sets forth operating data of the Company as a percentage of
net sales for the periods indicated below.

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
-------------------------------------- ---------------------
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29, AUGUST 31, AUGUST 31,
1994 1995 1996 1995 1996
------------ ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.............. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales
(including occupancy
expenses)............. 68.5 69.3 70.3 69.5 68.7
----- ----- ----- ----- -----
Gross profit........... 31.5 30.7 29.7 30.5 31.3
Selling, general and
administrative
expenses.............. 23.4 23.2 22.6 22.6 21.6
----- ----- ----- ----- -----
Operating income....... 8.1 7.5 7.1 7.9 9.7
Interest expense
(income) - net........ 0.1 0.2 0.4 .3 --
----- ----- ----- ----- -----
Income before income
taxes................. 8.0 7.3 6.7 7.6 9.7
Provision for income
taxes................. 3.2 2.9 2.7 3.1 3.9
----- ----- ----- ----- -----
Net income............. 4.8% 4.4% 4.0% 4.5% 5.8%
===== ===== ===== ===== =====
</TABLE>

13
<PAGE>

SIX MONTHS ENDED AUGUST 31, 1996 COMPARED TO SIX MONTHS ENDED AUGUST 31, 1995

Net sales increased 39.3% ($45.9 million) to $162.8 million for the six
months ended August 31, 1996 from $116.8 million for the six months ended
August 31, 1995. Of this increase, $21.9 million was attributable to a 15.2%
increase in the number of stores open (35 stores opened less 4 stores closed)
during the period from 204 at August 31, 1995 to 235 at August 31, 1996. The
balance of the increase was due to a $5.4 million increase in net sales from
the 17 stores open only part of the first six months of last year and a
comparable store sales increase of 15.0% for the six months ended August 31,
1996. Comparable net footwear sales for the six months ended August 31, 1996
increased approximately 14.8%. Comparable net activewear and accessories
increased approximately 15.4% for the comparable period. Net sales per square
foot increased to $182 for the current six month period from $160 for the same
period of the prior year.

Gross profit for the six months ended August 31, 1996 was $51.0 million, an
increase of $15.4 million over the six months ended August 31, 1995. During
this same period, gross profit increased to 31.3% of net sales versus 30.5%
for the prior year. Of this .8% increase, .6% was due to a decrease in
occupancy expenses as a percentage of net sales and a .2% increase in margins
for products sold.

Selling, general and administrative expenses for the six months ended August
31, 1995 were $26.4 million, an increase of $8.7 million or 33.0% over the
same period in the prior year, and decreased to 21.6% from 22.6% as a
percentage of net sales. This dollar increase was primarily attributable to
the operating costs related to operating 31 additional stores at August 31,
1996 versus August 31, 1995. The decrease as a percentage of sales is
primarily a result of the comparable store net sales increase of 15.0% for the
six months ended August 31, 1996 compared to the same period in the prior year
along with improved expense controls as well as the application of certain
administrative and other overhead costs over an increased net sales base.

Net interest expense decreased to $57,000 for the six months ended August
31, 1996, from $359,000 for the six months ended August 31, 1995, a decrease
of $302,000 or 84.1%. This decrease resulted from the proceeds of the
secondary offering being used to repay all existing outstanding indebtedness
under its unsecured committed Loan Agreement with the remainder of the
proceeds being invested in short term interest bearing instruments.

The Company's provision for federal and state income taxes increased $2.8
million for the six months ended August 31, 1996. The increase is due to the
increased level of income before income taxes for the six months ended August
31, 1996, as the effective tax rate was 40% for each of the comparable six
month periods.

Fully diluted net income per share increased 61.5% to $.42 for the six
months ended August 31, 1996 compared to fully diluted net income per share of
$.26 for the six months ended August 31, 1995. Weighted average shares
outstanding were 22,468,000 and 20,706,000, respectively, for the six months
ended August 31, 1996 and 1995.

FISCAL 1996 COMPARED TO FISCAL 1995

Net sales for fiscal 1996 were $240.2 million, an increase of $48.6 million
or 25.3% over fiscal 1995. Of this increase, $29.0 million was attributable to
a 15.8% increase in the number of stores open during the period from 190 at
the end of fiscal 1995 to 220 at the end of fiscal 1996 and a corresponding
25.8% increase in total square footage. The balance of the increase in net
sales was attributable to (i) an increase of $14.7 million from the 30
existing stores open only part of fiscal 1995, (ii) an increase of $7.0
million in net sales from existing stores open the entire twelve months of
fiscal 1996 and 1995 and (iii) less $2.1 million in net sales for stores
closed in fiscal 1996 but open for the entire twelve months of fiscal 1995.
During fiscal 1996, comparable store net sales increased 3.4% compared to
fiscal 1995. Comparable net footwear sales increased 1.0% for fiscal 1996 and
comparable net activewear and accessories sales increased 8.9%. Net sales per
square foot increased in fiscal 1996 to $308 from $300 in fiscal 1995. The
average selling price of footwear increased approximately 1.3% in fiscal 1996.

14
<PAGE>

Gross profit, which is product margin less store occupancy costs, for fiscal
1996 was $71.2 million, an increase of $12.3 million, or 21.0%, over fiscal
1995. As a percentage of net sales, gross profit decreased to 29.7% in fiscal
1996 from 30.7% in fiscal 1995. Of the 1.0% decrease, 0.6% was due to lower
margins for products sold, 0.2% was due to an increase in the Company's
reserve for inventory shrink and the remaining 0.2% decrease was due to an
increase in occupancy costs as a percentage of net sales. The 0.6% decrease in
product margin was primarily due to a competitive and promotional retail
environment, particularly in the year-end holiday selling season.

Selling, general and administrative expenses in fiscal 1996 were $54.3
million, an increase of $9.7 million or 21.8% over fiscal 1995, and decreased
to 22.6% from 23.2% as a percentage of net sales. The dollar increase was
primarily attributable to the operating costs related to the 35 additional
stores opened during fiscal 1996. The decrease as a percentage of sales is
primarily a result of the comparable store net sales increase of 3.4% for
fiscal 1996 along with improved expense controls as well as the application of
certain administrative and other overhead costs over an increased net sales
base.

Net interest expense for fiscal 1996 was $892,000, an increase of $575,000
or 181.4%. This increase resulted from a higher average balance outstanding on
the Company's Facility Agreement due to an increase in the number of stores in
operation, the funding of new store expansion and related inventory
requirements, and an increase in the merchandise inventories on a per square
foot basis. Partially offsetting the increase in interest expense was a
decrease in the Company's average interest rate on outstanding borrowings.

Income tax expense was $6.4 million for fiscal 1996 compared to $5.6 million
for fiscal 1995. The increase in the Company's provision for federal and state
taxes in fiscal 1996 is due to the increased level of income before income
taxes as the effective tax rate was 40% for each of the comparable periods.

Fully diluted net income per share increased 14.6% to $.47 for fiscal 1996
compared to $.41 for fiscal 1995. Weighted average shares outstanding were
20,712,000 and 20,630,000, respectively, for fiscal 1996 and fiscal 1995.

FISCAL 1995 COMPARED TO FISCAL 1994

Net sales for fiscal 1995 were $191.6 million, an increase of $34.6 million
or 22.0% over fiscal 1994. Of this increase, $19.8 million was attributable to
a 15.9% increase in the number of stores open during the period from 164 at
the end of fiscal 1994 to 190 at the end of fiscal 1995 and a corresponding
22.3% increase in total square footage. The balance of the increase in net
sales was attributable to (i) an increase of $14.4 million from the 33
existing stores open only part of fiscal 1994, (ii) an increase of $2.1
million in net sales from existing stores open the entire twelve months of
fiscal 1995 and 1994 and (iii) less $1.7 million in net sales for stores
closed in fiscal 1995 but open for the entire twelve months of fiscal 1994.
During fiscal 1995, comparable store net sales increased 1.7% compared to
fiscal 1994. Comparable net footwear sales for fiscal 1995 increased 3.9%.
Partially offsetting the increase in footwear sales was a 3.4% decrease in
comparable net activewear and accessories sales for the comparable period. Net
sales per square foot decreased in fiscal 1995 to $300 from $316 during fiscal
1994, primarily as a result of opening larger stores. The average selling
price of footwear increased approximately 1.5% in fiscal 1995.

Gross profit, which includes product margin less store occupancy costs, for
fiscal 1995 was $58.9 million, an increase of $9.4 million or 18.9% over
fiscal 1994. As a percentage of net sales, gross profit decreased to 30.7% in
fiscal 1995 from 31.5% in fiscal 1994. Of this 0.8% decrease, 0.7% was due to
an increase in occupancy costs as a percentage of net sales with the remaining
0.1% decrease due to lower margins for products sold. The Company's fiscal
1995 operating results were adversely affected, particularly through the first
six months, by an apparent trend in the fashion portion of the business toward
a non-athletic look and a more competitive and promotional retail environment
which resulted in lower margins. The 0.7% increase in occupancy costs resulted
primarily from (i) a 5.6% increase in the average store size from 3,449 in
fiscal 1994 to 3,641 in fiscal 1995, and (ii) a continued increase in other
mall charges (i.e., common area maintenance, real estate taxes, and insurance)
on a per square foot basis versus fiscal 1994.

15
<PAGE>

Selling, general and administrative expenses in fiscal 1995 were $44.5
million, an increase of $7.9 million or 21.5% over fiscal 1994, and decreased
to 23.2% from 23.4% as a percentage of net sales. This dollar increase was
primarily attributable to the operating costs related to the 30 additional
stores opened during fiscal 1995. The decrease as a percentage of sales is
primarily a result of the comparable store net sales increase of 1.7% for
fiscal 1995 along with improved expense controls as well as the application of
certain administrative and other overhead costs over an increased net sales
base.

Net interest expense for fiscal 1995 was $317,000, an increase of $133,000
or 72.3%. This increase resulted from a higher average balance outstanding on
the Company's Facility Agreement due to an increase in the number of stores
and an expansion of the Company's distribution center, as well as higher
average interest rates for fiscal 1995.

Income tax expense was $5.6 million for fiscal 1995 compared to $5.1 million
for fiscal 1994. The increase in the Company's provision for federal and state
taxes in fiscal 1995 is due to the increased level of income before income
taxes as the effective tax rate was 40% for each of the comparable periods.

Fully diluted net income per share increased 10.8% to $.41 for fiscal 1995
compared to $.37 for fiscal 1994. Weighted average shares outstanding were
20,630,000 and 20,634,000, respectively, for fiscal 1995 and 1994.

QUARTERLY COMPARISONS

The Company's merchandise is marketed during all seasons, with the highest
volume of merchandise sold during the second and fourth fiscal quarters as a
result of back-to-school and year-end holiday shopping. The third fiscal
quarter has traditionally had the lowest volume of merchandise sold and the
lowest results of operations.

The table below sets forth quarterly operating data of the Company,
including such data as a percentage of net sales, for fiscal 1997 through
August 31, 1996 and for fiscal 1996 and fiscal 1995. This quarterly
information is unaudited but, in management's opinion, reflects all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the information for the periods presented.

