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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the fiscal year ended February 27, 1999 or
[_] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
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Commission File Number 0-20184
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THE FINISH LINE, INC.
(Exact name of registrant as specified in its charter)
Delaware 35-1537210
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(State of Incorporation) (I.R.S. Employer ID No.)
3308 N. Mitthoeffer Road, Indianapolis, Indiana 46235
Registrant's telephone number, including area code: (317) 899-1022
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Securities registered pursuant to Section 12(b)of the Act:
(Title of Each Class) (Name of each exchange on which registered)
None None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.01 par value
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Indicate by check mark whether Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of April 23, 1999 was approximately $246,656,494 which was based
on the last sale price reported for such date by NASDAQ.
The number of shares of the Registrant's Common Stock outstanding on April 23,
1999 was:
Class A Common Stock: 17,658,321
Class B Common Stock: 7,244,068
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement dated June 9, 1999 for the Annual
Meeting of Stockholders to be held on July 15, 1999 (hereinafter referred to as
the "1999 Proxy Statement") are incorporated into Part III.
Portions of the Registrant's Annual Report to Stockholders for the fiscal year
ended February 27, 1999 (hereinafter referred to as the "1999 Annual Report to
Stockholders") are incorporated into Parts II and IV.
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PART I
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Item 1 - Business
General
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The Finish Line, Inc. together with its wholly owned subsidiary Spike's
Holding, Inc. (the "Company" or "Finish Line") is one of the largest mall based
specialty retailers of brand name athletic, outdoor and casual footwear,
activewear and accessories in the United States. As of April 1, 1999, the
Company operated 365 stores in 39 states. A Finish Line store generally carries
a large selection of men's, women's and children's athletic and casual shoes, as
well as a broad assortment of activewear and accessories. Brand names offered by
the Company include Nike, adidas, Reebok, And 1, K-Swiss, New Balance, Asics,
Fila and Skechers.
The Company attempts to distinguish itself from other athletic footwear
specialty retailers through larger mall-based store formats. Finish Line stores
average approximately 5,850 square feet, and the Company's stores opened during
fiscal 1999 averaged approximately 6,970 square feet. The Company's strategy is
to create an exciting and entertaining retail environment by continually
updating store designs, and to operate a larger store size which 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 these products than typical athletic footwear specialty
stores. Activewear and accessories accounted for approximately 28% of the
Company's net sales in fiscal 1999.
The Company's principal executive offices are located at 3308 N. Mitthoeffer
Road, Indianapolis, Indiana 46235, and its telephone number is (317) 899-1022.
Operating Strategies
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Finish Line seeks to be a leading specialty retailer of athletic footwear
and activewear in the markets it serves. To achieve this, the Company has
developed the following elements to its business strategy:
Emphasis on Customer Service and Convenience. The Company is committed to
making the shopping experience at Finish Line rewarding and enjoyable, and seeks
to achieve this objective by providing convenient mall-based 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 stresses effective replenishment and
distribution to each store. The Company's advanced information and distribution
systems enable it to track inventory in each store by stockkeeping unit (SKU) on
a daily basis, giving Finish Line 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 in each
store. The Company's inventory management system features automatic
replenishment driven by point-of-sale (POS) data capture and a highly automated
distribution center, which enables Finish Line to ship merchandise to each store
every third day.
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Product Diversity; Broad Demographic Appeal. Finish Line 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.
Expansion Strategies
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The Company's objective is to continue its store expansion program by
introducing Finish Line stores into new markets as well as increase its
visibility in previously established markets.
New Store Openings. Since the Company's initial public offering in June 1992,
Finish Line has expanded from 104 stores to 365 stores at April 1, 1999. The
Company opened 59 new stores in fiscal 1999 and intends to open 40 to 50 new
stores in fiscal 2000, which represents increases of approximately 19% in fiscal
1999 and 11% to 14% in fiscal 2000. Total square footage increased 32% in fiscal
1999 as a result of the Company's strategy of opening larger traditional stores,
as well as selected larger format stores.
For fiscal 2000 the Company plans to increase its total square footage open
by approximately 15%. Much of this square footage growth will result from a
continued emphasis on larger stores. The Company expects that its new stores
will be in both new and existing geographic markets.
Larger Stores. The Company has been adding larger stores to its chain over the
past five years. 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 total square footage increasing at a faster rate than store count. In
conjunction with these large stores the Company has developed two store formats:
Traditional Format Concept - These stores are less than 10,000 square feet
in size. They typically are stocked with 600-700 footwear styles and 10,000+
shoes. While the average size of all traditional concept stores is 4,970 square
feet, traditional concept stores opened in fiscal 1999 averaged 5,980 square
feet.
Larger Format Concept - These stores are more than 10,000 square feet in
size. They are typically stocked with 1,000 - 1,300 footwear styles and 20,000
- - 30,000+ shoes. This format offers Finish Line the opportunity to establish a
dominant presence in the best major malls throughout the country.
Commitment to Continually Strengthen Infrastructure. Over the past several
years, Finish Line has made a number of strategic infrastructure investments,
including enhancements to its management, store operations, and distribution and
information systems. Significant
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management additions and organizational changes include recruiting additional
senior management professionals with significant industry experience, as well as
centralizing the supervision of the footwear and activewear/accessories
departments to improve communication and coordination between the two areas. In
addition, staffs in both departments have been increased to allow the buyers and
merchandisers to focus more time and attention on specific product categories.
The Company has also invested in management information systems and the
distribution center by implementing Electronic Data Interchange (EDI) and radio
frequency (RF) technologies in inventory management/distribution areas. Both
technologies are designed to improve the efficiency of inventory management as
well as response time and in-stock position.
Merchandise
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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 have been designed to allow for a shift in emphasis in the
merchandise mix between footwear and activewear/accessory items.
<TABLE>
<CAPTION>
Year Ended
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Feb. 27, Feb. 28, March 1,
Category 1999 1998 1997
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<S> <C> <C> <C>
Footwear 72% 69% 68%
Activewear/Accessories 28% 31% 32%
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Total 100% 100% 100%
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</TABLE>
All 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 trends in the
marketplace.
Footwear
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Finish Line's distinctive shoe wall is stocked with the latest in athletic,
casual and outdoor footwear that the industry has to offer, including: Nike,
adidas, Reebok, And 1, K-Swiss, New Balance, Asics, Converse, Fila, Skechers and
many others. To make shopping easier for customers, footwear is categorized into
definable sections including: basketball, cross-training, running, fitness,
tennis, cleated, golf, outdoor, casual and lifestyle. Most categories are
available in men's, women's and children's styles.
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Activewear/Accessories
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Many of the same companies which supply Finish Line with quality footwear
also supply activewear, including products made by Nike, adidas and Reebok.
Additional suppliers include Logo Athletic, along with outdoor activewear from
Columbia, Woolrich, North Face, Timberland and Helly Hansen. In addition, the
Company offers fashion brands including NST Nautica Sport Tech, RLX Polo Sport,
Perry Ellis, RP55 and enyce. Many vendors offer footwear, activewear and
accessories in "collections". Categories of activewear consist of jackets, caps,
tops, pants, shorts, windwear, running wear, warm-ups, fleece, fitness wear and
sport-casual wear. Among the accessories offered by the Company are socks,
athletic bags, backpacks, sunglasses, watches and shoe-care products. In
addition, the Company has recently initiated a private label apparel program
focusing on basic products.
Marketing
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The Company attempts to reach its target audience by using a multifaceted
approach to marketing and advertising on national, regional and local levels.
The Company utilizes television, direct mail, consumer print, outdoor, and the
internet in its marketing efforts.
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 1999 and fiscal 1998 was 1.5% and 1.7%, respectively, of net sales,
after deducting co-op reimbursements. These percentages fluctuate substantially
during the different consumer buying seasons. The Company also believes that it
benefits from the multimillion dollar advertising campaigns of its key
suppliers, such as Nike, adidas, Reebok and Fila.
The Company also uses in-store contests, promotions and event sponsorships,
as well as a comprehensive public relations effort to further market the
Company.
Purchasing and Distribution
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Finish Line's footwear and activewear purchasing is coordinated through a
centralized merchandising department under the direction of a Senior Vice
President-Merchandise and Marketing. The buying and merchandise departments are
comprised of approximately 30 people. The footwear and activewear/accessories
divisions consist of a Vice President-General Merchandise Manager, divisional
merchandise managers, multiple buyers and associate buyers. Both buying
divisions are supported by a planning and distribution division which consists
of a director, planners, merchandisers and administrative assistants.
The Company believes that its ability to buy in large quantities directly
from suppliers enables it to obtain favorable pricing and trade terms.
Currently, the Company purchases product from approximately 160 suppliers and
manufacturers of athletic and fashion products, the largest of which (Nike)
accounted for approximately 56% and 63% of total purchases in fiscal 1999 and
fiscal 1998, respectively. The Company purchased approximately 87% of total
merchandise in fiscal 1999 and fiscal 1998, respectively, from its five largest
suppliers. The Company and its vendors use EDI technology to streamline
purchasing and distribution operations.
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The Company has implemented warehouse management computer software for
distribution center processing that features RF technology. This system has
helped improve productivity and accuracy as well as reduce the time it takes to
send merchandise to stores. The Company believes this innovative technology
will continue to improve its operations as well as 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 store will receive five
shipments. A shipment is normally received one to three days from the date that
the order is filled depending on the store's distance from the distribution
center. Historically, the Company maintains approximately two-thirds of a
month's supply of merchandise at the distribution center.
Management Information System
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The Company has a computerized management information system which includes
a network of computers at corporate headquarters used by management to support
decision making along with PC-based POS computers at the stores. Store computers
are connected via modem to computers at corporate headquarters. A perpetual
inventory system permits corporate management to review daily each store's
inventory by department, class and SKU. This system includes an automated
replenishment system that allows the Company to replace faster-selling items
more quickly. Other functions in the system include accounting, distribution,
inventory tracking and control.
Store Operations
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The Company has a Senior Vice President - Store Operations, Vice President-
Store Personnel and regional and district managers who visit the stores
regularly to review the implementation of Company plans and policies, monitor
operations, and review inventories and the presentation of merchandise.
Accounting and general financial functions for the stores are conducted at
corporate headquarters. Each store has a store manager or co-managers that are
responsible for supervision and overall operations, one or more assistant
mangers and additional full and part-time sales associates.
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.
Real Estate
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As of April 1, 1999, Finish Line operated 365 stores in 39 states. With the
exception of nine strip-center stores, all Finish Line stores are located in
enclosed shopping malls. The 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 (e.g., basketball, tennis, running), and
an adjacent stock room where the footwear inventory is maintained. Sales floors
in all stores represents approximately 65% to 75% of the total space. In
addition to its typical store format, the Company operates approximately 16
stores using a "rack store" format, where footwear inventory is kept directly on
the sales floor.
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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 located in strip
shopping centers or mixed-use outlet centers because these locations typically
have lower occupancy costs and investments in leasehold improvements.
Finish Line believes that 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 its future growth and profitability. In
determining new store locations, management evaluates market areas, in-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 believes that the number of desirable store sites likely to
be available in the future will permit it to implement its growth strategy in
total square footage.
Finish Line leases all of its stores. Initial lease terms of the stores
generally range from 5 to 10 years in duration without renewal options, although
some of the stores are subject to leases for 5 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.
Based upon expenditures for fiscal 1999, the Company estimates that the cash
requirements for opening a traditional new store (under 10,000 square feet) will
approximate $565,000. This estimate includes $340,000 for fixtures, equipment,
leasehold improvements and pre-opening expenses plus $325,000 ($225,000 net of
payables) in inventory investment. The estimate of opening a large format store
(over 10,000 square feet) may vary significantly depending on exact square
footage, landlord construction allowance and inventory investment needed to
support expected sales levels. These estimates range from $900,00 to
$1,900,000.