<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------
MAY 31, AUGUST 31,
1996 1996
------------- --------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales............... $71,744 100.0% $91,006 100.0%
Cost of sales (including
occupancy expenses).... 50,212 70.0 61,543 67.6
------- ----- ------- -----
Gross profit............ 21,532 30.0 29,463 32.4
Selling, general and
administrative
expenses............... 16,042 22.4 19,037 20.9
------- ----- ------- -----
Operating income........ 5,490 7.6 10,426 11.5
Interest expense (in-
come)--net............. 194 .3 (137) (.1)
------- ----- ------- -----
Income before income
taxes.................. 5,296 7.3 10,563 11.6
Provision for income
taxes.................. 2,119 2.9 4,225 4.6
------- ----- ------- -----
Net income.............. $ 3,177 4.4% $ 6,338 7.0%
======= ===== ======= =====
Fully diluted net income
per share.............. $ .15 $ .27
======= =======
</TABLE>

16
<PAGE>

<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------
MAY 31, AUGUST 31, NOVEMBER 30, FEBRUARY 29,
1995 1995 1995 1996
------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $52,219 100.0% $64,584 100.0% $52,729 100.0% $70,623 100.0%
Cost of sales (including
occupancy expenses).... 36,341 69.6 44,895 69.5 37,770 71.6 49,906 70.7
------- ----- ------- ----- ------- ----- ------- -----
Gross profit............ 15,878 30.4 19,689 30.5 14,959 28.4 20,717 29.3
Selling, general and
administrative
expenses............... 12,358 23.7 14,015 21.7 13,356 25.3 14,525 20.5
------- ----- ------- ----- ------- ----- ------- -----
Operating income........ 3,520 6.7 5,674 8.8 1,603 3.1 6,192 8.8
Interest expense........ 130 0.2 229 0.3 305 0.6 228 0.3
------- ----- ------- ----- ------- ----- ------- -----
Income before income
taxes.................. 3,390 6.5 5,445 8.5 1,298 2.5 5,964 8.5
Provision for income
taxes.................. 1,356 2.6 2,178 3.4 519 1.0 2,386 3.4
------- ----- ------- ----- ------- ----- ------- -----
Net income.............. $ 2,034 3.9% $ 3,267 5.1% $ 779 1.5% $ 3,578 5.1%
======= ===== ======= ===== ======= ===== ======= =====
Fully diluted net income
per share.............. $ .10 $ .16 $ .04 $ .17
======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------
MAY 31, AUGUST 31, NOVEMBER 30, FEBRUARY 28,
1994 1994 1994 1995
------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $42,174 100.0% $55,843 100.0% $41,198 100.0% $52,408 100.0%
Cost of sales (including
occupancy expenses).... 29,447 69.8 38,280 68.5 28,945 70.3 36,054 68.8
------- ----- ------- ----- ------- ----- ------- -----
Gross profit............ 12,727 30.2 17,563 31.5 12,253 29.7 16,354 31.2
Selling, general and
administrative
expenses............... 9,965 23.6 12,152 21.8 10,839 26.3 11,592 22.1
------- ----- ------- ----- ------- ----- ------- -----
Operating income........ 2,762 6.6 5,411 9.7 1,414 3.4 4,762 9.1
Interest expense........ 47 0.1 111 0.2 107 0.2 52 0.1
------- ----- ------- ----- ------- ----- ------- -----
Income before income
taxes.................. 2,715 6.5 5,300 9.5 1,307 3.2 4,710 9.0
Provision for income
taxes.................. 1,086 2.6 2,119 3.8 523 1.3 1,890 3.6
------- ----- ------- ----- ------- ----- ------- -----
Net income.............. $ 1,629 3.9% $ 3,181 5.7% $ 784 1.9% $ 2,820 5.4%
======= ===== ======= ===== ======= ===== ======= =====
Fully diluted net income
per share.............. $ .08 $ .15 $ .04 $ .14
======= ======= ======= =======
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

The Company financed the opening of new stores and the resulting increase in
inventory requirements principally from operating cash flow, borrowings under
the Facility (as defined below) and the proceeds of the Company's public
offering completed on June 19, 1996. Net cash provided by operations was $9.6
million, $3.9 million and $6.2 million for fiscal 1994, 1995 and 1996,
respectively, and $6.6 million and $14.2 million for the six months ended
August 31, 1995 and August 31, 1996, respectively. At August 31, 1996, the
Company had cash and cash equivalents of $31.9 million and short-term
investments of $5.0 million and no interest bearing debt. The short-term
investments range in maturity from 90 days to 180 days while the majority of
cash equivalents are invested in tax exempt instruments with maturities of one
to seven days.

The Company had a net use of cash from its investing activities, of $8.9
million and $6.3 million for the six months ended August 31, 1996 and 1995,
respectively. Of the $8.9 million in 1996, $4.0 million was due to new stores
construction and $4.9 million was for short-term investments.

17
<PAGE>

The Company had positive working capital of $75.2 million at August 31, 1996
which was an increase of $42.7 million from the working capital of $32.5
million at February 29, 1996. This increase was primarily the result of the
Company's completion of its secondary public offering on June 19, 1996 which
provided net proceeds of $33.6 million plus net income of $9.5 million for the
six month period ended August 31, 1996 which was reinvested in working
capital.

Merchandise inventories were $83.0 million at August 31, 1996 compared to
$76.1 million at February 29, 1996. On a per square foot basis, merchandise
inventories at August 31, 1996 decreased 8.3% compared to August 31, 1995, and
were 4.4% lower than at February 29, 1996. The Company believes present levels
are appropriate for the selling season and reflect a reduction of aged
inventory.

Effective September 1, 1996, the Company amended its unsecured committed
Loan Agreement (the "Facility") dated July 20, 1995 with a commercial bank.
The amendment extended the maturity to September 1, 1999 and set the credit
available at $30.0 million. At August 31, 1996 there were no borrowings
outstanding under the Facility.

The Facility contains restrictive covenants which limit, among other things,
mergers and dividends. In addition, the Company must maintain a fixed charge
coverage ratio (as defined) of not less than 1.5 to 1.0 and a tangible net
worth of not less than $69.3 million and funded debt to total capitalization
(as defined) may not exceed 40%. On November 30, 1996, the Company was in
compliance with all such covenants.

The interest rate on the Facility is, at the Company's election, either the
bank's Federal Funds Rate plus .625%, the bank's Libor Rate plus 0.5% or the
bank's prime commercial lending rate. The margin percentage added to the
Federal Funds Rate, and Libor Rate is subject to adjustment quarterly based on
the fixed charge coverage ratio (as defined).

Capital expenditures were $10.0 million and $10.2 million for fiscal 1995
and fiscal 1996, respectively. Expenditures in fiscal 1996 were primarily for
the build out of 32 of the 35 stores that were opened during fiscal 1996
(including one large format store), the remodeling of 7 existing stores, the
build out of the first three stores that were opened in fiscal 1997 and the
addition of 40,000 square feet of floor space in the existing warehouse
through the addition of a mezzanine level. Expenditures in fiscal 1995 were
primarily for the build out of 24 of the 30 stores that were opened during
fiscal 1995, the remodeling of 10 existing stores, the build out of the first
three stores that were opened in fiscal 1996 and the addition of 64,000 square
feet of warehouse space along with additional conveyor and material handling
equipment.

Capital expenditures were $6.4 million and $4.0 million for the six months
ended August 31, 1995 and August 31, 1996, respectively. Expenditures in the
six months ended August 31, 1996 were primarily for the opening of 17 new
stores (including two large format stores), the remodeling of two existing
stores and the commencement of a 130,000 square foot addition to the existing
distribution center. The Company anticipates that total capital expenditures
for fiscal 1997 and for fiscal 1998 will be approximately $11.0 million and
approximately $20.0 million, respectively.

The Company estimates that its cash requirement to open a traditional format
new store (up to 10,000 square feet) will range from $350,000 to $400,000 (net
of construction allowance) and from $900,000 to $1.9 million (net of
construction allowance) for a large format new store (10,000 to 25,000 square
feet). These requirements for a traditional store include approximately
$175,000 for fixtures, equipment, leasehold improvements and pre-opening
expenses and $325,000 ($200,000 net of payables) in new store inventory. The
cash requirements for a large format store include approximately $500,000 to
$1.0 million for fixtures, equipment, leasehold improvements and pre-opening
expenses and $1.5 million ($900,000 net of payables) in new store inventory.

Management believes that operating cash flow, borrowings under the Company's
existing Facility, cash on hand and the net proceeds to be received by the
Company from the offering contemplated by this Prospectus will be sufficient
to finance the accelerated expansion of the Company's store base, potential
acquisitions and to satisfy other capital requirements through fiscal 1998.

18
<PAGE>

BUSINESS

GENERAL

Finish Line is one of the largest specialty retailers of brand name
athletic, outdoor and casual footwear, activewear and accessories in the
United States. As of November 30, 1996, the Company operated 251 stores in 27
states, primarily in enclosed malls. A Finish Line store generally carries the
largest selection of men's, women's and children's athletic and casual shoes
in the mall in which it is located, as well as a broad assortment of
activewear and accessories all at competitive prices. Brand names offered by
the Company include Nike, Fila, adidas, Reebok, Starter, Champion, Asics,
Airwalk, Logo Athletic, Timberland and Converse.

The Company distinguishes itself from other athletic footwear specialty
retailers through its relatively large, mall-based store format. Finish Line's
stores average approximately 4,300 square feet, and its stores opened through
November 30, 1996 during fiscal 1997 average approximately 6,200 square feet.
The Company strives to create an exciting and entertaining retail environment
by continually updating its unique and highly functional store designs, while
its larger store size permits greater product depth and merchandising
flexibility. Since activewear and accessories generally carry higher gross
margins, Finish Line devotes a greater percentage of its sales area to such
products than typical athletic footwear specialty stores. Activewear and
accessories accounted for approximately 33% of the Company's net sales in
fiscal 1996.

OPERATING STRATEGIES

. INVENTORY MANAGEMENT. The Company's advanced information and distribution
systems enable it to track inventory in each store by SKU on a daily basis,
giving the Company the flexibility to merchandise its products effectively.
In addition, these systems allow the Company to respond promptly to changing
customer preferences and to maintain optimal inventory levels. The Company's
inventory management system features automatic replenishment driven by
point-of-sale data capture and a highly automated distribution center, which
enables the Company to ship merchandise to each store every third day.

EXPANSION STRATEGIES

. NEW STORE OPENINGS. Since its initial public offering in June 1992, Finish
Line has expanded rapidly from 104 stores to 251 stores on November 30,
1996. The Company has opened 34 of the 35 new stores planned to open in
fiscal 1997 and expects to open 45 to 55 new stores in fiscal 1998, which
will represent increases of approximately 16% in fiscal 1997 and 18% to 22%
in fiscal 1998. As a result of the Company's strategy of opening larger
stores, including selected large format stores, the Company expects to have
increased its total square footage at an annual rate of approximately 25% in
its current fiscal year. As a result of the success of the Company's large
format stores, continued strengthening of the Company's infrastructure and
current operating results, the Company has recently revised its growth plan
to accelerate its growth in total square footage to 35% in both fiscal 1998
and fiscal 1999 from previously planned increases of 25% in each of those
years. The Company expects that its new stores will be in both new and
existing geographic markets.