Competition
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The Company's business is highly competitive. Many of the products the
Company sells are sold in 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.
Some of the Company's primary competitors are large national and/or regional
chains that have substantially greater financial and other resources than Finish
Line. Among the Company's competition are stores that are owned by major
suppliers to 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 enclosed malls or shopping centers in which one
or more competitors also operate. Typically, the leases which the Company enters
into do not restrict the opening of stores by competitors.
The Company attempts to differentiate itself from its competition by
operating larger, more attractive, well-stocked stores in high retail traffic
areas, with competitive prices and knowledgeable and courteous customer service.
The Company attempts to keeps its prices competitive with athletic specialty and
sporting goods stores in each trade area, including competitors that are not
necessarily located inside the mall. The Company believes it accomplishes this
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 the organization.
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Seasonal Business
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The Company's business follows a seasonal pattern, peaking over a total of about
12 weeks during the late summer (Late July through early September) and holiday
(Thanksgiving through Christmas) periods. During the fiscal year ended February
27, 1999, these periods accounted for approximately 34% of the Company's annual
sales.
Employees
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As of April 1, 1999, the Company employed approximately 8,070 persons, 1,830 of
whom were full-time and 6,240 of whom were part-time. Of this total, 360 were
employed at the Company's Indianapolis, Indiana corporate headquarters and
distribution center and 33 were employed as regional and district managers.
Additional part-time employees are typically hired during the back-to-school and
holiday seasons. None of the Company's employees are represented by a union and
employee relations are generally considered good.
Profit Sharing Plan
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The Company has in the past purchased on the open market a limited amount of
Class A Common Stock and later contributed it in lieu of cash to the Company's
Profit Sharing Plan. Although the Company has no current plans to again make
such purchases for such purpose, it may do so in the future.
Trademarks
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The Company has registered in the United States Patent and Trademark Office
several trademarks relating to its business.
The Company believes its trademark and service mark registrations are valid,
and it intends to be vigilant with regard to infringing or diluting uses by
other parties, and to enforce vigorously its rights in its trademarks and
service marks.
Item 2 - PROPERTIES
In November 1991, the Company moved into its existing corporate headquarters
and distribution center located on 16 acres in Indianapolis, Indiana. The
facility, which is owned by the Company, was designed and constructed to the
Company's specifications and includes automated conveyor and storage rack
systems designed to reduce labor costs, increase efficiency in processing
merchandise and enhance space productivity. In 1992, the Company purchased an
additional 17 adjacent acres, thus bringing the total size of the headquarters
property to 33 acres. This facility includes 46,000 square feet of office space
and 256,000 square feet of warehouse space. The Company completed construction
of a 22,000 square feet addition to the existing office building and an addition
of 100,000 square feet of floor space to the existing distribution center
through the addition of mezzanine levels in fiscal 1999. In addition, the 33
acres will permit the headquarters and distribution center to be expanded to an
aggregate of approximately 800,000 square feet through the expansion of the
existing building and construction of additional buildings.
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Store Locations
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At April 1, 1999, the Company operated 365 stores in 39 states. With the
exception of nine strip center stores, all Finish Line stores are located in
enclosed shopping malls. The following table sets forth information concerning
the Company's stores.
<TABLE>
<CAPTION>
STATE TOTAL STATE TOTAL
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<S> <C> <C> <C>
Alabama 2 Missouri 9
Arizona 5 Nebraska 4
Arkansas 4 Nevada 1
California 3 New Hampshire 4
Colorado 5 New Jersey 4
Connecticut 3 New Mexico 1
Delaware 1 New York 21
Florida 21 North Carolina 15
Georgia 13 Ohio 38
Idaho 1 Oklahoma 7
Illinois 27 Pennsylvania 22
Indiana 24 South Carolina 4
Iowa 6 South Dakota 1
Kansas 8 Tennessee 11
Kentucky 8 Texas 27
Louisiana 5 Virginia 12
Maryland 12 Washington 2
Massachusetts 4 West Virginia 5
Michigan 14 Wisconsin 9
Mississippi 2 -------------
Total 365
</TABLE>
The Company leases all of its stores. Initial lease terms for 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 of more renewal options. The leases generally provide for a fixed minimum
rental plus a percentage of sales in excess of a specified amount.
Forward - Looking Statements
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This annual report on Form 10-K and the documents incorporated by reference
contain statements which constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Except for the
historical information contained herein, the matters discussed in the Form 10-K
and the documents incorporated by reference are forward looking statements that
involve risks and uncertainties that could cause actual results to differ
materially from those expressed in any of the forward-looking statements. Such
risks and uncertainties include, but are not limited to, product demand and
market acceptance risks, the
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effect of economic conditions, the effect of competitive products and pricing,
the availability of products, management of growth and other risks detailed in
the Company's Securities and Exchange Commission filings.
Item 3 - LEGAL PROCEEDINGS
The Company is from time to time, involved in certain legal proceedings in
the ordinary course of conducting its business. Management believes there are
no pending legal proceedings in which the Company is currently involved which
will have a material adverse effect on the Company's financial position.
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
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Item 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information required by this item is incorporated herein by reference to
pages 31 through 32 and the inside back cover of the 1999 Annual Report to
Stockholders filed as Exhibit 13 to this Annual Report on Form 10-K.
Item 6 - SELECTED FINANCIAL DATA
The information required by this item is incorporated herein by reference to
page 17 of the 1999 Annual Report to Stockholders filed as Exhibit 13 to this
Annual Report on Form 10-K.
Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by this item is incorporated herein by reference to
pages 18 through 21 of the 1999 Annual Report to Stockholders filed as Exhibit
13 to this Annual Report on Form 10-K.
Item 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is incorporated by reference to page
21 of the 1999 Annual Report to Stockholders filed as Exhibit 13 to this Annual
Report on Form 10-K.
Item 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by reference to
page 19 and pages 22 through 30 of the 1999 Annual Report to Stockholders filed
as Exhibit 13 to this Annual Report on Form 10-K.
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Item 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no disagreements between the Registrant and its independent
auditors on matters of accounting principles or practices.
PART III
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Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated herein by reference to
the Sections entitled "Election of Directors--Nominees", and "Management--
Executive Officers and Directors" in the 1999 Proxy Statement.
Item 11 - EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference to
the Section entitled "Executive Compensation" in the 1999 Proxy Statement.
Item 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is incorporated herein by reference to
the Section entitled "Securities Ownership of Certain Beneficial Owners and
Management" in the 1999 Proxy Statement.
Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference to
the Sections entitled "Certain Transactions" and "Compensation Committee
Interlocks and Insider Participation" in the 1999 Proxy Statement.
PART IV
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Item 14 - EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT
SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. The following financial statements of The Finish Line, Inc. and the
report of independent auditors included in the 1999 Annual Report to
Stockholders are incorporated herein by reference:
Report of Independent Auditors
Consolidated Balance Sheets as of February 27, 1999 and February 28,
1998.
Consolidated Statements of Income for the years ended February 27,
1999, February 28, 1998, and March 1, 1997.
Consolidated Statements of Changes in Stockholders' Equity for the
years ended February 27, 1999, February 28, 1998, and March 1, 1997.
Consolidated Statements of Cash Flows for the years ended February 27,
1999, February 28, 1998 and March 1, 1997.
Notes to Consolidated Financial Statements February 27, 1999.
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2. The Financial Statement Schedule of The Finish Line, Inc. is listed in
Item 14(d).
(b) Reports on Form 8-K
None.
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
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<S> <C>
3.1.1 Restated Certificate of Incorporation of The Finish Line, Inc.(1)
3.1.2 Certificate of Amendment to the Restated Certificate of
Incorporation of The Finish Line, Inc.(1)
3.2 Bylaws of The Finish Line, Inc. as amended and restated.(1)
4.1 1992 Employee Stock Incentive Plan of The Finish Line, Inc., as
amended and restated.(4)
10.6.2 Form of Incentive Stock Option Agreement pursuant to the 1992
Employee Stock Incentive Plan.(1)
10.6.3 Form of Non-Qualified Stock Option Agreement pursuant to the 1992
Employee Stock Incentive Plan.(1)
10.7 Form of Indemnity Agreement between The Finish Line Inc. and
each of its Directors or Executive Officers.(1)
10.18 Amended and Restated Tax Indemnification Agreement(2)
10.21.1 The Finish Line, Inc. Profit Sharing Plan as Amended and
Restated.(3)
10.21.2 Amendment to The Finish Line, Inc. Profit Sharing Plan dated
January 1, 1993.(3)
10.21.3 Second Amendment to The Finish Line, Inc. Profit Sharing Plan
dated January 1, 1994.(3)
10.26 Revolving Credit Agreement among Spike's Holding, Inc., and The
Finish Line, Inc. dated May 4, 1997.(5)
10.27 Credit Agreement among The Finish Line, Inc. and NBD Bank, N.A.,
National City Bank of Indiana, The Northern Trust Company,
Suntrust Bank, Central Florida, N.A. and NBD Bank, N.A. as
Agent dated July 10, 1998. (6)
10.27.1 Revolving Credit Note in the amount of $30,000,000 with NBD Bank,
N.A. dated July 10, 1998. (6)
</TABLE>
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<TABLE>
<S> <C>
10.27.2 Revolving Credit Note in the amount of $15,000,000 with The Northern
Trust Company dated July 10, 1998. (6)
10.27.3 Revolving Credit Note in the amount of $15,000,000 with The Northern
Trust Company dated July 10, 1998. (6)
10.27.4 Revolving Credit Note in the amount of $15,000,000 with Suntrust
Bank, Central Florida, N.A. dated July 10, 1998. (6)
10.28 The Finish Line, Inc. Non-Employee Director Stock Option Plan, as
amended and restated.(7)
11 Statement RE: Computation of Net Income Per Share.
13 Annual Report to Stockholders for the year ended February 27, 1999
21 Subsidiaries of The Finish Line, Inc.
23 Consent of Ernst & Young LLP (independent auditors).
27 Financial Data Schedule
(1) Previously filed as a like numbered exhibit to the Registrant's
Registration Statement on Form S-1 and amendments thereto (File No.
33-47247) and incorporated herein by reference.
(2) Previously filed as a like numbered exhibit to the Registrant's
Quarterly Report on Form 10-Q (File No. 0-20184) for the quarter
ended May 31, 1994 and incorporated herein by reference.
(3) Previously filed as a like numbered exhibit to the Registrant's
Annual Report on Form 10-K (File No. 0-20184) for the year ended
February 28, 1995 and incorporated herein by reference.
(4) Previously filed as a like numbered exhibit to the Registrant's
Registration Statement on Form S-8 (File No. 333-62063) and
incorporated herein by reference.
(5) Previously filed as a like numbered exhibit to the Registrants'
Quarterly Report on Form 10Q (File No. 0-20184) for the quarter ended
August 30, 1997 and incorporated herein by reference.
(6) Previously filed as a like numbered exhibit to the Registrants'
Quarterly Report on Form 10Q (File No. 0-20184) for the quarter ended
August 29, 1998 and incorporated herein by reference.
(7) Previously filed as a like numbered exhibit to the Registrant's
Annual Report on Form 10-K (File No. 0-20184) for the year ended
February 27, 1999 and incorporated herein by reference.
</TABLE>
13
<PAGE>
(d) Financial Statement Schedule Page
----
Schedule II -- Valuation and Qualifying Accounts 17
All supporting schedules other than the above have been omitted because
they are not required or the information to be set forth therein is included in
the financial statements or in the notes thereto.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE FINISH LINE, INC.
Date: May 6, 1999 By:/s/ Steven J. Schneider,
-----------------------
Steven J. Schneider, Sr. Vice President Finance,
Chief Financial Officer and Assistant Secretary
(Principal Financial and Accounting Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature to this
Annual Report on Form 10-K appears below hereby constitutes and appoints Alan H.
Cohen and Steven J. Schneider as such person's true and lawful attorney-in-fact
and agent with full power of substitution for such person and in such person's
name, place and stead, in any and all capacities, to sign and to file with the
Securities and Exchange Commission, any and all amendments to this Annual Report
on Form 10-K, with exhibits thereto and other documents in connection therewith,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as such person might or
could do in person, hereby ratifying and confirming all that said attorney-in-
fact and agent, or any substitute therefore, may lawfully do or cause to be done
by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date: May 6, 1999 /s/ Alan H. Cohen
--------------------------
Alan H. Cohen, Chairman of the Board, President and Chief
Executive Officer (Principal Executive Officer)
Date: May 6, 1999 /s/ David I. Klapper
--------------------------
David I. Klapper, Executive Vice President, and Director
Date: May 6, 1999 /s/ David M. Fagin
--------------------------
David M. Fagin, Executive Vice President and Director
Date: May 6, 1999 /s/ Larry J. Sablosky
--------------------------
Larry J. Sablosky, Executive Vice President and Director
Date: May 6, 1999 /s/ Jonathan K. Layne
--------------------------
Jonathan K. Layne, Director
Date: May 6, 1999 /s/ Jeffrey H. Smulyan
--------------------------
Jeffrey H. Smulyan, Director
15
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULE PAGE
- ------------------------------------- ----
II - Valuation and Qualifying Accounts 17
16
<PAGE>
THE FINISH LINE, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
<TABLE>
<CAPTION>
COL A COL B COL C COL D COL E
- ----- ----- ----- ----- -----
Additions
-------------------
Charged to
Balance Charged to Other Deduc- Balance
at Beg. Costs and Accounts- tions- at End of
Description of Period Expense Describe Describe Period
- ------------------ --------- --------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
Year ended
March 1, 1997:
Deducted from asset
account:
Reserve for inventory
obsolescence............ $1,785 $1,015 -- -- $2,800
---------- --------- -------- --------- -------
Total.................. $1,785 $1,015 $0 $0 $2,800
========== ========= ======== ========= =======
Year ended
February 28, 1998:
Deducted from asset
account:
Reserve for inven-
tory obsolescence....... $2,800 $ 200 -- -- $3,000
---------- --------- -------- --------- -------
Total.................... $2,800 $ 200 $0 $0 $3,000
========== ========= ======== ========= =======
Year ended
February 27, 1999:
Deducted from asset
account:
Reserve for inven-
tory obsolescence....... $3,000 $ 300 -- -- $3,300
---------- --------- -------- --------- -------
Total.................. $3,000 $ 300 $0 $0 $3,300
========== ========= ======== ========= =======
</TABLE>
17
<PAGE>
Exhibit Index
-------------
Exhibit
Number Description
- ------- ----------------------------------------------
10.28 The Finish Line, Inc. Non-Employee Director Stock Option Plan, as
amended and restated.
11 Statement RE: Computation of Net Income Per Share.
13 Annual Report to Stockholders for the year ended February 27, 1999
21 Subsidiaries of The Finish Line, Inc.
23 Consent of Ernst & Young LLP (independent auditors).
27 Financial Data Schedule for year ended February 27, 1999 and
February 28, 1998
18
<PAGE>
EXHIBIT 10.28
THE FINISH LINE, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN,
AS AMENDED
1. Purpose of the Plan. Under this Non-Employee Director Stock Option Plan
(the "Director Plan") of The Finish Line, Inc. a Delaware corporation (the
"Company"), options may be granted to eligible persons, as set forth in Section
4, to purchase shares of the Company's Class A Common Stock ("Common Stock").
This Director Plan is designed to promote the long-term growth and financial
success of The Finish Line, Inc. by enabling the Company to attract, retain and
motivate such persons by providing for or increasing their proprietary interest
in the Company.
2. Effective Dates. This Director Plan shall be in effect commencing on July
21, 1994, subject to approval by the Company's stockholders. Options may not be
granted more than ten years after the date of stockholder approval of this
Director Plan or termination of this Director Plan by the Board of Directors of
the Company (the "Board"), whichever is earlier.
3. Plan Operation. This Director Plan is intended to be self-governing. To
this end, this Director Plan requires no discretionary action by any
administrative body with regard to any transaction under this Director Plan. To
the extent, if any, that any questions of interpretation arise, these shall be
resolved by the Board.
4. Eligible Persons. The persons eligible to receive a grant of non-qualified
stock options hereunder are any Director of the Board who on the date of said
grant is not an employee of the Company or a subsidiary of the Company. For
purposes of this Section 4, a person shall not be considered an employee solely
by reason of serving as Chairman of the Board.
5. Stock Subject to Director Plan. The maximum number of shares that may be
subject to options granted hereunder shall be 150,000 shares of Class A Common
Stock, subject to adjustments under Section 6. Shares of Class A Common Stock
subject to the unexercised portions of any options granted under this Director
Plan which expire, terminate or are canceled may again be subject to options
under this Director Plan.
6. Adjustments. If the outstanding shares of stock of the class then subject
to this Director Plan are increased or decreased, or are changed into or
exchanged for a different number or kind of shares or securities as a result of
one or more reorganizations, recapitalizations, stock splits, reverse stock
splits, stock dividends, spin-offs and the like, appropriate adjustments shall
be made in the number and/or type of shares or securities for which options may
thereafter be granted under this Director Plan and for which options then
outstanding under this Director Plan may thereafter be exercised. Any such
adjustments in outstanding options shall be made without changing the aggregate
exercise price applicable to the unexercised portions of such options.
7. Stock Options. Simultaneous with the original adoption of this Director
Plan by stockholders on July 21, 1994, each non-employee director elected at
such meeting of stockholders will be granted a non-qualified stock option to
purchase 6,000 shares of the Company's Class A Common Stock. The per share
exercise
<PAGE>
EXHIBIT 10.28
price of the option will be the fair market value of a share of the Company's
Class A Common Stock on the date of grant, defined as the closing price of the
Company's Class A Common Stock on the Nasdaq National Market (or such other
securities market on which the Company's Class A Common Stock is primarily
traded on such date). Each option will have a term of ten years and shall become
fully exercisable one year after a non-employee director's initial election to
the Board. Optionees will receive credit for service on the Board prior to the
date of the option grant in satisfying these vesting requirements. Thereafter,
upon election or appointment of any non-employee director to the Board or upon a
continuing director becoming a non-employee director, such non-employee director
will become eligible to receive an option to purchase 3,000 shares of the
Company's Class A Common Stock to be granted on the date of the next Annual
Meeting of Stockholders pursuant to the terms and conditions described in this
Section 7.
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 of
Stockholders commencing with the Annual Meeting of Stockholders at which the
non-employee director is granted the 3,000 share option pursuant to the
foregoing paragraph. The per share exercise price of the option will be the
fair market value of a share of the Company's Class A Common Stock on the date
of grant, defined as the closing price of the Company's Class A Common Stock on
the Nasdaq National Market (or such other securities market on which the
Company's Class A Common Stock is primarily traded on such date). Each option
will have a term of ten years and shall become fully exercisable one year after
grant.
If on any date upon which options are to be granted under this Director Plan the
number of shares of Class A Common Stock remaining available under the Director
Plan are less than the number of shares required for all grants to be made on
such date, then options to purchase a proportionate amount of such available
number of shares of Class A Common Stock shall be granted to each eligible non-
employee director.
8. Documentation of Grants. Awards made under this Director Plan shall be
evidenced by written agreements or such other appropriate documentation as the
Board shall prescribe. The Board need not require the execution of any
instrument or acknowledgement of notice of an award under this Direction Plan,
in which case acceptance of such award by the respective optionee will
constitute agreement to the terms of the award.
9. Nontransferrability. Any options granted under this Director Plan shall by
its terms be nontransferable by the optionee otherwise than by will or the laws
of descent and distribution, and shall be exercisable, during the optionee's
lifetime, only by the optionee.
10. Amendment and Termination. The Board may alter, amend, suspend, or
terminate this Director Plan, provided that no such actions shall deprive any
optionee, without his consent, of any option granted to the optionee pursuant to
this Director Plan or of any of his rights under such option and provided
further that the provisions of this Director Plan designating persons eligible
to participate in the Director Plan and specifying the amount, exercise price
and timing of grants under the Director Plan shall not be amended more than once
every six months other than to comply with changes with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act, or the rules
thereunder.
<PAGE>
EXHIBIT 10.28
11. Termination of Directorship. All options held by non-employee directors as
of the date of cessation of service as a director may be exercised in accordance
with their terms by the non-employee director or his heirs or legal
representatives until the earlier of one year after such termination and the
expiration of the applicable option term.
12. Manner of Exercise. All or a portion of an exercisable option shall be
deemed exercised upon delivery to the Secretary of the Company at the Company's
principal office all of the following: (i) a written notice of exercise
specifying the number of shares to be purchased signed by the non-employee
director or other person then entitled to exercise the option, (ii) full payment
of the exercise price for such shares by any of the following or combination
thereof (a) cash, (b) certified or cashier's check payable to the order of the
Company, ( c) the delivery of whole shares of the Company's Class A Common Stock
owned by the option holder, or (d) by requesting that the Company withhold whole
shares of Class A Common Stock then issuable upon exercise of the option (for
purposes of such a transaction the value of shares of the Company's Class A
Common Stock shall be defined as in the first paragraph of Section 7 hereof),
(iii) such representations and documents as the Board, in its sole discretion,
deems necessary or advisable to effect compliance with all applicable provisions
of the Securities Act of 1933, as amended , and any other federal or state
securities laws or regulations, (iv) in the event that the option shall be
exercised by any person or persons other than the non-employee director,
appropriate proof of the right of such person or persons to exercise the option,
and (v) such representations and documents as the Board, in its sole discretion,
deems necessary or advisable.
13. Compliance with Law. Class A Common Stock shall not be issued upon
exercise of an option granted under this Director Plan unless and until counsel
for the Company shall be satisfied that any conditions necessary for such
issuance to comply with applicable federal, state or local tax, securities or
other laws or rules or applicable securities exchange requirements have been
fulfilled.
IN TESTIMONY WHEREOF, The Finish Line, Inc. has executed this Director Plan, as
amended, by it officers thereunto duly authorized this 29th day of April, 1999.
THE FINISH LINE, INC.