19
<PAGE>

Line's total square footage increasing at a faster rate than its store count.
The traditional stores which the Company currently has firm commitments to
open in fiscal 1997 average approximately 5,600 square feet. Since September
1995, the Company has opened three stores ranging in size from 20,000 to
25,000 square feet. These large format stores are upscale athletic specialty
stores designed and merchandised into distinct departments to satisfy the
needs of the entire family. These large format stores have generated
encouraging results. The Company believes that it can effectively implement
the merchandising presentation and atmosphere of this large format concept to
stores exceeding 10,000 square feet in order to, among other things, take
advantage of real estate opportunities. Based upon the expansion of the large
format concept, the Company expects to open approximately ten additional
stores utilizing this concept in fiscal 1998.

. COMMITMENT TO CONTINUALLY STRENGTHEN INFRASTRUCTURE. Over the past two
years, Finish Line has made a number of strategic infrastructure
investments, including enhancements to its management, store formats, and
distribution and information systems. Significant management additions and
organizational changes include recruiting additional senior management
professionals with significant industry experience and centralizing
supervision of the Company's footwear and activewear/accessories departments
to improve communication and coordination between the departments. In
addition, staffs in both departments were increased to allow buyers and
merchandisers to focus more time and attention on their product categories.
The Company has also invested in its management information systems and
distribution center by implementing EDI and radio frequency technology and
is currently building a 130,000 square foot addition to the distribution
center which is expected to be completed by June 1997. Management believes
these infrastructure investments will improve efficiency of the Company's
inventory management and its response time and in-stock position thereby
facilitating its continued growth.

The Company believes that its operating and expansion strategies have
contributed to its record of increasing net sales in each year since its
founding. Over the past five years, net sales have increased at a 25% compound
annual growth rate, and in fiscal 1996, net sales increased to $240.2 million,
a 25% improvement over the prior year period. The increase in fiscal 1996
included a 3.4% comparable store net sales gain resulting in an increase in
net sales per square foot to $308. This comparable store net sales growth,
together with improved expense controls and the leveraging of net sales
increases over its established infrastructure, have resulted in increased
profits in recent years. Net income increased to $9.7 million in fiscal 1996,
a 15% improvement over the prior year period.

Net sales for the six months ended August 31, 1996 were $162.8 million, a
39.3% increase over net sales of $116.8 for the same period in the prior year.
Comparable store sales for the six month period ended August 31, 1996
increased 15.0% over the same period in the prior year. Net income for the six
months ended August 31, 1996 was $9.5 million, which represents a 79.5%
increase over net income of $5.3 million for the same period in the prior year
and approximates net income for the entire previous fiscal year.

MERCHANDISE

The following table sets forth the percentage of net sales attributable to
the categories of footwear, activewear and related accessories during the
periods indicated. These percentages fluctuate substantially during the
different consumer buying seasons. To take advantage of this seasonality, the
Company's stores are designed to allow a shift in emphasis in the merchandise
mix between footwear and activewear/accessory items.

20
<PAGE>

Merchandising decisions, including merchandise mix, pricing, promotions and
markdowns, are made at the corporate headquarters. The store manager and
district manager, along with management at the Company's headquarters, review
the merchandise mix to adapt to permanent or temporary changes or sales
trends.

Footwear

The Company carries footwear from Nike, Fila, adidas, Reebok, Asics,
Timberland, Airwalk, Converse and many others. Major categories of footwear
include basketball, cross-training, running, aerobic, tennis, cleated, golf,
outdoor, casual and lifestyle. Most of the categories are available in men's,
women's and children's styles.

Activewear/Accessories

The activewear and accessories offered by the Company include products from
many of the same companies that supply the Company's footwear such as Nike,
adidas, Fila and Reebok. Additional suppliers include Starter, Champion, Logo
Athletic, along with outdoor apparel from Columbia and Timberland. Categories
of activewear consist of jackets, caps, tops, bottoms, windwear, running wear,
warm-ups, fleece, fitness wear and sports-casual wear. Many of these
categories include licensed products bearing the logos of college and
professional teams. Among the accessories offered by the Company are socks,
athletic bags and shoe-care products. The Company's vendors offer footwear,
apparel and accessories in "collections" of similar design and for specific
purposes.

MARKETING

The Company attempts to price its merchandise competitively with athletic
specialty and sporting goods stores in the trade area of each Company store.
While the majority of merchandise is sold at the Company's regular retail
prices, the Company conducts promotions which generally revolve around themes
such as back-to-school, holiday seasons and vendor weeks. In addition, the
Company frequently promotes individual items.

The Company advertises through many different media, including television,
radio, newspaper and outdoor advertising. The Company also contributes to mall
merchant association funds which will advertise both the mall and individual
stores within the mall. In-store promotions with point-of-purchase materials
are also an important part of the Company's marketing strategy.

The Company also takes advantage of advertising and promotional assistance
from many of its suppliers. This assistance takes the form of cooperative
advertising programs, in-store sales incentives, point-of-purchase materials,
product training for employees and other programs. Total advertising expense
for fiscal 1996 and for the first six months of fiscal 1997 was 1.5% and 1.9%
of net sales, respectively, after deducting co-op reimbursements, and the
Company expects that total advertising expense as a percentage of net sales
for fiscal 1997 will approximate that of the prior fiscal year. These
percentages fluctuate substantially during the different consumer buying
seasons. The Company believes that it benefits significantly from the
advertising campaigns of its key suppliers, such as Nike, Fila, adidas, Reebok
and Starter.

PURCHASING AND DISTRIBUTION

The Company's product purchasing is coordinated through a centralized
merchandising department under the direction of a Vice President--Senior
General Merchandise Manager. The merchandise department is currently comprised
of 27 persons. A General Merchandise Manager oversees the footwear and
softgoods divisions. The footwear division consists of a Divisional
Merchandise Manager, four buyers and two associate buyers. The softgoods
division consists of a Divisional Merchandise Manager, four buyers and one
associate buyer. The buying divisions are supported by the planning and
distribution division which consists of a Director of Planning and
Distribution, two planners and seven merchandisers and one administrative
assistant.

The Company believes that its ability to buy in large quantities directly
from suppliers enables it to obtain favorable pricing and trade terms. The
Company works with approximately 130 suppliers, the largest of which (Nike)
accounted for approximately 40% and 50% of the Company's purchases in fiscal
1995 and fiscal 1996, respectively. The Company purchased approximately 70%
and 80% of its merchandise in fiscal 1995 and fiscal 1996, respectively, from
its five largest suppliers. For the first six months of fiscal 1997, Nike
represented

21
<PAGE>

approximately 67% of all purchases and the five largest suppliers represented
approximately 90%. The Company and its vendors have the capability to use EDI
technology. See "Risk Factors--Dependence on Major Suppliers; Product
Availability."

The Company's corporate headquarters and distribution center are located on
33 acres in Indianapolis, Indiana. The facility was designed to the Company's
requirements and specifications and is owned by the Company. It includes
automated conveyor and storage rack systems designed to reduce labor costs,
increase efficiency in processing merchandise and enhance space productivity.
This facility includes 24,000 square feet of office space and 128,000 square
feet of warehouse space. During fiscal 1996, the Company added 40,000 square
feet of floor space in the existing warehouse through the addition of a
mezzanine level at a cost of approximately $1.5 million, and is currently
building a 130,000 square foot addition to the existing distribution center
which is expected to be completed by June 1997. The Company believes it has
the ability to significantly expand the facility, as needed, on its existing
33 acres.

In fiscal 1996, the Company implemented new management computer software for
distribution center processing that features "radio frequency" technology.
Management believes that this new software should improve response time and
accuracy and allow for real-time tracking of inventory within the distribution
center.

Nearly all of the Company's merchandise is shipped directly from suppliers
to the distribution center, where the Company processes and ships it by
contract and common carriers to its stores. Each day shipments are made to
one-third of the Company's stores. In any three-week period, each Company
store will receive five shipments. A shipment is received one to three days
from the date that the order is filled depending on the store's distance from
the distribution center. The Company maintains approximately one month's
supply of merchandise at the distribution center.

The Company believes that the distribution center, including planned future
expansion, will enable it to continue to service its stores, including
additional stores, for the foreseeable future.

MANAGEMENT INFORMATION SYSTEMS

The Company has a computerized management information system that includes a
network of computers at corporate headquarters used by management to support
decision making along with PC based point-of-sale (POS) computers at the
stores. The store computers are connected via modem to the corporate
headquarters computers. The system also features a perpetual inventory system
which permits corporate management to review daily each store's inventory by
department, class and stockkeeping unit (SKU), as well as current sales data.
This system includes an automated replenishment system that allows the Company
to replace faster-selling items on a more timely basis. Other functions in the
system include accounting, distribution, inventory tracking and control. In
fiscal 1996, the Company completed the replacement of all existing store
registers with PC based POS systems which provide increased productivity at
the store level along with additional controls and efficiencies at the
Company's headquarters.

Also during fiscal 1996, the Company upgraded its computer system at the
corporate headquarters which the Company believes will adequately serve its
needs for the foreseeable future.

STORE OPERATIONS

The Company operated 251 stores as of November 30, 1996, which are primarily
located in enclosed shopping malls. The Company's typical store format has a
sales floor, which includes a try-on area and a display area where each style
of footwear carried in the store is displayed by category (basketball, tennis,
running, etc.), and an adjacent stock room where the footwear inventory is
kept. The Company's stores currently range in size from 1,200 to 10,750 square
feet plus the three recently opened large format stores which are
approximately 20,200, 23,500 and 24,750 square feet in size. The sales floor
represents approximately 65% to 75% of the total store space. In addition to
its typical store format, the Company operates approximately 30 stores
utilizing a "rack store" format, where footwear inventory is kept on the sales
floor.

In order to keep its stores fresh and exciting, the Company has developed a
strategy of consolidating older merchandise in one or more stores in each
district for additional or final markdown. These stores are generally

22
<PAGE>

located in strip shopping centers or mixed use outlet centers because these
locations typically have lower occupancy costs and investments in leasehold
improvements, allowing the Company to sell merchandise at lower prices.

Substantially all merchandise decisions with respect to prices, markdowns
and advertising are controlled by management at the corporate headquarters.
The Company has a national sales manager and regional and district managers
who visit each of the Company's stores on a regular basis to review the
implementation of Company policy, monitor operations and review inventories
and the presentation of merchandise. Accounting and general financial
functions for the Company's stores are conducted at corporate headquarters.
Each of the Company's stores has a store manager responsible for supervision
and overall operations, one or more assistant managers and additional full-
and part-time sales associates. Management believes that the Company's store
format and customer service help to reduce inventory shrinkage, which was
approximately 1.25% of net sales in fiscal 1996.

The national, regional, district and store managers receive a fixed salary
and are eligible for bonuses, based primarily on sales, payroll and shrinkage
performance goals of the stores for which they are responsible. All assistant
store managers and sales associates are paid on an hourly basis.

STORE LOCATIONS

The Company operated 251 stores in 27 states as of November 30, 1996. The
following table sets forth information concerning the Company's stores.