By /s/ Alan H. Cohen
-----------------
Alan H. Cohen
Chairman of the Board and
Chief Executive Officer
ATTEST:
By /s/ Gary D. Cohen
-----------------
Gary D. Cohen
Secretary
<PAGE>
EXHIBIT 11
COMPUTATION OF NET INCOME PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended
-------------------------------------
February 27, February 28, March 1,
1999 1998 1997
------- ------- -------
Basic
- -----
<S> <C> <C> <C>
Average shares outstanding 25,541 25,963 23,100
======= ======= =======
Net income $20,687 $26,734 $18,813
======= ======= =======
Per share amount $ .81 $ 1.03 $ .81
======= ======= =======
</TABLE>
Diluted
- -------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Average shares outstanding 25,541 25,963 23,100
Net effect of dilutive stock options 292 354 402
------- ------- -------
Total 25,833 26,317 23,502
======= ======= =======
Net Income $20,687 $26,734 $18,813
======= ======= =======
Per Share Amount $ .80 $ 1.02 $ .80
======= ======= =======
</TABLE>
<PAGE>
ANNUAL REPORT
[PICTURE OF MALL APPEARS HERE]
Barton Creek Square Mall
Austin, Texas
Store Front
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FISCAL Fiscal Fiscal
Dollars in thousands (except per share data) 1999 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 522,623 $ 438,911 $ 332,002
Operating income 31,946 40,799 30,533
Operating income as a percent of net sales 6.1% 9.3% 9.2%
Net income 20,687 26,734 18,813
Net income as a percent of net sales 4.0% 6.1% 5.7%
Diluted earnings per share $ .80 $ 1.02 $ .80
Number of stores open at end of period 358 302 251
Total retail square footage at end of period 2,095,264 1,586,520 1,088,419
Average store size 5,853 5,253 4,336
Total assets $ 278,555 $ 255,978 $ 217,718
Cash (including short-term & long-term securities) 40,924 53,809 82,834
Total debt -- -- --
Total stockholders' equity 208,679 197,122 169,875
========================================================================================
</TABLE>
The Company's fiscal year ends on the Saturday nearest the end of February
starting with fiscal 1997. For fiscal 1996 and prior, the Company's fiscal year
ended at the end of February. As used in this Report, "fiscal 1995," "fiscal
1996," "fiscal 1997," "fiscal 1998" and "fiscal 1999" refer to the Company's
fiscal years ended February 28, 1995; February 29, 1996; March 1, 1997; February
28, 1998; and February 27, 1999, respectively. "Fiscal 2000" and "fiscal 2001"
refer to the Company's fiscal years ending February 26, 2000 and March 3,
2001.
[GRAPH APPEARS HERE]
<PAGE>
COMPANY
[FASHION MODEL PRESENTING PRODUCT PICTURE APPEARS HERE]
Finish Line, Inc. is a leading athletic specialty retailer specializing in brand
name athletic and casual footwear, apparel and accessories. Known for its
signature shoe wall, Finish Line strives to offer customers more styles and
sizes of active footwear than any mall-based retailer. Finish Line began
operations in 1976 in Indianapolis, Indiana and at year-end served customers in
39 states through 358 stores.
ALABAMA Kennesaw IOWA Flint
Dothan Union City Cedar Rapids Fort Gratiot
Montgomery Augusta Coralville Holland
Macon Davenport Lansing
ARIZONA Savannah Des Moines Midland
Mesa Dubuque Monroe
Phoenix IDAHO Iowa City Port Huron
Scottsdale Boise Portage
Traverse City
ARKANSAS ILLINOIS KANSAS
Fayetteville Alton Hutchinson MISSISSIPPI
Fort Smith Bloomington Manhattan Ridgeland
Little Rock Bourbonnais Olathe Tupelo
N. Little Rock Carbondale Overland Park
Chicago Salina MISSOURI
CALIFORNIA Aurora Topeka Cape Girardeau
Los Angeles Bloomingdale Wichita Chesterfield
San Diego Fairview Heights Florissant
Forsyth KENTUCKY Independence
COLORADO Gurnee Ashland Joplin
Boulder Lombard Bowling Green Kansas City
Colorado Springs Matteson Florence St. Louis
Denver Niles Lexington St. Peters
N. Riverside Louisville Springfield
CONNECTICUT Orland Park Paducah
Meriden St. Charles
Waterbury Schaumburg LOUISIANA NEBRASKA
Waterford Skokie Alexandria Lincoln
Waukegan Bossier City Omaha
DELAWARE WestDundee Monroe
Wilmington Danville Shreveport NEVADA
Marion Las Vegas
Moline MARYLAND
FLORIDA Peoria Baltimore NEW
Brandon Peru Bethesda HAMPSHIRE
Crystal River Rockford Cumberland Concord
Daytona Beach Springfield Frederick Manchester
Fort Myers Hagerstown Newington
Jacksonville Laurel Salem
Lakeland INDIANA Owings Mills
Naples Anderson Salisbury
Ocoee Bloomington Towson NEW JERSEY
Orlando Carmel Deptford
Panama City Elkhart MASSACHUSETTS Eatontown
Pensacola Evansville Hanover Paramus
Port Richey Fort Wayne Holyoke Phillipsburg
St. Petersburg Indianapolis Saugus
Sanford Kokomo Taunton
Tallahassee Lafayette NEW MEXICO
Tampa Marion MICHIGAN Albuquerque
Merrillville Adrian
Michigan City Auburn Hills
Muncie Battle Creek NEW YORK
GEORGIA Richmond Bay City Albany
Alpharetta South Bend Benton Harbor Buffalo
Athens Terre Haute Burton Blasdell
Atlanta Williamsville
Decatur Clay
Duluth Dewitt
Horseheads
Ithaca
Lakewood Northwood TEXAS Janesville
Middletown Piqua Abilene Madison
Niagara Falls Reynoldsburg Amarillo Milwaukee
Poughkeepsie St. Clairsville Austin Racine
Rochester Sandusky Dallas/Fort Worth Wauwatosa
Rotterdam Springfield Arlington
Saratoga Springs Toledo Denton
Schenectady Hurst
Staten Island OKLAHOMA Irving
Syracuse Midwest City Lewisville
Wilton Oklahoma City Mesquite
Tulsa Plano
NORTH PENNSYLVANIA Richardson
CAROLINA Altoona El Paso
Burlington Bensalem Houston
Cary Bloomsburg Humble
Charlotte Butler Killeen
Gastonia Camp Hill Longview
Pineville Chambersburg Midland
Concord Erie San Angelo
Fayetteville Greensburg San Antonio
Greensboro Hanover Sherman
Hickory Indiana Temple
High Point Johnstown Tyler
Morrisville Media Waco
Raleigh Wales Wichita Falls
Rocky Mount Philadelphia
Winston-Salem Pittsburgh
Scranton
OHIO Uniontown VIRGINIA
Akron Washington Alexandria
Ashtabula West Mifflin Chesapeake
Beaver Creek York Dulles
Canton Fredericksburg
Cincinnati SOUTH Harrisonburg
Cleveland CAROLINA Lynchburg
Euclid Charleston Newport News
Mentor Columbia Richmond
N. Olmsted Greenville Colonial Heights
N. Randall Glen Allen
Parma SOUTH Roanoke
Richmond Heights DAKOTA Virginia Beach
Columbus Sioux Falls Winchester
Dayton
Dublin TENNESSEE WASHINGTON
Elyria Antioch Seattle
Findlay Chattanooga
Franklin Clarksville WEST VIRGINIA
Heath Franklin Barboursville
Lancaster Goodlettsville Bridgeport
Lima Johnson City Charleston
Mansfield Memphis Martinsburg
Marion Nashville Morgantown
New Philadelphia
Niles WISCONSIN
Green Bay
Greendale
<PAGE>
During the year our "Champions of Achievement" campaign succeeded in building
Finish Line brand recognition in the marketplace. The campaign was led by two
award-winning television commercials, and supported with consumer-targeted print
advertising, outdoor boards, direct mail, in-store graphics and promotions. In
order to complement the look and feel of our stores, and to continue to build
our relationship and company brand recognition with our customers, we have
continued our efforts to position and grow SPIKE Magazine, which now reaches
more than 800,000 customers every three months. Conceived two years ago and
directed to the 14- to 22-year-old mall shopper, SPIKE Magazine has positioned
Finish Line as the first choice for the hottest athletic products and product
information and has made our store, not just the mall, our customers' shopping
destination.
Back in 1976, we began by opening our first store in Indianapolis. We did not
dare dream how far we could come with the Finish Line concept. Over the years,
we have continued to challenge ourselves to be the best athletic footwear
retailer in the mall. Today, as a result of meeting those challenges, we have a
sound financial base from which to operate and a track record that builds
confidence in and around the Company. We are staffed with bright professionals
eager to succeed in any competitive environment. Professionals who not only work
hard, but work smart, setting a standard for those who work with and for them.
Together we will meet the needs of our customers and the marketplace, as we
continually strive to be the best athletic footwear retailer in the mall. While
our competitors are focusing on the Finish Line, we at the Finish Line remain
focused on the future.
/s/ Alan H. Cohen
Alan H. Cohen, President & CEO
[LOGO OF FINISH LINE YOUTH FOUNDATION]
This year also saw the creation of the Finish Line Youth Foundation. We created
the Youth Foundation to facilitate our ability to provide funding and assistance
to youth athletics and programs. In its first year of operation, the Finish Line
Youth Foundation, through our customers, employees and stores, raised more than
$600,000 for Boys and Girls Clubs of America. We look forward to growing the
Foundation and continue giving back to the communities where we do business.
[PICTURE APPEARS HERE]
Alan Cohen, Finish Line President & CEO (left) and Kurt Aschermann, Vice
President of the Boys and Girls Clubs of America.
<PAGE>
(to shareholders)
Finish Line has always understood the importance of setting goals, participating
and competing to the best of one's abilities. Even our marketing efforts focused
on what it takes to be a true "Champion of Achievement." From the store level to
the front office, Finish Line worked as a team to succeed in a challenging year.
Fiscal 1999 proved to be a difficult year in our industry and caused us to
reflect on that marketing message. This adverse business environment challenged
us to be "Champions." Throughout the year industry trends seemed to grow more
negative, but true champions find a way to persevere and succeed. As we were
faced with new challenges and obstacles, we continued to work toward our
corporate goal of being THE BEST ATHLETIC FOOTWEAR RETAILER IN THE MALL.
For the year, we again broke sales records posting $522,623,000 in sales, an
increase of 19 percent vs. last year. While an adverse specialty retail
environment kept us from reporting same store sales increases for the year, we
were still able to deliver respectable earnings of $.80 per share vs. $1.02 last
year. We also accomplished our aggressive store growth plan for the year with
the opening of 59 new stores, including our first stores in Delaware, New
Mexico, Nevada, Idaho, South Dakota and California, and ended the year with 358
stores in 39 states. In addition to the new stores, we expanded/remodeled 26
existing stores. During fiscal 1999, we added approximately 510,000 square feet
of retail space, an increase of 32 percent on top of a 46 percent square footage
increase the previous year, bringing us to 2.1 million square feet of retail
space at year end. As a result of this aggressive growth, at fiscal year-end
1999 nearly one-half of our total retail square footage was less than two years
old.
We remain confident and committed to our store concept and operating strategies,
and believe that our larger, more exciting stores have become the mall-based
athletic specialty store of choice for our customers, landlords and product
vendors. We intend to continue to grow our retail square footage in fiscal year
2000 with 40 to 50 new stores and approximately 20 expansion/remodels of
existing stores. Our store formats will continue to cater to the branded
athletic footwear and apparel needs of the entire family, including performance,
fashion and value-oriented product.
At Finish Line, we believe important lessons can be learned through adverse
times and such experiences will help make us a better retailer. In our search
for improvement and competitive advantage, it is critical to recognize and adapt
quickly to changing market conditions, including fashion shifts and consumer
spending habits. We must also be prepared to review and refine in-store
merchandising and product offerings to better serve our customers' needs, as
illustrated in the recent introductions of new vendors and products such as
NST Nautica Sport Tech and RLX Polo Sport into our stores.
<PAGE>
[PICTURE OF STORE APPEARS HERE]
Northridge Fashion Center
Northridge, California
<PAGE>
[PICTURE OF SHOES APPEARS HERE]
<PAGE>
BUSINESS STRATEGY
Finish Line is dedicated to being the best athletic footwear retailer in the
mall. Like a ballplayer staying after practice to work on his game, we are
working harder and smarter to always be a step ahead of the competition. We are
working on the little things so that every time a customer steps into our
stores, we are delivering the best possible shopping experience.
For more than 20 years, our success has been built on a three-point strategy.
Through our product offering, particularly footwear, we address three key
consumer desires:
FUNCTION, FASHION AND VALUE
FUNCTION. Finish Line will always be tied to authentic athletic performance.
From our Company name and the dreams and best efforts it immediately inspires,
to our well-trained sales associates and performance product mix, Finish Line
has a heritage linked to the thrill of competition and being the best.
Performance is trend-proof and will never go out of style.
FASHION FOLLOWS FUNCTION. We understand that not every pair of athletic shoes we
sell will find its way to the track or court. Many of our customers are looking
for an athletic or casual look. To meet these
[FASHION MODELS PRESENTING PRODUCT PICTURE APPEARS HERE]
<PAGE>
customers' needs, we keep abreast of the latest trends--offering product for use
on or off the court.
VALUE ENHANCES FUNCTION AND FASHION. We will also take advantage of market
opportunities that allow us to purchase brand name performance or fashion
products from our vendors at special prices to attract the value customer. And
in-store programs like the Tiebreaker price guarantee policy ensure that Finish
Line will never lose a sale on price.
Today, Finish Line is more focused than ever on being the best athletic footwear
retailer in the mall. No matter what our customers interpret as best (selection,
service, product knowledge, value, etc.), we are working to make sure they will
find it at Finish Line.
GROWING STRONG
During the last few years, Finish Line has aggressively grown into a national
chain. Fiscal 1999 saw 59 new Finish Lines open across the country, while we
remodeled/expanded an additional 26 existing stores. In the last two years, we
have nearly doubled our retail square footage. Today our customers shop our
stores in 39 states, in more than 2.1 million square feet of retail space.
[FASHION MODELS PRESENTING PRODUCT PICTURE APPEARS HERE]
<PAGE>
[PICTURE APPEARS HERE]
Los Cerritos Mall
Cerritos, California
Womens Shoe Wall
<PAGE>
As the competition for prime mall real estate intensifies, Finish Line will
continue to work to find prime locations in the best markets and malls. A
careful growth plan calling for a 15 to 20 percent retail square footage
increase is now in place to guide Finish Line into the next millennium. During
fiscal 2000, we expect to add another 300,000 to 400,000 square feet of great
looking, athletic specialty store space.
SIZED TO FIT
When a customer walks into a Finish Line store, they are walking into an
athletic retail format like no other. In our large-format stores, those with
more than 10,000 square feet, a dramatic shoe wall showcasing up to 1,300 styles
drives home our footwear focus.
Our large-format stores offer customers a unique shopping experience. Multiple
footwear and apparel styles are offered in an exciting and entertaining shopping
environment. Vendor and sport-specific concept shops are used to showcase
particular vendors or categories, simplifying the shopping experience while
showcasing product collections and accessories.
Even our traditional stores, those less than 10,000 square feet, offer more
shopping area than most of our competitors' stores. Our traditional new stores,
opened over the last two fiscal years, have averaged almost 6,000 square feet
allowing us to offer a broader product selection in both footwear and apparel.
Product. Product. Product.
[PICTURE APPEARS HERE]
Northridge Fashion Center
Northridge California
Mens Shoe Wall
<PAGE>
[FASHION MODELS PRESENTING PRODUCT PICTURE APPEARS HERE]
<PAGE>
In addition to footwear, our merchandise department will work closely with
vendors to offer a complete and complimentary product assortment. New items from
vendors like NST Nautica Sport Tech, RLX Polo Sport, Oakley and The North Face
will enhance our product offering beyond our traditional athletic brands like
Nike and adidas. We have also recently introduced our own private label apparel
brand into our stores, SPK. This proprietary branded product is designed to meet
the needs of consumers looking for a high-quality, basics-type of product at
attractive price points.
In all categories, we will continue to offer value merchandise. Our size,
flexibility and good reputation with our product partners have allowed us to
take advantage of opportunity buys from our vendors, allowing us to satisfy the
needs of our value-conscious customers. It's another way we meet the diverse
needs of our target audience.
IT'S WHAT YOU KNOW
As we've grown, it has become increasingly important that our information
technology keep pace. From managing inventories to tracking daily sales to
forecasting product allotment for new stores, quick and accurate sharing of
information is crucial for our continued success.
[FASHION MODEL PRESENTING PRODUCT PICTURE APPEARS HERE]
Enhanced capabilities at our stores provide for daily transmission of
information to and from the field and home office, allowing for timely product
replenishment and rapid response for buying and merchandising strategies. Going
forward, we will continue to invest in our communications infrastructure to
strengthen our capabilities of exchanging information throughout the company in
a timely and accurate manner.
[FASHION MODEL PRESENTING PRODUCT PICTURE APPEARS HERE]
Improved communication is vital to our aggressive expansion plan. We plan to
implement a new merchandise planning system which will allow us to more
accurately forecast merchandise needs and store allotments. We will be able to
build more precise sales plans down to the department class level for each
store. New software now being implemented will also allow improved store-level
labor forecasting and scheduling.
Armed with these new ways to gather and provide information, our people are more
prepared than ever before to meet customer needs.
<PAGE>
[PICTURE APPEARS HERE]
Los Cerritos Mall
Cerritos, California
Youth Wall
<PAGE>
PEOPLE MAKE THE DIFFERENCE
[EMPLOYEE PICTURES APPEAR HERE]
With the addition of 59 stores this year, on top of 53 openings in fiscal year
1998, it is an on-going challenge to make certain we have well-trained,
motivated staffs to service our customers and operate each store. With this
rapid growth, our entire store workforce has doubled in two short years--placing
unique pressures on the crucial hiring and training process.
Realizing that our store personnel are the front line, we have worked diligently
to recruit quality people and provide them with the right tools and training to
offer our customers a satisfying store experience. The rallying cry has been
back to basics with a re-emphasis on service, knowledge and selection. With each
success in training, recruitment and education, employee confidence has grown.
Today our pool of management trainees is greater and better prepared to take
leadership positions as new stores are opened.
[PICTURE OF WASHINGTON SQUARE MALL
INDIANAPOLIS, INDIANA STORE CASH
WRAP AND PRODUCT APPEARS HERE]
HOW WE SEE IT
In many instances, how we show our product may be as important as what we carry.
We will continue to hone our merchandising strategy to create an exciting,
shopping environment that not only invites customers into the store, but sets
the stage for product purchase. New footwear display tables and lease line
fixtures offer additional opportunities to showcase footwear. And by working
with vendors to create shared graphics packages, each Finish Line can deliver a
consistent brand or category message at the crucial in-mall contact point.
<PAGE>
BUILDING RELATIONSHIPS
[SPIKE MAGAZINE COVERS PICTURE APPEARS HERE]
BUILDING OUR BRAND. OUR BRAND.
This year we embarked on a performance-based branding campaign that positioned
Finish Line as a supportive, goal-driven retailer that understands and relishes
the joy of competition. In two television commercials, we asked our customers
the simple question, "Where's your Finish Line?" Print ads focused on goals and
goal attainment, reinforcing a commitment to performance and positioning Finish
Line as the destination for gear that can help you reach your goals.
Our own SPIKE Magazine continued to reach more than 800,000 customers, creating
customer loyalty and providing a showcase for new footwear and apparel.
Delivered four times a year, SPIKE Magazine offers a unique one-on-one dialogue
in the homes of our key target audiences. Advertising support from our vendors
makes the magazine cost effective while building Finish Line brand identity as
well as reinforcing the product and performance messages of our vendors.
We will continue to build a bridge to our customers. This year we will
investigate new ways to reach our customers and test several new programs to
build customer loyalty and repeat visits. Direct mail, cooperative marketing
programs and grass-roots initiatives will again play a role in getting our
message out. This summer for the first time, product will be available for sale
on our web site at www.finishline.com along with in-store promotional activities
and technical product information.
Our goal is to deliver a consistent message every time we "speak" to our
customers, whether it's in their home, in the mall or in our store.
[FASHION MODEL PRESENTING PRODUCT PICTURE APPEARS HERE]
<PAGE>
[PICTURE OF STORE APPEARS HERE]
Los Cerritos Mall
Cerritos, California
Store Front
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended
- ------------------------------------------------------------------------------------------------------------------------------------
FEBRUARY 27, February 28, March 1, February 29, February 28,
(In thousands, except per share and store operating data) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT DATA:
- ------------------------------------------------------------------------------------------------------------------------------------
Net sales $ 522,623 $ 438,911 $ 332,002 $ 240,155 $ 191,623
Cost of sales (including occupancy expenses) 373,170 303,809 229,187 168,912 132,726
- ------------------------------------------------------------------------------------------------------------------------------------
Gross profit 149,453 135,102 102,815 71,24 58,897
Selling, general and administrative expenses 117,507 94,303 72,282 54,254 44,548
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income 31,946 40,799 30,533 16,989 14,349
Interest expense (income)--net (1,421) (2,495) (824) 892 317
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 33,367 43,294 31,357 16,097 14,032
Income taxes 12,680 16,560 12,544 6,439 5,618
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 20,687 $ 26,734 $ 18,813 $ 9,658 $ 8,414
====================================================================================================================================
EARNINGS PER SHARE DATA:
- ------------------------------------------------------------------------------------------------------------------------------------
Basic earnings per share $ .81 $ 1.03 $ .81 $ .47 $ .41
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share $ $ .80 $ 1.02 $ .80 $ .47 $ .41
====================================================================================================================================
Share Data/(1)/:
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted-average shares 25,541 25,963 23,100 20,630 20,630
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted weighted-average shares 25,833 26,317 23,502 20,671 20,630
====================================================================================================================================
Selected Store Operating Data:
- ------------------------------------------------------------------------------------------------------------------------------------
Number of stores:
Opened during period 59 53 35 35 30
Closed during period 3 2 4 5 4
Open at end of period 358 302 251 220 190
Total square feet/(3)/ 2,095,264 1,586,520 1,088,419 870,340 691,831
Average square feet per store/(2)/ 5,853 5,253 4,336 3,956 3,641
Net sales per square foot for comparable stores 310 $ 345 $ 352 $ 308 $ 300
Increase (decrease) in comparable store net sales/(3)/ (1.7)% 5.6% 16.0% 3.4% 1.7%
====================================================================================================================================
Balance Sheet Data:
- ------------------------------------------------------------------------------------------------------------------------------------
Working capital $ 106,661 $ 120,822 $ 112,079 $ 32,453 $ 30,050
Total assets 278,555 255,978 217,718 114,972 88,535
Total debt -- -- -- 9,500 5,025
Stockholders' equity 208,679 197,122 169,87 63,148 53,487
====================================================================================================================================
</TABLE>
(1) Consists of weighted-average common and common equivalent shares outstanding
for the period and was adjusted to give effect for the November 15, 1996
two-for-one stock split.
(2) Computed as of the end of each fiscal period.
(3) Calculated using those stores that were open for the full current fiscal
period and were also open for the full prior fiscal period.
<PAGE>
[FINISH LINE]
<TABLE>
<S> <C>
Selected Financial Data................................................... 17
Management Discussion and Analysis
of Financial Conditions and Results of Operations......................... 18-21
Consolidated Balance Sheets............................................... 22
Consolidation Statements of Income........................................ 23
Consolidated Statements of Cash Flows..................................... 24
Consolidated Statements of Changes of
Stockholder's Equity...................................................... 25
Notes to Consolidated Financial Statements................................ 26-30
Report of Independent Auditors............................................ 31
Market Price of Common Stock.............................................. 31
Officers and Directors.................................................... 32
Shareholder Information................................................... 33
</TABLE>
[PICTURE OF LOS CERRITOS MALL
CERRITOS, CALIFORNIA STORE CASH WRAP
APPEARS HERE]
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL 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.