<TABLE>
<CAPTION>
TOTAL NUMBER TOTAL NUMBER
STATE OF STORES STATE OF STORES
----- ------------ ----- ------------
<S> <C> <C> <C>
Alabama................... 1 Missouri............ 5
Arkansas.................. 2 Nebraska............ 4
Colorado.................. 1 New York............ 9
Florida................... 13 North Carolina...... 13
Georgia................... 11 Ohio................ 38
Illinois.................. 17 Oklahoma............ 6
Indiana................... 23 Pennsylvania........ 17
Iowa...................... 4 South Carolina...... 2
Kansas.................... 5 Tennessee........... 8
Kentucky.................. 6 Texas............... 23
Louisiana................. 5 Virginia............ 9
Maryland.................. 6 West Virginia....... 5
Michigan.................. 10 Wisconsin........... 6
Mississippi............... 2
</TABLE>

The Company considers its ability to obtain attractive, high traffic store
locations such as enclosed malls to be a critical element of its business and
a key factor in the Company's future growth and profitability. The Company
believes that the number of desirable store sites likely to be available in
the future will permit the Company to implement its revised growth strategy
and accelerate its growth in total square footage. In determining new store
locations, the Company evaluates market areas, mall locations, "anchor"
stores, consumer traffic, mall sales per square foot, competition and
occupancy, construction and other costs associated with opening a store.

The Company leases all of its stores. Initial lease terms of the Company's
stores generally range from five to ten years in duration without renewal
options, although some of the stores are subject to leases for five years with
one or more renewal options. The leases generally provide for a fixed minimum
rental plus a percentage of sales in excess of a specified amount.

23
<PAGE>

COMPETITION

The business in which the Company is engaged is highly competitive and many
of the items sold by the Company are sold by department stores, national and
regional full line sporting goods stores, athletic footwear specialty stores,
athletic footwear superstores, discount stores, traditional shoe stores and
mass merchandisers. Many of the stores with which the Company competes are
units of large national and regional chains that have substantially greater
financial and other resources than the Company. Among these stores are stores
that are owned by major suppliers of the Company. To a lesser extent, the
Company competes with mail order and local sporting goods and athletic
specialty stores. In many cases, the Company's stores are located in shopping
centers or malls in which one or more of its competitors also has a store. The
leases that the Company enters into generally do not restrict the opening of
stores by the Company's competitors in the same mall carrying merchandise
similar to that of the Company.

The Company has been able to compete favorably with these competitors by
operating attractive, well-stocked stores in high retail traffic areas, with
competitive prices and knowledgeable and courteous customer service. The
Company attempts to keep its prices competitive with athletic specialty and
sporting goods stores in the trade area of a particular Company store,
including competitors that are not necessarily located in high traffic
enclosed malls like the Company's stores. The Company seeks to achieve this
objective by effectively mixing high profile and brand name merchandise with
promotional and opportunistic purchases of other brand name merchandise and by
controlling expenses, especially administrative and overhead expenses, with
small, efficient departments throughout its organization.

24
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
EXECUTIVE OFFICER
NAME AGE POSITION OR DIRECTOR SINCE
- ---- --- -------- -----------------
<S> <C> <C> <C>
Alan H. Cohen........... 49 Chairman of the Board of Directors, President and
Chief Executive Officer 1976
David I. Klapper........ 48 Executive Vice President, Director 1976
David M. Fagin.......... 52 Executive Vice President, Secretary and Director 1982
Larry J. Sablosky....... 47 Executive Vice President, Director 1982
Joseph W. Wood.......... 49 Vice President--Senior General Merchandise Manager 1995
Steven J. Schneider..... 41 Vice President--Finance and Chief Financial Officer 1989
Donald E. Courtney...... 42 Vice President--MIS and Distribution 1989
George S. Sanders....... 38 Vice President--Real Estate and Construction 1994
Michael L. Marchetti.... 46 Vice President--Operations 1995
Jonathan K. Layne....... 43 Director 1992
Jeffrey H. Smulyan...... 49 Director 1992
</TABLE>

Mr. Alan H. Cohen, a co-founder of the Company, has served as President and
Chief Executive Officer and a director of the Company since May 1982. Since
1976, Mr. Cohen has been involved in the athletic retail business as principal
co-founder of Athletic Enterprises, Inc. (one of the predecessor companies of
the Company). Mr. Cohen is an attorney, and practiced law from 1973 through
1981.

Mr. David I. Klapper, a co-founder of the Company, has served as Executive
Vice President and a director of the Company since May 1982. Since 1976, Mr.
Klapper has been involved in the athletic retail business as principal co-
founder of Athletic Enterprises, Inc. (one of the predecessor companies of the
Company).

Mr. David M. Fagin, a co-founder of the Company, has served as Executive
Vice President, Secretary and a director of the Company since May 1982. Prior
to 1982, Mr. Fagin was self-employed as a manufacturer representative for
sporting goods companies. Mr. Fagin has been involved in the athletic retail
industry for over 25 years.

Mr. Larry J. Sablosky, a co-founder of the Company, has served as Executive
Vice President and a director of the Company since May 1982. Prior to 1982,
Mr. Sablosky was employed in a family retail business for over 10 years. Mr.
Sablosky has been involved in the retail industry for over 20 years.

Mr. Joseph W. Wood has served as Vice President--Senior General Merchandise
Manager of the Company since January 1995. From May 1993 to December 1994, Mr.
Wood served as Executive Vice President and Chief Operating Officer of Just
For Feet, a superstore athletic footwear retailer. From October 1986 to May
1993, Mr. Wood served as Senior Vice President and General Merchandise Manager
of the Athlete's Foot Group, a mall based athletic footwear retailer.

Mr. Steven J. Schneider has served as Vice President--Finance and Chief
Financial Officer of the Company since April 1989. From August 1984 to March
1989, Mr. Schneider was employed as Assistant Controller for Paul Harris
Stores, Inc., a women's apparel retailer. Mr. Schneider, a Certified Public
Accountant, was employed by a national accounting firm for two years and has
been engaged in various financial positions in the retail industry for 15
years.

Mr. Donald E. Courtney has served as Vice President--MIS and Distribution of
the Company since August 1989. From August 1988 to August 1989, Mr. Courtney
served as Director of MIS and Distribution for the Company. From August 1976
to August 1988, Mr. Courtney was employed by Guarantee Auto Stores, Inc., an
automotive retailer. At the time Mr. Courtney left Guarantee Auto Stores, he
held the position of VicePresident--MIS and Distribution. Mr. Courtney has
been involved in the retail industry for 18 years.

25
<PAGE>

Mr. George S. Sanders has served as Vice President--Real Estate and Store
Construction since April 1994. From February 1993 to April 1994, Mr. Sanders
served as Director of Real Estate of the Company. From 1983 to February 1993,
Mr. Sanders was employed by Melvin Simon and Associates, a real estate
developer and manager. At the time Mr. Sanders left Melvin Simon and
Associates, he held the position of Senior Leasing Representative.

Mr. Michael L. Marchetti has served as Vice President--Store Operations
since September 1995. From May 1990 to September 1995, Mr. Marchetti was
employed by Champs Sports, a division of Woolworth Corporation, the last five
years of which he served as Regional Vice President. Mr. Marchetti has been
involved in the retail industry for over 25 years.

Mr. Jonathan K. Layne has served as a director of the Company since June
1992. Mr. Layne has been a partner of the law firm of Gibson, Dunn & Crutcher
LLP since 1987, where he specializes in corporate and securities law matters.
Mr. Layne was an associate with Gibson, Dunn & Crutcher LLP from 1979 to 1986.
Mr. Layne is also a member of the Boards of Directors of Amwest Insurance
Group, Inc., an insurance holding company, K-Swiss Inc., a manufacturer of
athletic footwear and Maxwell Shoe Company, Inc., a manufacturer of women's
casual and dress footwear.

Mr. Jeffrey H. Smulyan has served as a director of the Company since June
1992. Mr. Smulyan has served since 1986 as Chairman of the Board and President
of Emmis Broadcasting Corporation, an owner and operator of radio stations.
Mr. Smulyan served as Chairman of the Seattle Mariners professional baseball
team from 1989 until 1992 and was the principal owner of Seattle Baseball,
L.P., which owned the Mariners prior to their sale in July 1992.

Each director holds office until the next annual meeting of stockholders or
until his successor has been elected and qualified. Officers are appointed by
and serve at the discretion of the Board of Directors. There are no family
relationships among any directors or executive officers of the Company.

The Board of Directors has two committees. The Audit Committee is comprised
of Messrs. Cohen, Layne, and Smulyan. The Compensation and Stock Option
Committee is comprised of Messrs. Smulyan and Layne.

26
<PAGE>

EXECUTIVE COMPENSATION

The following Summary Compensation Table shows compensation paid by the
Company for services rendered during fiscal years 1996, 1995, and 1994 for the
Chief Executive Officer at the end of the last fiscal year and the five most
highly compensated executive officers of the Company whose salary and bonus
exceeded $100,000 in fiscal year 1996.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------
ANNUAL
COMPENSATION AWARDS PAYOUTS
--------------- --------------------- -------
RESTRICTED SECURITIES
STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
POSITION YEAR ($)(1) ($)(2) $ SAR'S(#) ($) ($)(3)
------------------ ---- ------- ------- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alan H. Cohen 1996 265,000 116,706 -- -- -- --
CEO, President and 1995 250,000 90,000 -- -- -- 30,000
Chairman of the Board 1994 250,000 42,511 -- -- -- 29,193
Larry J. Sablosky 1996 225,000 99,090 -- -- -- 17,879
Executive Vice
President 1995 250,000 90,000 -- -- -- 30,000
1994 250,000 30,788 -- -- -- 29,193
Joseph W. Wood 1996 172,632 80,685(4) -- 10,000 -- --
Vice President--Senior
General 1995 26,559 -- -- 80,000 -- --
Merchandise Manager 1994 -- -- -- -- -- --
David I. Klapper 1996 175,000 51,380 -- -- -- 17,879
Executive Vice
President 1995 250,000 90,000 -- -- -- 30,000
1994 250,000 42,511 -- -- -- 29,193
David M. Fagin 1996 175,000 51,380 -- -- -- 17,879
Executive Vice
President, 1995 250,000 90,000 -- -- -- 30,000
and Secretary 1994 250,000 30,805 -- -- -- 29,193
</TABLE>
- --------
(1) From the Company's initial public offering in June 1992 through fiscal
1995, Messrs. Cohen, Klapper, Fagin and Sablosky were compensated at an
annualized base rate of $250,000.
(2) Cash bonuses for services rendered in fiscal 1996 have been listed in the
year earned; however, the stated amounts were actually paid in the
subsequent fiscal year.
(3) The stated amounts are Company contributions to The Finish Line, Inc.
Profit Sharing Plan. Mr. Cohen elected not to participate in the plan for
plan year ended October 31, 1995. Mr. Wood was not eligible to participate
in the plan during his first year of employment.
(4) $30,000 of the stated amount was paid in January 1996 as a signing bonus
which was paid at the end of Mr. Wood's first full year of employment.

DIRECTOR COMPENSATION

Directors who are employees of the Company are not compensated for serving
as directors. Directors who are not employees of the Company are paid $2,500
per annum and an additional $2,500 per meeting for attending regular meetings
of the Board of Directors and are reimbursed for expenses incurred in
attending regular, special and committee meetings. In addition, Directors who
are not employees of the Company receive options to purchase 6,000 shares of
Class A Common Stock upon their first election to the Board and an additional
4,000 options for each year they serve on the Board.