The table below sets forth operating data of the Company as a percentage of
net sales for the periods indicated below.
Year Ended
- -----------------------------------------------------------------------------
FEBRUARY 27, February 28, March 1,
1999 1998 1997
- -----------------------------------------------------------------------------
Income Statement Data:
Net sales 100.0% 100.0% 100.0%
Cost of sales (including
occupancy expenses) 71.4 69.2 69.0
- -----------------------------------------------------------------------------
Gross profit 28.6 30.8 31.0
Selling, general and
administrative expenses 22.5 21.5 21.8
- -----------------------------------------------------------------------------
Operating income 6.1 9.3 9.2
Interest income--net .3 .6 .2
- -----------------------------------------------------------------------------
Income before income taxes 6.4 9.9 9.4
Income taxes 2.4 3.8 3.7
- -----------------------------------------------------------------------------
Net income 4.0% 6.1% 5.7%
- -----------------------------------------------------------------------------
FISCAL 1999 COMPARED TO FISCAL 1998 Net sales for fiscal 1999 were $522.6
million, an increase of $83.7 million or 19.1% over fiscal 1998. Of this
increase, $48.3 million was attributable to an 18.5% increase in the number of
stores open during the period from 302 at the end of fiscal 1998 to 358 at the
end of fiscal 1999. The balance of the increase in net sales was attributable to
an increase of $30.9 million from the 53 existing stores open only part of
fiscal 1998 along with an increase in sales from stores remodeled. These
increases were partially offset by a comparable store net sales decrease of 1.7%
in fiscal 1999. Comparable net footwear sales increased 2.4% for fiscal 1999 and
comparable net activewear and accessories sales decreased 11.0%. Net sales per
square foot decreased in fiscal 1999 to $310 from $345 in fiscal 1998. The
decrease in 1999 was the result of the competitive and promotional retail
environment and negative apparel trends due to a fashion shift by customers to
contemporary non-athletic brands. In addition, an 11.4% increase in the average
store size from 5,253 square feet in fiscal 1998 to 5,853 square feet in fiscal
1999 contributed to the decline in sales per square foot.
Gross profit, which includes product margin less store occupancy costs, for
fiscal 1999 was $149.5 million, and increase of $14.4 million or 10.6% over
fiscal 1998, and a decrease of approximately 2.2% as a percentage of net sales.
Of this 2.2% decrease, 1.5% was due to an increase in occupancy costs as a
percentage of net sales, 0.4% was due to lower margins for product sold and 0.3%
was due to an increase in inventory shrink.
Selling, general and administrative expenses were $117.5 million, an
increase of $23.2 million or 24.6% over fiscal 1998, and increased to 22.5% from
21.5% as a percentage of net sales. The dollar increase was primarily
attributable to the operating costs related to the 59 additional stores opened
during 1999. The increase as a percentage of net sales is a result of higher
store payroll costs and weaker sales from the end of July through February.
Net interest income for fiscal 1999 was $1.4 million compared to net
interest income of $2.5 million for fiscal 1998. This decrease was the result of
reduced invested cash balances due to the Company's funding of fiscal 1999
expansion and the purchase of treasury stock under the Company's stock
repurchase program.
Income tax expense was $12.7 million for fiscal 1999 compared to $16.6
million for fiscal 1998. The decrease in the Company's provision for federal and
state taxes in 1999 is due to the decreased level of income before taxes along
with a decrease in the effective tax rate to 38% for fiscal 1999 from 38.25% in
fiscal 1998. In addition, the Company is currently considering other
opportunities that may further reduce the Company's effective tax rate in future
periods.
Net income decreased 22.6% to $20.7 million for fiscal 1999 compared to
$26.7 million for fiscal 1998. Diluted net income per share decreased 21.6% to
$.80 for fiscal 1999 compared to $1.02 for fiscal 1998. Diluted weighted average
shares outstanding were 25,833,000 and 26,317,000, for fiscal 1999 and 1998,
respectively. The reduction in the diluted weighted average shares outstanding
reflects the repurchase of 1,313,000 shares of Class A Common Stock through the
stock buyback program authorized by the Board of Directors in September 1998.
FISCAL 1998 COMPARED TO FISCAL 1997 Net sales for fiscal 1998 were $438.9
million, an increase of $106.9 million or 32.2% over fiscal 1997. Of this
increase, $64.7 million was attributable to a 20.3% increase in the number of
stores open during the period from 251 at the end of fiscal 1997 to 302 at the
end of fiscal 1998. The balance of the increase in net sales was attributable to
an increase of $23.2 million from the 35 existing stores open only part of
fiscal 1997 along with an increase in net sales from existing stores open the
entire twelve month period of fiscal 1998 compared to fiscal 1997. During fiscal
1998, comparable store net sales increased 5.6% compared to fiscal 1997.
Comparable net footwear sales increased 6.6% for fiscal 1998 and comparable net
activewear and accessories sales increased 3.3%. Net sales per square foot
decreased in fiscal 1998 to $345 from $352 in fiscal 1997. The decrease in 1998
was the result of the competitive and promotional retail environment along with
a 21.1% increase in the average square feet per store from 4,336 in fiscal 1997
to 5,253 in fiscal 1998.
Gross profit, which includes product margin less store occupancy costs, for
fiscal 1998 was $135.1 million, an increase of $32.3 million or 31.4% over
fiscal 1997, and a decrease of approximately 0.2% as a percentage of net sales.
Of this 0.2% decrease,
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
Quarter Ended
- ------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data) May 30, 1998 August 29, 1998 November 28, 1998 FEBRUARY 27, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $116,602 100.0% $144,719 100.0% $109,655 100.0% $151,647 100.0%
Cost of sales (including occupancy expenses) 81,379 69.8 100,211 69.2 81,874 74.7 109,706 72.3
- ------------------------------------------------------------------------------------------------------------------------------------
Gross profit 35,223 30.2 44,508 30.8 27,781 25.3 41,941 27.7
Selling, general and administrative expenses 26,472 22.7 32,170 22.2 27,454 25.0 31,411 20.7
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income 8,751 7.5 12,338 8.6 327 5.3 10,530 7.0
Interest income--net 490 .4 397 .3 313 .3 221 .1
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 9,241 7.9 12,735 8.9 640 .6 10,751 7.1
Income taxes 3,512 3.0 4,839 3.4 244 .2 4,085 2.7
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 5,729 4.9% $ 7,896 5.5% $ 396 .4% $ 6,666 4.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Basic earnings per share $ .22 $ .30 $ .02 $ .27
Diluted earnings per share $ .22 $ .30 $ .02 $ .27
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Quarter Ended
- ------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data) May 31, 1997 August 30, 1997 November 29, 1997 February 28, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $87,537 100.0% $118,727 100.0% $95,928 100.0% $136,719 100.0%
Cost of sales (including occupancy expenses) 60,903 69.6 80,178 67.5 67,557 70.4 95,171 69.6
- ------------------------------------------------------------------------------------------------------------------------------------
Gross profit 26,634 30.4 38,549 32.5 28,371 29.6 41,548 30.4
Selling, general and administrative expenses 20,083 22.9 24,744 20.8 23,141 24.1 26,335 19.3
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income 6,551 7.5 13,805 11.7 5,230 5.5 15,213 11.1
Interest income--net 722 0.8 712 0.6 624 0.6 437 0.4
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 7,273 8.3 14,517 12.3 5,854 6.1 15,650 11.5
Income taxes 2,782 3.2 5,553 4.7 2,240 2.3 5,985 4.4
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 4,491 5.1% $ 8,964 7.6% $ 3,614 3.8% $ 9,665 7.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Basic earnings per share $ 0.17 $ 0.35 $ 0.14 $ 0.37
Diluted earnings per share $ 0.17 $ 0.34 $ 0.14 $ 0.37
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
0.4% was due to an increase in occupancy costs as a percentage of net sales,
partially offset by a 0.2% increase in margins for product sold.
Selling, general and administrative expenses were $94.3 million, an increase
of $22.0 million or 30.5% over fiscal 1997, and decreased to 21.5% from 21.8% as
a percentage of net sales. The dollar increase was primarily attributable to the
operating costs related to the 53 additional stores opened during fiscal 1998.
The decrease as a percentage of sales was primarily a result of the comparable
store net sales increase of 5.6% for fiscal 1998 along with improved expense
controls.
Net interest income for fiscal 1998 was $2.5 million compared to net
interest income of $824,000 for fiscal 1997. The increase was a result of using
the proceeds of the secondary offering completed on June 19, 1996 to repay all
existing outstanding indebtedness under the Company's unsecured committed Loan
Agreement with the remainder of these proceeds along with the proceeds from the
secondary offering completed on December 18, 1996, being invested in interest
bearing instruments.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Income tax expense was $16.6 million for fiscal 1998 compared to $12.5
million for fiscal 1997. The increase in the Company's provisions for federal
and state taxes in 1998 is due to the increased level of income before income
taxes, partially offset by a decrease in the effective tax rate to 38.25% for
fiscal 1998 from 40.0% in fiscal 1997. With the Company's significant investment
in tax exempt instruments.
Net income increased 42.1% to $26.7 million for fiscal 1998 compared to
$18.8 million for fiscal 1997. Diluted net income per share increased 27.5% to
$1.02 for fiscal 1998 compared to $0.80 for fiscal 1997. Diluted weighted-
average shares outstanding were 26,317,000 and 23,502,000, respectively, for
fiscal 1998 and 1997.
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 holiday shopping. The
third fiscal quarter has traditionally had the lowest volume of merchandise sold
and the lowest results of operations.
The table on the previous page sets forth quarterly data of the Company,
including such data as a percentage of net sales. For fiscal 1999 and fiscal
1998. This quarterly information is unaudited but, in managements opinion,
reflects all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the information for the periods presented.
LIQUIDITY AND CAPITAL RESOURCES The Company finances the opening of new
stores and the resulting increase in inventory requirements principally from
operating cash flow and cash on hand. Net cash provided by operations was
$37,734,000, $212,000 and $15,565,000 respectively, for fiscal 1999, 1998 and
1997. At February 27, 1999, cash and cash equivalents were $23.1 million and
short-term marketable securities were an additional $2.2 million. Cash
equivalents are primarily invested in tax exempt instruments with maturities of
one to twenty-eight days. Short-term marketable securities range in maturity
from 90-365 days and are primarily invested in tax exempt municipal obligations.
Merchandise inventories were $135.3 million at February 27, 1999 compared
to $130.1 million at February 28, 1998. On a per square foot basis, merchandise
inventories at February 27, 1999 decreased 21.3% compared to February 28, 1998.
The company believes current inventory levels are appropriate based on the
industry environment.
The Company has an unsecured committed Credit Agreement (the "Facility")
with a syndicate of commercial banks in the amount of $75,000,000, which expires
on July 10, 2003. The Company periodically reviews its ongoing credit needs with
its syndicate of commercial banks and expects to be able to renew or renegotiate
the Facility prior to its expiration for an additional period beyond the current
maturity date of July 10, 2003. The interest rate on the Facility is, at the
Company's election, either a negotiated rate approximating the federal funds
effective rate plus .775% (this rate is available on the first $10,000,000 of
borrowings), the bank's LIBOR Rate plus .475% or the bank's prime commercial
lending rate. The margin percentage added to the LIBOR Rate is subject to
adjustment quarterly based on the fixed charge coverage ratio (as defined). At
February 27, 1999, there were no borrowings outstanding under the Facility.