27
<PAGE>

SELLING STOCKHOLDERS

The following table sets forth information as to the current ownership of
the Class A and Class B Common Stock by the persons named below (the "Selling
Stockholders"), and as adjusted to reflect the sale of 2,400,000 shares of
Class A Common Stock by the Company and 600,000 shares of Class A Common Stock
by the Selling Stockholders.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES TO BE BENEFICIALLY OWNED
PRIOR TO THE OFFERING AFTER THE OFFERING
------------------------------------------- -------------------------------------------------------
CLASS A CLASS B CLASS A CLASS B
------------------- ----------------------- SHARES TO ------------------- -----------------------
PERCENT PERCENT BE SOLD IN PERCENT PERCENT PERCENT OF
NAME AND OF OF THE OF OF CLASS A AND
ADDRESS(1) SHARES(2) CLASS SHARES CLASS OFFERING(3) SHARES(2) CLASS SHARES CLASS CLASS B
- ---------- --------- ------- --------- ------- ----------- --------- ------- --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alan H. Cohen... 94,000(4) .7% 2,802,086(5) 29.2% 176,188 94,000(4) .6% 2,625,898(5) 29.2% 10.5%
David I.
Klapper........ 97,000(4) .7% 2,799,086(5)(6) 29.2 176,188(7) 97,000(4) .6% 2,622,898(5)(6) 29.2 10.5
David M. Fagin.. -- -- 1,861,508(8) 19.4 121,749 -- -- 1,739,759(8) 19.3 6.7
Larry J.
Sablosky....... 70,000(4) .5% 1,999,054(5)(9) 20.8 125,875 70,000(4) .4% 1,873,179(5)(9) 20.8 7.5
</TABLE>
- -------
(1) The address of each is 3308 North Mitthoeffer Road, Indianapolis, Indiana
46236.
(2) Excludes shares of Class B Common Stock convertible into a corresponding
number of Class A Common Stock.
(3) Consists of shares of Class B Common Stock that the Selling Stockholders
will convert immediately prior to the closing of this offering into the
same number of shares of Class A Common Stock, which shares will then be
sold in this offering.
(4) Represents shares of Class A Common Stock which were gifted on October 22,
1996 to private charitable foundations established by the Selling
Stockholders who retain voting and investment power with respect to such
shares.
(5) Includes 512,096 shares of Class B Common Stock for each of Messrs. Cohen
and Klapper and 371,992 for Mr. Sablosky held as trustee of various trusts
for the benefit of their respective minor children.
(6) Includes 685,714 shares held by Mr. Klapper as general partner of a family
partnership.
(7) These shares will be sold by the Klapper Family Partnership, L.P., of
which Mr. Klapper is the general partner and a limited partner.
(8) Includes 66,108 shares held by Mr. Fagin's spouse and includes 13,164
shares held by Mr. Fagin as custodian for his minor children. Excludes an
aggregate of 139,740 shares held by Mr. Fagin's son and daughter who are
over the age of 21. Mr. Fagin disclaims beneficial ownership of all
securities held by other members of his household.
(9) Includes 9,968 shares held by Mr. Sablosky's spouse and includes 11,632
shares held by Mr. Sablosky as custodian for his minor children. Also
includes 119,496 shares held by a trust for Mr. Sablosky's minor children
under a Trust Agreement pursuant to which he serves as a co-trustee. Mr.
Sablosky disclaims beneficial ownership of all securities held by other
members of his household.

If the Underwriters' over-allotment option is exercised in full, Messrs.
Cohen, Klapper, Fagin and Sablosky will sell in this offering a total of
308,329, 308,329, 213,061 and 220,281 shares of Class A Common Stock,
respectively, and therefore will own 2,493,757, 2,490,757, 1,648,447 and
1,778,773 shares of Class B Common Stock, respectively, after completion of
this offering.

28
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 1,000,000 shares of
Preferred Stock, par value $.01 per share, and 42,000,000 shares of Common
Stock, par value $.01 per share.

COMMON STOCK

Each share of Common Stock is designated as either Class A Common Stock or
Class B Common Stock. The Company is authorized to issue 30,000,000 shares of
Class A Common Stock and 12,000,000 shares of Class B Common Stock. As of the
close of business on December 10, 1996, there were 13,940,774 shares of Class
A Common Stock outstanding and 9,601,474 shares of Class B Common Stock
outstanding. Substantially all of the outstanding Class B Common Stock is held
by the Selling Stockholders and their family members. Upon the closing of this
offering, there will be 16,940,774 shares of Class A Common Stock and
9,001,474 shares of Class B Common Stock outstanding. Authorized shares of
Class A Common Stock will be increased by an amount equal to any corresponding
decrease determined by the Board of Directors in the number of authorized
shares of Class B Common Stock. The issued and outstanding shares of Class A
Common Stock and Class B Common Stock have been, and the shares of Class A
Common Stock offered hereby will be, duly authorized, validly issued, fully
paid and nonassessable.

The Board of Directors has determined not to issue additional shares of
Class B Common Stock, except in conjunction with stock splits, reverse stock
splits, stock dividends, reclassifications and similar transactions and events
regarding the Class A Common Stock that would otherwise have the effect of
changing the conversion rights of the Class B Common Stock relative to the
Class A Common Stock (the "Adjustments").

Holders of Common Stock do not have any preemptive rights or rights to
subscribe for additional securities of the Company. Shares of Common Stock are
not redeemable and there are no sinking fund provisions.

While the shares of Class A Common Stock are not convertible into any other
series or class of the Company's securities, each share of Class B Common
Stock is freely convertible into one share (subject to the Adjustments) of
Class A Common Stock at the option of the Class B stockholder. All shares of
Class B Common Stock shall automatically convert to shares of Class A Common
Stock (on a share-for-share basis, subject to the Adjustments) on the earliest
record date for an annual meeting of the Company's stockholders on which the
number of shares of Class B Common Stock outstanding is less than 5% of the
total number of shares of Common Stock outstanding. Shares of Class B Common
Stock may not be transferred to third parties (except for transfers to certain
family members and in other limited circumstances). Any impermissible transfer
of shares of Class B Common Stock will result in the automatic conversion of
such shares into shares of Class A Common Stock.

Subject to the preferences applicable to Preferred Stock outstanding at the
time, holders of shares of Common Stock are entitled to dividends if, when and
as declared by the Board of Directors from funds legally available therefor,
and are entitled, in the event of liquidation, to share ratably in all assets
remaining after payment of liabilities and Preferred Stock preferences, if
any. In the case of dividends or other distributions payable in Common Stock,
shares of Class A Common Stock will be distributed with respect to Class A
Common Stock, and shares of Class B Common Stock shall be distributed with
respect to Class B Common Stock unless the Board of Directors determines to
distribute shares of Class A Common Stock with respect to Class B Common
Stock. In all other respects each share of Class A Common Stock and Class B
Common Stock will be treated equally with respect to dividends and
distributions.

Holders of Class A Common Stock are entitled to one vote for each share held
of record, and holders of Class B Common Stock are entitled to ten votes for
each share held of record. The Class A Common Stock and the Class B Common
Stock vote together as a single class on all matters submitted to a vote of
stockholders (including the election of directors), except that, in the case
of a proposed amendment to the Company's Restated Certificate of Incorporation
that would alter the powers, preferences or special rights of either the Class
A

29
<PAGE>

Common Stock or the Class B Common Stock, the class of Common Stock to be
altered shall vote on the amendment as a separate class. Shares of Common
Stock do not have cumulative voting rights with respect to the election of
directors. Immediately after this offering, the Selling Stockholders and their
family members will hold all the outstanding shares of Class B Common Stock,
which together with their beneficial ownership of Class A Common Stock
constitute approximately 84% of the voting power of the outstanding Common
Stock, which will allow them to control all actions to be taken by the
stockholders, including the election of all directors to the Board of
Directors. See "Selling Stockholders" and "Risk Factors."

The Company's Board of Directors has six members. Either the directors or
the stockholders may amend the Bylaws to change the size of the Board, subject
to the requirement in the Restated Certificate of Incorporation that the
entire Board must consist of at least four and no more than 12 directors. The
directors stand for reelection at each annual meeting of the stockholder and
vacancies on the Board, including a vacancy caused by an increase in the size
of the Board, may be filled by the remaining directors. Any stockholder
entitled to vote at a meeting regarding the election of directors may nominate
a person for election as a director, provided that the stockholder gives the
Company written notice of the nomination at least 90 days before the meeting
(or if later, the seventh day after the first public announcement of the date
of such meeting), which notice must contain specified information about the
stockholder and the nominee.

The Company's Restated Certificate of Incorporation provides that any action
that can be taken at a meeting of the stockholders may be taken by written
consent in lieu of the meeting if the Company receives consents signed by
stockholders having the minimum number of vote that would be necessary to
approve the action at a meeting at which all shares entitled to vote on the
matter were present. This would permit the Selling Stockholders to take all
actions required to be taken by the stockholders without providing the other
stockholders the opportunity to make nominations, or raise other matters at a
meeting. However, the Company does not presently expect the written consent
procedure to be utilized in the future.

The Company's Transfer Agent and Registrar for the Class A and Class B
Common Stock is American Stock Transfer & Trust Co. The Class A Common Stock
is traded on the Nasdaq under the symbol "FINL."

PREFERRED STOCK

The Company's Board of Directors is authorized without further action by the
stockholders to issue, from time to time, shares of Preferred Stock in one or
more class or series, and to fix or alter the designations, powers and
preferences, and relative, participating, optional or other rights, if any,
and qualifications, limitations or restrictions thereof, including, without
limitation, dividend rights (and whether dividends are cumulative), conversion
rights, if any, voting rights (including the number of votes, if any, per
slide), rights and terms of redemption (including sinking fund provisions, if
any), redemption price and liquidation preferences of any unissued shares or
wholly unissued series of Preferred Stock, and the number of shares
constituting any such class or series and the designation thereof, and to
increase or decrease the number of shares of any such class or series
subsequent to the issuance of shares of such class or series, but not below
the amount then outstanding.

30
<PAGE>

UNDERWRITING

Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each Underwriter named below has severally
agreed to purchase, and the Company and the Selling Stockholders have agreed
to sell to such Underwriter, the number of shares of Class A Common Stock set
forth opposite the name of such Underwriter.

<TABLE>
<CAPTION>
NUMBER OF SHARES
OF CLASS A
NAME COMMON STOCK
---- ----------------
<S> <C>
Smith Barney Inc. ........................................ 1,000,000
A.G. Edwards & Sons, Inc. ................................ 1,000,000
Oppenheimer & Co., Inc. .................................. 1,000,000
---------
Total................................................. 3,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all shares of Class A
Common Stock offered hereby (other than those covered by the over-allotment
options described below) if any such shares are taken.

The Underwriters, for whom Smith Barney Inc., A.G. Edwards & Sons, Inc. and
Oppenheimer & Co., Inc. are acting as the Representatives, propose to offer
part of the shares directly to the public at the public offering price set
forth on the cover page of this Prospectus and part of the shares to certain
dealers at a price which represents a concession not in excess of $.67 per
share under the public offering price. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $.10 per share to certain
other dealers. After the initial offering of the shares to the public, the
public offering price and such concessions may be changed by the
Representatives.

The Selling Stockholders have granted to the Underwriters an option,
exercisable for thirty days from the date of this Prospectus, to purchase up
to 450,000 additional shares of Class A Common Stock at the price to public
set forth on the cover page of this Prospectus minus the underwriting
discounts and commissions. The Underwriters may exercise such option solely
for the purpose of covering over-allotments, if any, in connection with the
offering of the shares offered hereby. To the extent such option is exercised,
each Underwriter will be obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number of
shares set forth opposite each Underwriter's name in the preceding table bears
to the total number of shares listed in such table.

The Company and the Selling Stockholders have agreed that, for a period of
120 days from the date of this Prospectus, and the remaining executive
officers and directors have agreed that, for a period of 90 days from the date
of this Prospectus, they will not, without the prior written consent of Smith
Barney Inc., offer, sell, contract to sell, or otherwise dispose of, any
shares of Class A Common Stock of the Company or any securities convertible
into, or exercisable or exchangeable for, Class A Common Stock of the Company,
except for the sale of up to 80,000 shares by certain executive officers and
directors.

The Company, the Selling Stockholders, and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.

The rules of the Securities and Exchange Commission (the "Commission")
generally prohibit the Underwriters from making a market in the Class A Common
Stock of the Company during the two business days prior to commencement of
sales in this Offering (the "Cooling Off Period"). The Commission has,
however, adopted Rule 10b-6A under the Securities Exchange Act of 1934, as
amended ("Rule 10b-6A"), which provides an exemption from such prohibition for
certain passive market making transactions. Such passive market making
transactions must comply with applicable price and volume limits and must be
identified as

31
<PAGE>

passive market making transactions. In general, pursuant to Rule 10b-6A, a
passive market maker must display its bid for a security at a price not in
excess of the highest independent bid for the security. If all independent
bids are lowered below the passive maker's bid, however, such bid must then be
lowered when certain purchase limits are exceeded. Further, net purchases by a
passive market maker on each day are generally limited to a specified
percentage of the passive market maker's average daily trading volume in a
security during a specified prior period and must be discontinued when such
limit is reached. Pursuant to the exemption provided by Rule 10b-6A, certain
of the Underwriters and selling group members may engage in passive market
making in the Class A Common Stock of the Company during the Cooling Off
Period. Passive market making may stabilize the market price of the Class A
Common Stock at a level above that which might otherwise prevail, and, if
commenced, may be discontinued at any time.

LEGAL MATTERS

The validity of the shares of Class A Common Stock offered hereby will be
passed upon for the Company by Gibson, Dunn & Crutcher LLP, Los Angeles,
California. Jonathan K. Layne, who is a member of the Company's Board of
Directors, is a partner of Gibson, Dunn & Crutcher LLP. Kirkland & Ellis,
Chicago, Illinois, will act as counsel to the Underwriters.

EXPERTS

The financial statements (including the schedule incorporated by reference)
of The Finish Line, Inc. at February 28, 1995 and February 29, 1996, and for
each of the three years in the period ended February 29, 1996, appearing in
this Prospectus and Registration Statement (as defined below) have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing and incorporated by reference elsewhere herein, and
are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed a Registration Statement on Form S-3 (the
"Registration Statement") with the Commission under the Securities Act with
respect to the securities covered by this Prospectus. This Prospectus omits
certain information and exhibits included in the Registration Statement,
copies of which may be obtained upon payment of a fee prescribed by the
Commission or may be examined free of charge at the principal office of the
Commission in Washington, D.C.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed with
the Commission by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located
at 500 West Madison Street, Room 1400, Chicago, Illinois 60606 and at 7 World
Trade Center, Suite 1300, New York, New York 10048. Copies of such material
can be obtained from the Public Reference Section of the Commission at 450
Fifth Street, Washington, D.C. 20549, at prescribed rates. The Commission
maintains a web site that contains reports, proxy statements and other
information that has been filed electronically by the Company with the
Commission. The address of the Commission's web site is http://www.sec.gov.

32
<PAGE>

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission are by this
reference incorporated in and made a part of this Prospectus: (i) the
Company's Annual Report on Form 10-K for the fiscal year ended February 29,
1996; (ii) the Company's Quarterly Reports on Form 10-Q for the quarters ended
May 31, 1996 and August 31, 1996; (iii) the Company's Registration Statement
on Form 8-A filed May 20, 1992; (iv) the Current Reports on Form 8-K dated
June 5, 1996 and December 4, 1996; and (v) all documents filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Prospectus and prior to the filing of a post-effective amendment
which indicates that all the securities offered hereby have been sold or which
deregisters all the securities then remaining unsold. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.

Copies of all documents that are incorporated herein by reference (not
including the exhibits to such documents, unless such exhibits are
specifically incorporated by reference into such documents or into this
Prospectus) will be provided without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon a written or oral
request to The Finish Line, Inc., Attention: Chief Financial Officer, 3308 N.
Mitthoeffer Road, Indianapolis, Indiana 46236, telephone number (317) 899-
1022.

33
<PAGE>

THE FINISH LINE, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors............................................ F-3
Audited Financial Statements
Balance Sheets as of February 28, 1995 and February 29, 1996.............. F-4
Statements of Income for the Years Ended February 28, 1994, February 28,
1995 and February 29, 1996............................................... F-6
Statements of Cash Flows for the Years Ended February 28, 1994, February
28, 1995 and February 29, 1996........................................... F-7
Statements of Changes in Stockholders' Equity for the Years Ended February
28, 1994, February 28, 1995 and February 29, 1996........................ F-8
Notes to Financial Statements............................................. F-9
Unaudited Financial Statements
Balance Sheets as of February 29, 1996 and August 31, 1996................ F-15
Statements of Income for the Six Months Ended August 31, 1995 and August
31, 1996................................................................. F-17
Statements of Cash Flows for the Six Months Ended August 31, 1995 and
August 31, 1996.......................................................... F-18
Notes to Financial Statements............................................. F-19
</TABLE>

F-1
<PAGE>

(THIS PAGE INTENTIONALLY LEFT BLANK)

F-2
<PAGE>

REPORT OF INDEPENDENT AUDITORS

THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
THE FINISH LINE, INC.

We have audited the accompanying balance sheets of The Finish Line, Inc. as
of February 28, 1995 and February 29, 1996, and the related statements of
income, cash flows, and changes in stockholders' equity for each of the three
years in the period ended February 29, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Finish Line, Inc. at
February 28, 1995 and February 29, 1996 and the results of its operations and
its cash flows for each of the three years in the period ended February 29,
1996, in conformity with generally accepted accounting principles.

Ernst & Young LLP

Fort Wayne, Indiana
March 26, 1996, except for Note 8, as to which the date is November 15, 1996

F-3
<PAGE>

THE FINISH LINE, INC.

BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 29,
1995 1996
------------ ------------
<S> <C> <C>

ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................. $ 978 $ 1,686
Accounts receivable................................... 1,914 1,099
Merchandise inventories............................... 55,498 76,088
Deferred income taxes................................. 1,367 1,608
Other................................................. 682 524
------- --------
Total current assets.............................. 60,439 81,005
PROPERTY AND EQUIPMENT:
Land.................................................. 315 315
Building.............................................. 4,114 4,156
Leasehold improvements................................ 20,861 26,898
Furniture, fixtures and equipment..................... 7,732 11,235
Construction in progress.............................. 1,975 596
------- --------
34,997 43,200
Less accumulated depreciation......................... 9,029 11,441
------- --------
25,968 31,759
OTHER ASSETS:
Deferred income taxes................................. 1,981 2,208
Other................................................. 147 --
------- --------
2,128 2,208
------- --------
Total assets.................................... $88,535 $114,972
======= ========
</TABLE>
See accompanying notes.

F-4
<PAGE>

THE FINISH LINE, INC.

BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 29,
1995 1996
------------ ------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable..................................... $19,272 $ 29,717
Notes payable to bank................................ 3,025 9,500
Employee compensation and related payroll taxes...... 2,570 3,234
Accrued interest..................................... 9 56
Accrued income taxes................................. 2,460 2,074
Accrued property and sales tax....................... 1,282 1,869
Other liabilities and accrued expenses............... 1,771 2,102
------- --------
Total current liabilities........................ 30,389 48,552
LONG-TERM LIABILITIES:
Deferred rent payments............................... 2,659 3,272
Long-term debt....................................... 2,000 --
------- --------
4,659 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 (1995--8,118; 1996--
8,162)........................................... 40 41
Class B:
Shares authorized--12,000
Shares issued and outstanding (1995--12,512;
1996--12,470).................................... 63 62
Additional paid-in capital......................... 30,371 30,374
Retained earnings.................................. 23,013 32,671
------- --------
Total stockholders' equity....................... 53,487 63,148
------- --------
Total liabilities and stockholders' equity..... $88,535 $114,972
======= ========
</TABLE>
See accompanying notes.

F-5
<PAGE>

THE FINISH LINE, INC.

STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................... $157,011 $191,623 $240,155
Cost of sales (including occupancy
expenses).............................. 107,491 132,726 168,912
-------- -------- --------
Gross profit............................ 49,520 58,897 71,243
Selling, general and administrative
expenses............................... 36,678 44,548 54,254
-------- -------- --------
Operating income........................ 12,842 14,349 16,989
Interest expense........................ 184 317 892
-------- -------- --------
Income before income taxes.............. 12,658 14,032 16,097
Provision for federal and state income
taxes.................................. 5,063 5,618 6,439
-------- -------- --------
Net income.............................. $ 7,595 $ 8,414 $ 9,658
======== ======== ========
Fully diluted net income per share...... $ .37 $ .41 $ .47
======== ======== ========
Weighted average shares and share
equivalents............................ 20,634 20,630 20,712
======== ======== ========
</TABLE>
See accompanying notes.

F-6
<PAGE>

THE FINISH LINE, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............................. $ 7,595 $ 8,414 $ 9,658
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization........ 2,018 2,888 3,982
Deferred income taxes................ (589) (835) (468)
(Gain) loss on disposal of property
and equipment....................... 4 (15) 213
Changes in operating assets and
liabilities:
Accounts receivable................. (412) (881) 815
Merchandise inventories............. (6,059) (9,568) (20,590)
Other current assets................ 120 (280) 158
Tax deposits and other assets....... 1,726 (43) 147
Accounts payable.................... 2,925 1,391 10,445
Employee compensation and related
payroll taxes...................... 543 608 664
Accrued income taxes................ 758 1,038 (386)
Other liabilities and accrued
expenses........................... 349 554 965
Deferred rent payments.............. 621 621 613
-------- -------- --------
Net cash provided by operating
activities........................ 9,599 3,892 6,216
INVESTING ACTIVITIES:
Purchases of property and equipment.... (6,544) (10,025) (10,197)
Proceeds from disposals of property and
equipment............................. 12 418 211
-------- -------- --------
Net cash used in investing
activities........................ (6,532) (9,607) (9,986)
FINANCING ACTIVITIES:
Proceeds from short-term and long-term
debt.................................. 37,900 59,249 102,100
Principal payments on short-term and
long-term debt........................ (37,900) (56,224) (97,625)
Net principal reduction of stockholder
loans................................. (595) -- --
Proceeds and tax benefits from exercise
of stock options...................... -- -- 3
-------- -------- --------
Net cash provided by (used in)
financing activities.............. (595) 3,025 4,478
-------- -------- --------
Net increase (decrease) in cash and
cash equivalents...................... 2,472 (2,690) 708
Cash and cash equivalents at beginning
of year............................... 1,196 3,668 978
-------- -------- --------
Cash and cash equivalents at end of
year.................................. $ 3,668 $ 978 $ 1,686
======== ======== ========
</TABLE>
See accompanying notes.