The Facility contains restrictive covenants that limit, among other things,
the Company's ability to declare or pay dividends, incur or guarantee debt,
redeem shares of its capital stock, be a party to a merger, acquire or dispose
of assets or engage in any other transactions outside the ordinary course of
business. In addition, the Company must maintain a fixed charge coverage ratio
(as defined) of not less than 1.5 to 1.0, a consolidated tangible net worth of
not less than $168,000,000 and a leverage ratio (as defined) of not greater than
.63 to 1.0. The Company is in compliance with all such covenants.
Capital expenditures were $41,398,000 and $29,555,000 for fiscal 1999 and
1998, respectively. Expenditures in 1999 were primarily for the build-out of 59
stores that were opened during fiscal 1999 (including 7 large format stores),
the remodeling of 26 existing stores, the completion of a 22,000 square foot
addition to the existing office building and the completion of mezzanine levels
in the existing distribution center which added 100,000 square feet of floor
space.
Expenditures in 1998 were primarily for the build-out of 50 of the 53
stores that were opened during fiscal 1998 (including 12 larger format stores),
the remodeling of 19 existing stores, the completion of a 130,000 square foot
addition to the existing distribution center, the start of a 22,000 square foot
addition to the existing office building and the start of the addition of
100,000 square feet of floor space in the existing distribution center through
the addition of mezzanine levels.
The Company anticipates that total capital expenditures for fiscal 2000
will be approximately $30,000,000 primarily for the build-out of 40-50 new
stores (including 5-7 large format stores), the remodeling of 15-20 existing
stores and various corporate projects. The Company estimates that its cash
requirement to open a traditional format new store (up to 10,000 square feet)
will range from $500,000 to $600,000 (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 $340,000 for fixtures, equipment, and leasehold
improvements and $325,000 ($225,000 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 and leasehold improvements and $1.5 million
($1.0 million net of payables) in new store inventory.
During fiscal 1999, the Company purchased, at an aggregate cost of
$683,000, 50,000 shares of Finish Line Class A Common Stock for the sole purpose
of contributing such stock to the Company's retirement plan for its employees.
The Company contributed 40,000 shares purchased in fiscal 1998 to the retirement
plan on April 1, 1998.
Effective September 2, 1998 the Board of Directors approved a stock
repurchase program. The Company was authorized to purchase on the open market or
in privately negotiated transactions, through December 31, 1999, up to 2.6
million shares of the
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Company's Class A Common Stock outstanding. As of February 27, 1999, the Company
purchased 1,313,000 shares of its Class A Common Stock in the open market at an
average price of $8.96 per share for an aggregate purchase amount of
$11,759,000. The treasury shares may be issued upon the exercise of employee
stock options or for other corporate purposes.
Management believes that cash on hand, operating cash flow and borrowings
under the Company's existing Facility will be sufficient to complete the
Company's fiscal 2000 store expansion program and to satisfy the Company's other
capital requirements through fiscal 2000.
MARKET RISK The Company is exposed to changes in interest rates primarily
from its investments in held-to-maturity municipal marketable securities. The
Company does not use interest rate derivative instruments to manage exposure to
interest rate changes. A hypothetical 100 basis point increase in interest rates
would adversely effect the net fair value of marketable securities by $337,000
at February 27, 1999.
YEAR 2000 READINESS The year 2000 issue is the result of computer programs
using two digits rather than four to define the applicable year. Such software
may recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in system failures or miscalculations leading to disruptions in the
Company's operations, including, among other things, a temporary inability to
process transactions, receive inventory from suppliers, ship inventory to
stores, or engage in similar business activities.
The Company's Year 2000 Plan is being completed in four phases as it
relates to IT systems, non-IT systems and third party suppliers, vendors and
service providers ("Third Parties"). The four phases include inventory and
assessment; remediation; testing; and contingency planning.
The Company has undertaken initiatives to ensure that its information
technology (IT) systems and non-IT systems will function properly with respect
to dates in the Year 2000 and thereafter. IT systems include hardware,
accounting, data processing, and telephone systems, cash registers, hand-held
terminals, scanning equipment, and other miscellaneous systems. Non-IT systems
include alarm systems, time clocks, fax machines, material handling equipment,
sprinklers, and heating, ventilating and air conditioning systems.
To date the Company has substantially completed the first three phases of
the Plan as it relates to substantially all IT and non-IT systems. The Company
utilizes commercially available packaged software to support the majority of its
application needs. A majority of such packages have been represented by the
respective vendors as Year 2000 compliant. Testing completed to date has
confirmed this. Contingency planning as deemed necessary will be completed by
June 1999.
The Company believes that Third Parties represent the area of greatest risk
to the Company including the potential failure of mall utilities and failure of
merchandise vendor production facilities. This is due to the Company's limited
ability to influence actions of the Third Parties, and because of the Company's
inability to estimate the level and impact of noncompliance of Third Parties in
some instances. Material Third Parties have been identified and the Company has
opened communication with them in regards to the Year 2000 issue. Correspondence
has been sent to material Third Parties and the Company has received return
correspondence from a large majority stating that they expect to be Year 2000
compliant in 1999. The Company plans to perform follow-up inquiries with
nonresponding Third Parties and develop contingency plans by June 1999 if
necessary.
Costs related to the Year 2000 issue are funded through operating cash
flows. The Company has not incurred significant historic costs related to the
Year 2000 issue as systems have been upgraded as a part of the Company's growth
and normal maintenance routines. Through February 27, 1999 the Company had
expended approximately $100,000 in remediation efforts, including the costs of
new software and modifying the applicable code of existing software. The Company
has expensed the majority of these costs to date. The Company estimates the
remaining costs to be less than $50,000.
Although the Company anticipates no material business disruption will occur
as a result of the Year 2000 issue, the Year 2000 issue is unique and the
failure to correct a material Year 2000 issue could result in an interruption,
or a failure of certain normal business activities or operations, such as loss
of communications with store locations, inability to process transactions,
inability for malls to operate, and the disruption of the supply of product and
distribution channel. Such failures could materially and adversely affect the
Company's results of operations, liquidity and financial condition. Due to
general uncertainty inherent in the Year 2000 problem resulting from the
uncertainty of the Year 2000 readiness of Third Parties, the Company is unable
to determine at this time whether the consequences of Year 2000 failures will
have a material impact on the Company's results of operations, liquidity or
financial condition. The Company's Year 2000 Plan is expected to significantly
reduce the Company's level of uncertainty about the Year 2000 issue and the
readiness of its material Third Parties. The Company believes that with the
completion of the Plan as scheduled, the possibility of significant
interruptions of normal operations should be reduced.
The above section, even if incorporated by reference into other documents
or disclosures, is a Year 2000 Readiness Disclosure as defined under the Year
2000 Information and Readiness Disclosure Act of 1998.
EFFECTS OF INFLATION As the costs of inventory and other expenses of the
Company have increased, the Company has generally been able to increase its
selling prices. In periods of high inflation, increased build out and other
costs could adversely affect the Company's expansion plans.
<PAGE>
<TABLE>
<CAPTION>
FEBRUARY 27, February 28,
(in thousands) 1999 1998
- -------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 23,113 $ 28,113
Short-term marketable securities 2,155 7,886
Accounts receivable 6,951 4,668
Merchandise inventories 135,303 130,150
Deferred income taxes 2,432 2,275
Other 1,241 1,988
- -------------------------------------------------------------------------
Total current assets 171,195 175,080
=========================================================================
Property and Equipment
Land 315 315
Building 10,251 7,517
Leasehold improvements 74,948 49,549
Furniture, fixtures, and equipment 30,418 21,547
Construction in progress 4,251 3,828
- -------------------------------------------------------------------------
120,183 82,756
Less accumulated depreciation 29,749 21,844
- -------------------------------------------------------------------------
90,434 60,912
Other Assets
Marketable securities 15,656 17,810
Deferred income taxes 1,022 1,951
Other 248 225
- -------------------------------------------------------------------------
16,926 19,986
- -------------------------------------------------------------------------
Total assets $278,555 $255,978
=========================================================================
<CAPTION>
FEBRUARY 27, February 28,
(in thousands) 1999 1998
- -------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 50,672 $ 38,790
Employee compensation 5,025 5,154
Accrued income taxes 446 3,377
Accrued property and sales tax 3,533 3,352
Other liabilities and accrued expenses 4,858 3,585
- --------------------------------------------------------------------------
Total current liabilities 64,534 54,258
==========================================================================
Long-term deferred rent payments 5,342 4,598
Stockholders' Equity
Preferred stock, $.01 par value;
1,000 shares authorized; none issued -- --
Common stock, $.01 par value
Class A:
Shares authorized--30,000
Shares issued
(1999--18,961; 1998--18,170)
Shares outstanding
(1999--17,598; 1998--18,130) 190 182
Class B:
Shares authorized--12,000
Shares issued and outstanding
(1999--7,244; 1998--7,842) 72 78
Additional paid-in capital 121,954 119,181
Retained earnings 98,905 78,218
Treasury stock (1999--1,363; 1998--40) (12.442) (537)
- --------------------------------------------------------------------------
Total stockholders' equity 208,679 197,122
- --------------------------------------------------------------------------
Total liabilities and stockholders' equity $278,555 $255,978
==========================================================================
</TABLE>
See accompanying notes
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended
- ---------------------------------------------------------------------------------------------------------
FEBRUARY 27, February 28, March 1,
(in thousands, except per share amounts) 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $522,623 $438,911 $332,002
Cost of sales (including occupancy expenses) 373,170 303,809 229,187
- ---------------------------------------------------------------------------------------------------------
Gross profit 149,453 135,102 102,815
Selling, general and administrative expenses 117,507 94,303 72,282
- ---------------------------------------------------------------------------------------------------------
Operating income 31,946 40,799 30,533
Interest income--net 1,421 2,495 824
- ---------------------------------------------------------------------------------------------------------
Income before income taxes 33,367 43,294 31,357
Income taxes 12,680 16,560 12,544
- ---------------------------------------------------------------------------------------------------------
Net income $ 20,687 $ 26,734 $ 18,813
=========================================================================================================
Basic earnings per share $ .81 $ 1.03 $ .81
=========================================================================================================
Diluted earnings per share $ .80 $ 1.02 $ .80
=========================================================================================================
</TABLE>
See accompanying notes.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
- ------------------------------------------------------------------------------------------------------------------------------------
February 27, February 28, March 1,
(in thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 20,687 $ 26,734 $ 18,813
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 10,987 7,359 5,013
Contribution of treasury stock to pension plan 981 1,039 --
Deferred income taxes 772 669 (1,079)
(Gain) loss on disposal of property and equipment (1) (42) 59
Changes in operating assets and liabilities:
Accounts receivable (2,283) 181 (3,750)
Merchandise inventories (5,153) (48,159) (5,903)
Other current assets 747 1,643 (3,107)
Other assets (23) (225) --
Accounts payable 11,882 11,201 (2,128)
Employee compensation (129) 301 1,619
Accrued income taxes (2,931) (1,799) 3,102
Other liabilities and accrued expenses 1,454 650 2,260
Deferred rent payments 744 660 666
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 37,734 212 15,565
INVESTING ACTIVITIES
Purchases of property and equipment (41,398) (29,555) (13,064)
Proceeds from disposals of property and equipment 890 844 233
Purchases of short-term marketable securities (1,971) (3,511) (16,496)
Proceeds from maturity of short-term marketable securities 9,856 12,066 4,980
Purchase of marketable securities -- (2,629) (20,106)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (32,623) (22,785) (44,453)
FINANCING ACTIVITIES
Proceeds from short-term debt 32,200 13,650 42,200
Principal payments on short-term debt (32,200) (13,650) (51,700)
Net proceeds from public offerings -- -- 84,467
Proceeds and tax benefits from exercise of stock options 2,331 704 3,447
Purchase of treasury stock (12,442) (1,230) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (10,111) 526 78,414
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (5,000) (23,099) 49,526
Cash and cash equivalents at beginning of year 28,113 51,212 1,686
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 23,113 $ 28,113 $ 51,212
====================================================================================================================================
</TABLE>
See accompanying notes.