F-7
<PAGE>

THE FINISH LINE, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------
NUMBER OF SHARES AMOUNT ADDITIONAL
----------------- --------------- PAID-IN RETAINED
CLASS A CLASS B CLASS A CLASS B CAPITAL EARNINGS TOTALS
-------- -------- ------- ------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 1,
1993................... 8,032 12,598 $40 $63 $30,371 $ 6,987 $37,461
Net income for 1994... 7,595 7,595
Conversion of Class B
Common Stock to Class
A Common Stock....... 40 (40)
Other................. 17 17
------- -------- --- --- ------- ------- -------
Balance at February 28,
1994................... 8,072 12,558 40 63 30,371 14,599 45,073
Net income for 1995... 8,414 8,414
Conversion of Class B
Common Stock to Class
A Common Stock....... 46 (46)
------- -------- --- --- ------- ------- -------
Balance at February 28,
1995................... 8,118 12,512 40 63 30,371 23,013 53,487
Net income for 1996... 9,658 9,658
Conversion of Class B
Common Stock to Class
A Common Stock....... 42 (42) 1 (1) --
Non-qualified Class A
Common Stock options
exercised............ 2 3 3
------- -------- --- --- ------- ------- -------
Balance at February 29,
1996................... 8,162 12,470 $41 $62 $30,374 $32,671 $63,148
======= ======== === === ======= ======= =======
</TABLE>
See accompanying notes.

F-8
<PAGE>

THE FINISH LINE, INC.

NOTES TO FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements include the accounts of The Finish Line, Inc. ("the
Company"). Throughout these notes to the financial statements, the fiscal
years ended February 28, 1994, February 28, 1995, and February 29, 1996 are
referred to as 1994, 1995, and 1996, respectively.

Reclassification

Certain amounts in prior years have been reclassified to conform to the 1996
presentation.

Nature of Operations

Finish Line is a specialty retailer of men's, women's and children's brand-
name athletic, outdoor and lifestyle footwear, activewear and accessories.
Finish Line stores average approximately 4,000 square feet in size and are
primarily located in enclosed malls in the Midwest, Southeast and South.

In 1996, the Company purchased approximately 80% of its merchandise from its
five largest suppliers. The largest supplier, Nike, accounted for
approximately 40% and 50% of merchandise purchases in 1995 and 1996,
respectively.

Use of Estimates

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with a
maturity date of three months or less when purchased.

Merchandise Inventories

Merchandise inventories are valued at the lower of cost or market using a
weighted average cost method, which approximates the first-in, first-out
method.

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are
generally provided using the straight-line method over the estimated useful
lives of the assets, or where applicable, the terms of the respective leases,
whichever is shorter.

Store Opening and Closing Costs

Store opening costs and other non-capitalized expenditures incurred prior to
opening new retail stores are expensed on a pro rata basis throughout the
fiscal year in which the store is opened. When a decision to close a retail
store is made, the Company expenses any remaining future net lease obligation,
nonrecoverable investment in property and equipment and other costs related to
the store closure.

Deferred Rent Payments

The Company is a party to various lease agreements which require scheduled
rent increases over the noncancelable lease term. Rent expense for such leases
is recognized on a straight-line basis over the related lease term. The
difference between rent based upon scheduled monthly payments and rent expense
recognized on a straight-line basis is recorded as deferred rent payments.

F-9
<PAGE>

THE FINISH LINE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Advertising

The Company expenses the cost of advertising as incurred. Advertising
expense net of co-op credits for the years ended 1994, 1995, and 1996 amounted
to $2,788,000, $3,020,000, and $3,524,000, respectively.

Financial Instruments

Financial Instruments consist of cash and cash equivalents and Notes Payable
to Bank. The fair value of these financial instruments approximates their
carrying amounts at February 29, 1996. At February 28, 1995 and February 29,
1996, the Company had not invested in any derivative financial instruments.

Fully Diluted Net Income per Share

The computation of net income per share is based on the weighted average
number of shares outstanding during each period and the assumed exercise of
dilutive stock options.

Accounting Changes

In March 1995, the Financial Accounting Standards Board issued Statement No.
121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. The Company will adopt SFAS
121 in the first quarter of fiscal 1997 and, based on current circumstances,
does not believe the effect of adoption will be material.

2. DEBT AGREEMENTS

The Company has an unsecured committed Loan Agreement (the "Facility") with
a commercial bank in the amount of $25,000,000, which expires on September 1,
1997. The Company, at its election, can increase the credit available to
$30,000,000. At February 29, 1996, $9,500,000 was outstanding under the
Facility.

The Facility contains restrictive covenants which limit, among other things,
mergers and dividends. In addition, the Company must maintain a fixed charge
coverage ratio (as defined) of not less than 1.5 to 1.0, a tangible net worth
of not less than $42,500,000, and funded debt to total capitalization (as
defined) may not exceed 40%. The Company was in compliance with all
restrictive covenants of the debt agreements in effect at February 29, 1996.

The interest rate on the Facility is, at the Company's election, either the
bank's Federal Fund Rate plus .975%, the bank's CD Rate plus .875%, the bank's
LIBOR Rate plus .875% or the bank's prime commercial lending rate. The margin
percentage added to the Federal Fund Rate, CD Rate and LIBOR Rate is subject
to adjustment quarterly based on the fixed charge coverage ratio (as defined).
The effective borrowing rate at February 29, 1996 was approximately 6.4%.
Interest paid on the Facility during 1994, 1995, and 1996 amounted to $98,000,
$225,000, and $773,000, respectively. The Company pays a commitment fee on the
unused portion of the Facility at an effective annual rate of 1/8 of 1%. The
commitment fees expensed in 1996 were $12,000.

Long-term debt as of February 28, 1995 consisted of a $2,000,000 promissory
note. The note was repaid in full on August 31, 1995. Interest paid on long-
term debt for 1994, 1995, and 1996 amounted to $94,000, $111,000, and $68,000,
respectively.

F-10
<PAGE>

THE FINISH LINE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. LEASES

The Company leases retail stores under noncancelable operating leases which
generally have lease terms ranging from five to ten years. Most of these lease
arrangements do not provide for renewal periods. Many of the leases contain
contingent rental provisions computed on the basis of store sales. In addition
to rent payments, certain leases require the Company to pay real estate taxes,
insurance, maintenance, and other costs. The components of rent expense
incurred under these leases is as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Base rent............................. $ 8,686 $11,079 $14,042
Deferred rent......................... 621 621 613
Contingent rent....................... 1,020 859 1,509
------- ------- -------
Rent expense.......................... $10,327 $12,559 $16,164
======= ======= =======
</TABLE>

A schedule of future fixed rent payments by fiscal year for signed operating
leases at February 29, 1996 with initial or remaining noncancelable terms of
one year or more is as follows (in thousands):

<TABLE>
<S> <C>
1997................................................................ $ 16,196
1998................................................................ 15,977
1999................................................................ 15,744
2000................................................................ 15,396
2001................................................................ 15,040
Thereafter.......................................................... 48,850
--------
$127,203
========
</TABLE>

The above schedule includes lease commitments for nine new stores which were
not open as of February 29, 1996.

4. INCOME TAXES

Components of the provision for income taxes are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Currently payable:
Federal............................. $4,598 $5,162 $5,570
State............................... 1,054 1,291 1,337
------ ------ ------
5,652 6,453 6,907
------ ------ ------
Deferred:
Federal............................. (463) (663) (371)
State............................... (126) (172) (97)
------ ------ ------
(589) (835) (468)
------ ------ ------
$5,063 $5,618 $6,439
====== ====== ======
</TABLE>

F-11
<PAGE>

THE FINISH LINE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Deferred income taxes reflect the net tax effects of temporary differences
between the amount of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities are as follows (in thousands):

<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 29,
1995 1996
------------ ------------
<S> <C> <C>
Deferred tax assets:
Deferred rent accrual............................ $1,063 $1,343
Store opening supplies........................... 927 1,073
Uniform capitalization........................... 764 819
Vacation accrual................................. 186 224
Bonus accrual.................................... 388 438
Other............................................ 30 127
------ ------
Total deferred tax assets.......................... 3,358 4,024
------ ------
Deferred tax liabilities:
Tax over book depreciation....................... (10) (208)
------ ------
Net deferred tax assets............................ $3,348 $3,816
====== ======
</TABLE>

Payments of income taxes for 1994, 1995, and 1996 were $5,082,000,
$5,579,000, and $7,465,000, respectively.

5. PROFIT SHARING PLAN

The Company sponsors a defined contribution profit sharing plan which covers
substantially all employees who have completed one year of service.
Contributions to this plan are discretionary and are allocated to employees as
a percentage of each covered employee's salary. The Company's total expense
for the plan in 1994, 1995, and 1996 amounted to $801,000, $900,000, and
$815,000, respectively.

6. STOCK OPTIONS

On March 27, 1992, the Board of Directors of the Company adopted and
approved the 1992 Incentive Plan (the "Plan"), which allows the grants of
incentive stock options and other awards. The Board of Directors has reserved
1,700,000 shares of Class A Common Stock for issuance upon exercise of options
or grants of other awards under the Plan.

Subject to the provisions of the Plan, the Compensation and Stock Option
Committee determines the terms of awards under the Plan, including exercise
price, vesting and expiration. All options outstanding under the Plan as of
the end of fiscal 1996 are exercisable at a price equal to the fair market
value on the date of grant, vest over four years and expire ten years after
the date of grant.

On July 21, 1994, the Company's stockholders approved The Finish Line, Inc.
Non-Employee Director Stock Option Plan (the "Director Plan"), which allows
the grant of a maximum of 150,000 shares of Class A Common Stock to non-
employee directors of the Company.

Subject to the provisions of the Director Plan, upon initial election as a
non-employee director, each such director will be granted a non-qualified
stock option to purchase 6,000 shares of the Class A Common Stock. In
addition, each non-employee director will be automatically granted, on an
annual basis, a non-qualified stock option to purchase 4,000 shares of the
Company's Class A Common Stock on the date of each Annual Meeting

F-12
<PAGE>

THE FINISH LINE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

of Stockholders commencing with the Annual Meeting of Stockholders at which
the non-employee director is granted the initial 6,000 share option. The per
share exercise price of the options will be the fair market value of a share
of the Company's Class A Common Stock on the date of grant. Each option will
have a term of ten years and will become fully exercisable one year after a
non-employee director's initial election to the board. Options granted under
the Director Plan amounted to 20,000 and 8,000 in 1995 and 1996, respectively.

The Company currently follows the provisions of Accounting Principles Board
Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees," which
requires compensation expense for the Company's options to be recognized only
if the market price of the underlying stock exceeds the exercise price on the
date of grant. Accordingly, the Company has not recognized compensation
expense for its options granted in 1994, 1995 or 1996.

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 123 ("SFAS 123"), "Accounting for Stock-
Based Compensation." SFAS 123 is effective for fiscal years beginning after
December 15, 1995 and will require companies to either adopt a fair value
based method of expense recognition for all stock compensation based awards,
or provide proforma net income and earnings per share information as if the
recognition and measurement provisions of SFAS 123 had been adopted. Upon the
adoption of SFAS 123 in fiscal 1997, the Company intends to continue to
account for its stock compensation based awards following the provisions of
APB 25 and provide the required fair value based proforma information.

A reconciliation of the Company's stock option activity and related
information under both plans is as follows:

<TABLE>
<CAPTION>
NUMBER PRICE
OF OPTIONS PER SHARE
---------- -------------
<S> <C> <C>
Outstanding at February 28, 1993.................. 190,002 $5.13 - $9.88
Granted........................................... 214,000 4.88 - 7.63
Exercised......................................... 0
Canceled.......................................... (52,000) 6.94 - 9.88
--------- -------------
Outstanding at February 28, 1994.................. 352,002 4.88 - 7.63
Granted........................................... 345,000 3.75 - 4.50
Exercised......................................... 0
Canceled.......................................... (33,000) 4.00 - 7.63
--------- -------------
Outstanding at February 28, 1995.................. 664,002 3.75 - 7.63
Granted........................................... 562,500 3.38 - 6.00
Exercised......................................... (600) 4.00
Canceled.......................................... (57,400) 3.38 - 7.63
--------- -------------
Outstanding at February 29, 1996.................. 1,168,502 $3.38 - $7.63
========= =============
</TABLE>

As of February 29, 1996, 208,112 of the options are exercisable.

F-13
<PAGE>

THE FINISH LINE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

7. COMMON STOCK

At February 29, 1996, shares of the Company's stock outstanding consisted of
Class A and Class B Common Stock. Class A and Class B Common Stock have
identical rights with respect to dividends and liquidation preference.
However, Class A and Class B Common Stock differ with respect to voting
rights, convertibility, and transferability.

Shares of Class B Common Stock may not be transferred to third parties
(except for transfer to certain family members of the holders and in other
limited circumstances). All of the shares of Class B Common Stock are held by
certain executive officers and their family members.

8. SUBSEQUENT EVENTS

The Company completed a public offering of its Class A Common Stock on
June 19, 1996 pursuant to which the Company sold 2,600,000 shares of Class A
Common Stock. Net proceeds from the offering (after deducting the underwriting
discount of $1,781,000 and expenses of $410,000 incurred in connection with
the public offering) were $33,559,000. These proceeds were used to repay bank
indebtedness of $15,000,000 and for general corporate purposes. As part of the
public offering, certain Selling Stockholders sold 2,600,000 shares of Class A
Common Stock (converted from Class B Common Stock to Class A Common Stock).
The Company did not receive any of the proceeds from the shares sold by the
Selling Stockholders.

On September 27, 1996, the Company's Board of Directors declared a two-for-
one split of the Company's Class A and Class B Common Stock which was
distributed after the close of business on November 15, 1996 in the form of a
100% stock dividend to shareholders of record as of October 18, 1996. All
references in the financial statements to number of shares, per share amounts
and prices per share of the Company's Class A and B Common Stock have been
retroactively restated to reflect the impact of the Company's stock split.

F-14
<PAGE>

(THIS PAGE INTENTIONALLY LEFT BLANK)

F-15
<PAGE>

THE FINISH LINE, INC.

BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FEBRUARY 29, AUGUST 31,
1996 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 1,686 $ 31,852
Short-term investments................................. -- 4,980
Accounts receivable.................................... 1,099 4,639
Merchandise inventories................................ 76,088 83,046
Deferred income taxes.................................. 1,608 2,350
Other current assets................................... 524 658
-------- --------
Total current assets............................... 81,005 127,525
PROPERTY AND EQUIPMENT:
Land................................................... 315 315
Building............................................... 4,156 4,168
Leasehold improvements................................. 26,898 29,600
Furniture, fixtures and equipment...................... 11,235 12,184
Construction in progress............................... 596 706
-------- --------
43,200 46,973
Less accumulated depreciation.......................... 11,441 13,851
-------- --------
31,759 33,122
OTHER ASSETS:
Deferred income taxes.................................. 2,208 2,368
-------- --------
Total assets....................................... $114,972 $163,015
======== ========
</TABLE>
See accompanying notes.

F-16
<PAGE>

THE FINISH LINE, INC.

BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FEBRUARY 29, AUGUST 31,
1996 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable...................................... $ 29,717 $ 39,610
Notes payable to bank................................. 9,500 --
Employee compensation and related payroll taxes....... 3,234 3,140
Accrued interest...................................... 56 --
Accrued income taxes.................................. 2,074 3,416
Accrued property and sales tax........................ 1,869 3,332
Other liabilities and accrued expenses................ 2,102 2,781
-------- --------
Total current liabilities.......................... 48,552 52,279
LONG-TERM LIABILITIES
Deferred rent payments................................ 3,272 3,632
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 1,000 shares
authorized; none issued.............................. -- --
Common Stock, $.01 par value
Class A:
Shares authorized--20,000
Shares issued and outstanding (August 31,
1996--13,464; February 29, 1996--8,162)............. 41 67
Class B:
Shares authorized--12,000
Shares issued and outstanding
(August 31, 1996--9,869; February 29, 1996--12,470). 62 49
Additional paid-in capital............................ 30,374 64,802
Retained earnings..................................... 32,671 42,186
-------- --------
Total stockholders' equity......................... 63,148 107,104
-------- --------
Total liabilities and stockholders' equity......... $114,972 $163,015
======== ========
</TABLE>

See accompanying notes.

F-17
<PAGE>

THE FINISH LINE

STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------
AUGUST 31,
1995 1996
-------- --------
<S> <C> <C>
Net sales.................................................... $116,803 $162,750
Cost of sales (including occupancy expenses)................. 81,236 111,755
-------- --------
Gross profit................................................. 35,567 50,995
Selling, general, and administrative expenses................ 26,373 35,079
-------- --------
Operating income............................................. 9,194 15,916
Interest expense (income)--net............................... 359 57
-------- --------
Income before income taxes................................... 8,835 15,859
Provision for income taxes................................... 3,534 6,344
-------- --------
Net income................................................... $ 5,301 $ 9,515
======== ========
Fully diluted net income per share........................... $ .26 $ .42
======== ========
Weighted average shares and share equivalents................ 20,706 22,468
======== ========
</TABLE>
See accompanying notes.

F-18
<PAGE>

THE FINISH LINE, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31,
------------------
1995 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income................................................ $ 5,301 $ 9,515
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 2,113 2,616
Deferred income taxes................................... (259) (902)
Gain on disposal of property and equipment.............. (5) (16)
Changes in operating assets and liabilities:
Accounts receivable.................................... (133) (3,540)
Merchandise inventories................................ (14,552) (6,958)
Other current assets................................... 141 (134)
Tax deposits and other assets.......................... 147 --
Accounts payable....................................... 12,805 9,893
Employee compensation and related payroll taxes........ (840) (94)
Accrued income taxes................................... 524 1,342
Other liabilities and accrued expenses................. 924 2,086
Deferred rent payments................................. 420 360
-------- --------
Net cash provided by operating activities............. 6,586 14,168
INVESTING ACTIVITIES:
Purchases of property and equipment....................... (6,357) (3,992)
Proceeds from disposals of property and equipment......... 72 29
Investment in short-term investments...................... -- (4,980)
-------- --------
Net cash used in investing activities................. (6,285) (8,943)
FINANCING ACTIVITIES:
Proceeds from short-term debt............................. 49,800 39,800
Principal payments on short-term and long-term debt....... (50,325) (49,300)
Net proceeds from public offering......................... -- 33,559
Proceeds and tax benefits from exercise of stock options.. 3 882
-------- --------
Net cash provided by (used in) financing activities... (522) 24,941
-------- --------
Net increase (decrease) in cash and cash equivalents...... (221) 30,166
Cash and cash equivalents at beginning of year............ 978 1,686
-------- --------
Cash and cash equivalents at end of period................ $ 757 $ 31,852
======== ========
</TABLE>
See accompanying notes.

F-19
<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. NOTES PAYABLE TO BANK

Effective September 1, 1996, the Company amended its unsecured committed
Loan Agreement (the "Facility") dated July 20, 1995 with a commercial bank.
The amendment extended the maturity to September 1, 1999 and set the credit
available at $30,000,000. At August 31, 1996 there were no borrowings
outstanding under the Facility.

The Facility contains restrictive covenants which limit, among other things,
mergers and dividends. In addition, the Company must maintain a fixed charge
coverage ratio (as defined) of not less than 1.5 to 1.0 and a tangible net
worth of not less than $69,300,000, and funded debt to total capitalization
(as defined) may not exceed 40%. As of August 31, 1996, the Company is in
compliance with all such covenants.

The interest rate on the Facility is, at the Company's election, either the
bank's Federal Fund Rate plus .625%, the bank's Libor Rate plus .5% or the
bank's prime commercial lending rate. The margin percentage added to the
Federal Fund Rate, and Libor Rate is subject to adjustment quarterly based on
the fixed charge coverage ratio (as defined).

3. PUBLIC OFFERING

The Company completed a secondary offering (the "Secondary Offering") of its
Class A Common Stock on June 19, 1996 pursuant to which the Company sold
2,600,000 shares of Class A Common Stock at an offering price of $13.75 per
share. Net proceeds to the Company from the Secondary Offering (after
deducting the underwriting discount of $1,781,000 and expenses of $410,000
incurred in connection with the Secondary Offering) were $33,559,000.

4. STOCK SPLIT

F-20
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED HEREIN AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, THOSE TO WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM
IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH STATE. THE DELIVERY OF THIS
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

-----------

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
Use of Proceeds........................................................... 9
Price Range of Class A Common Stock....................................... 9
Dividend Policy........................................................... 10
Capitalization............................................................ 10
Selected Financial Data................................................... 11
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 13
Business.................................................................. 19
Management................................................................ 25
Selling Stockholders...................................................... 28
Description of Capital Stock.............................................. 29
Underwriting.............................................................. 31
Legal Matters............................................................. 32
Experts................................................................... 32
Available Information..................................................... 32
Incorporation of Certain Documents by Reference........................... 33
Index to Financial Statements............................................. F-1
</TABLE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

3,000,000 SHARES

[LOGO OF FINISH LINE(TM)]

CLASS A COMMON STOCK

-------

PROSPECTUS

DECEMBER 12, 1996

-------

SMITH BARNEY INC.
A.G. EDWARDS & SONS, INC.
OPPENHEIMER & CO., INC.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

Edgar description of Pictures/Graphics.
---------------------------------------

Page 2 =
(a) Top = Map of United States depicting, by state, where Company stores and
Corporate Headquarters and Distribution Center are located.

(b) Bottom = Bar chart graph indicating for the years 1987-1997 Company stores
opened at the beginning of each year and Company stores opened during each year.

Page 2A =
(a) Top = Store brand picture of Company's retail store located at Circle Centre
Mall, Indianapolis, Indiana.

(b) Left Center and Left Bottom = Store brand picture and "shoe wall" depicting
footwear sold by Company at Company's retail store located at Eastview Mall,
Rochester, New York.

(c) Right Center and Right Bottom = "Shoe walls" depicting footwear sold by
Company at Company's retail store located at Greenwood Mall, Indianapolis,
Indiana.

Page 2B =
(a) Top = Store brand picture of Company's retail store located at Circle Centre
Mall, Indianapolis, Indiana.

(b) Left Center and Left Bottom = "Shoe walls" depicting footwear sold by
Company at Company's retail store located at Park Meadows Mall, Littleton,
Colorado.

(c) Right Center and Right Bottom = Pictures of Company store interior depicting
merchandise sold by Company at Company's retail store located at Walden Galleria
Mall, Buffalo, New York.

(d) Inside Back Cover = Six poster advertisements depicting vendor merchandise
sold by the Company.