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Number of Shares Amount Additional
-------------------------- --------------- Paid-In Retained Treasury
(in thousands) Class A Class B Treasury Class A Class B Capital Earnings Stock Totals
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT FEBRUARY 29, 1996 8,162 12,470 -- $ 41 $ 62 $ 30,374 $32,671 $ -- $ 63,148
====================================================================================================================================
Net income for 1997 18,813 18,813
- ------------------------------------------------------------------------------------------------------------------------------------
Secondary Public Offering of Class A
Common Stock--June 19, 1996 2,600 13 33,546 33,559
- ------------------------------------------------------------------------------------------------------------------------------------
Secondary Public Offering of Class A Common
Stock--December 18, 1996 2,400 24 50,884 50,908
- ------------------------------------------------------------------------------------------------------------------------------------
Conversion of Class B Common Stock to
Class A Common Stock 3,720 (3,720) 37 (37) --
- ------------------------------------------------------------------------------------------------------------------------------------
Two-for-One Stock Split 54 62 (116) --
- ------------------------------------------------------------------------------------------------------------------------------------
Non-qualified Class A Common Stock options
exercised 310 3 3,444 3,447
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 1, 1997 17,192 8,750 -- 172 87 118,132 51,484 -- 169,875
====================================================================================================================================
Net income for 1998 26,734 26,734
- ------------------------------------------------------------------------------------------------------------------------------------
Conversion of Class B Common Stock to Class
A Common Stock 908 (908) 9 (9) --
- ------------------------------------------------------------------------------------------------------------------------------------
Non-qualified Class A Common Stock options
exercised 70 1 703 704
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury Stock purchased (94) 94 (1,230) (1,230)
- ------------------------------------------------------------------------------------------------------------------------------------
Contribution of Treasury Stock to profit
sharing plan 54 (54) 346 693 1,039
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT FEBRUARY 28, 1998 18,130 7,842 40 182 78 119,181 78,218 (537) 197,122
====================================================================================================================================
Net income for 1999 20,687 20,687
- ------------------------------------------------------------------------------------------------------------------------------------
Conversion of Class B Common Stock to Class A
Common Stock 598 (598) 6 (6) --
- ------------------------------------------------------------------------------------------------------------------------------------
Non-qualified Class A Common Stock options
exercised 193 2 2,329 2,331
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury Stock purchased (1,363) 1,363 (12,442) (12,442)
- ------------------------------------------------------------------------------------------------------------------------------------
Contribution of Treasury Stock to profit
sharing plan 40 (40) 444 537 981
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT FEBRUARY 27, 1999 17,598 7,244 1,363 $190 $72 $121,954 $98,905 $(12,442) $208,679
====================================================================================================================================
</TABLE>
See accompanying notes.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION The consolidated financial statements include the
accounts of The Finish Line, Inc. and its wholly-owned subsidiary Spike's
Holding, Inc. (collectively the "Company"). Throughout these notes to the
financial statements, the fiscal years ended February 27, 1999, February 28,
1998 and March 1, 1997 are referred to as 1999, 1998 and 1997, respectively.
Effective with the quarter ended March 1, 1997, the Company changed to a
"Retail" calendar. The Company's fiscal year ends on the Saturday closest to the
last day of February and included 52 weeks in 1999 and 1998.
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 5,850 square feet in
size and are primarily located in enclosed malls in the Midwest, Northeast,
Southeast and South.
In 1999, the Company purchased approximately 87% of its merchandise from
its five largest suppliers. The largest supplier, Nike, accounted for
approximately 56%, 63% and 69% of merchandise purchases in 1999, 1998 and 1997,
respectively.
USE OF ESTIMATES Preparation of the financial statements requires management
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
EARNINGS PER SHARE Earnings per share are calculated based on the
weighted-average number of outstanding common shares. Diluted earnings per share
are calculated based on the weighted-average number of outstanding common
shares, plus the effect of dilutive stock options. All per-share amounts, unless
otherwise noted, are presented on a diluted basis, that is, based on the
weighted-average number of outstanding common shares and the effect of all
potentially dilutive common shares (primarily unexercised stock options).
REVENUE RECOGNITION Revenues from retail sales are recognized at the time
of sale.
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 as incurred. 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.
ADVERTISING The Company expenses the cost of advertising as incurred.
Advertising expense net of co-op credits for the years ended 1999, 1998 and 1997
amounted to $7,657,000, $7,326,000 and $4,950,000, respectively.
FINANCIAL INSTRUMENTS Financial instruments consist of cash and cash
equivalents, accounts receivable, marketable securities and accounts payable.
The carrying value of cash and cash equivalents, accounts receivable, and
accounts payable approximate fair value. The fair value of marketable securities
is determined on the basis of market quotes by brokers and is disclosed in Note
2. At February 27, 1999 and February 28, 1998, the Company had not invested in
any derivative financial instruments.
The Company classifies its marketable securities in one of three categories:
trading, available-for-sale, or held-to-maturity. Trading securities are bought
and held for resale in anticipation of short-term market movements. Held-to-
maturity securities are those securities which the Company has the positive
intent and ability to hold until maturity. Marketable securities not included in
trading or held-to-maturity are classified as available-for-sale. The Company
does not have any securities classified as trading or available-for-sale.
Management determines the appropriate classification of marketable
securities at the time of purchase and reevaluates such designations as of each
balance sheet date. Held-to-maturity securities are stated at amortized cost,
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization is included in interest income. Interest on securities
classified as held-to-maturity is included in interest income.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. MARKETABLE SECURITIES
All marketable securities are classified as held-to-maturity. The following
is a summary of marketable securities (in thousands):
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
February 27, 1999--
municipal obligations $17,811 $350 $(15) $18,146
- --------------------------------------------------------------------------
February 28, 1998--
municipal obligations $25,696 $251 $(47) $25,900
==========================================================================
</TABLE>
The amortized cost and estimated fair value of marketable securities at
February 27, 1999 by contractual maturity are shown below. Expected maturities
may differ from contractual maturities because the issuers of the securities may
have the right to prepay obligations without prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
- ---------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 2,155 $ 2,161
Due after one year through three years 9,944 10,120
Due after three years through five years 5,512 5,658
Due after five years ,200 ,207
- ---------------------------------------------------------------
$17,811 $18,146
===============================================================
</TABLE>
3. DEBT AGREEMENT
The Company has an unsecured committed Credit Agreement (the "Facility")
with a syndicate of commercial banks in the amount of $75,000,000, which expires
on July 10, 2003. At February 27, 1999, 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, a consolidated tangible
net worth of not less than $168,000,000 and a leverage ratio (as defined) of not
greater than .63 to 1.0. The Company was in compliance with all restrictive
covenants of the debt agreement in effect at February 27, 1999.
The interest rate on the Facility is, at the Company's election, either a
negotiated rate approximating the federal funds effective rate plus .775% (this
rate is available on the first $10,000,000 of borrowings), the bank's LIBOR Rate
plus .475% or the bank's prime commercial lending rate. The margin percentage
added to the LIBOR Rate is subject to adjustment quarterly based on the fixed
charge coverage ratio (as defined). Interest expense for 1999, 1998 and 1997 was
$57,000, $4,000 and $242,000, respectively. Interest paid on the Facility during
1999, 1998, and 1997 amounted to $57,000, $4,000 and $298,000, respectively. The
Company pays a commitment fee on the unused portion of the Facility at an
effective annual rate of .15%.
4. 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, these leases generally 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>
1999 1998 1997
- ---------------------------------------------
<S> <C> <C> <C>
Base Rent $34,697 $25,067 $17,716
Deferred Rent 744 660 666
Contingent Rent 2,871 2,940 2,868
- ---------------------------------------------
Rent Expense $38,312 $28,667 $21,250
=============================================
</TABLE>
A schedule of future base rent payments by fiscal year for signed operating
leases at February 27, 1999 with initial or remaining noncancelable terms of one
year or more is as follows (in thousands):
<TABLE>
<S> <C>
2000 $ 40,441
2001 40,623
2002 40,738
2003 40,344
2004 38,168
Thereafter 146,162
- ---------------------------------------------------------------
$346,476
===============================================================
</TABLE>
This schedule of future base rent payments includes lease commitments for
ten new stores and nine remodels which were not open as of February 27, 1999.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES
The components of income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
Federal $ 10,028 $ 13,268 $ 10,741
State 1,880 2,623 2,882
- --------------------------------------------------------
11,908 15,891 13,623
Deferred:
Federal 650 560 (850)
State 122 109 (229)
- --------------------------------------------------------
772 669 (1,079)
- --------------------------------------------------------
$ 12,680 $ 16,560 $ 12,544
========================================================
</TABLE>
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 liability are as follows (in thousands):
<TABLE>
<CAPTION>
FEBRUARY 27, February 28,
1999 1998
- ---------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Deferred rent accrual $ 2,030 $ 1,759
Property and Equipment -- 84
Uniform capitalization 1,513 1,493
Vacation accrual 471 379
Pension accrual 279 271
Bonus accrual 114 115
Other 163 125
- ---------------------------------------------------------------------
Total deferred tax assets 4,570 4,226
- ---------------------------------------------------------------------
Deferred tax liability:
Property and Equipment (1,116) --
- ---------------------------------------------------------------------
Net deferred tax assets $ 3,454 $ 4,226
=====================================================================
</TABLE>
Payments of income taxes for 1999, 1998 and 1997 were $13,672,000,
$17,572,000 and $9,122,000, respectively.
6. 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 wages. The Company's total expense for the
plan in 1999, 1998 and 1997 amounted to $1,621,000, $1,789,000 and $1,338,000,
respectively.
7. STOCK OPTIONS
The Board of Directors has reserved 3,500,000 shares of Class A Common Stock
for issuance upon exercise of options or of grants of other awards under the
option plan. Stock options have been granted to directors, officers and other
key employees. All options outstanding under the plans as of the end of fiscal
1999 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.
The Company has elected to follow Accounting Principles Board Opinion (APB)
No 25, "Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock options. Under APB No. 25, because the exercise price
of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
However, SFAS No. 123, "Accounting for Stock-Based Compensation," requires
presentation of pro forma information as if the Company had accounted for its
employee stock options granted subsequent to December 31, 1994, under the fair
value method. For purposes of pro forma disclosure, the estimated fair value of
the options is amortized to expense over the vesting period. Under the fair
value method, the Company's net income and earnings per share would have been as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------
<S> <C> <C> <C>
Net income (in thousands)
As reported $ 20,687 $ 26,734 $ 18,813
Pro forma 19,165 25,768 18,571
- -----------------------------------------------------------------
Diluted earnings per share
As reported $ 1.80 $ 1.02$ .80
Pro forma .75 .99 .80
=================================================================
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The estimated weighted-average fair value of the individual options granted
during 1999, 1998 and 1997 was $7.59, $12.70 and $12.65, respectively, on the
date of grant. The fair values for all years were determined using a Black-
Scholes option-pricing model with the following assumptions:
1999 1998 1997
- ----------------------------------------------------------------------
Dividend yield 0% 0% 0%
- ----------------------------------------------------------------------
Volatility 81.6% 74.8% 68.6%
- ----------------------------------------------------------------------
Risk-free interest rate 5.70% 6.18% 6.47%
- ----------------------------------------------------------------------
Expected life 7 years 7 years 7 years
======================================================================
A reconciliation of the Company's stock option activity and related
information is as follows:
Number Weighted-Average
of Options Exercise Price
- -----------------------------------------------------------------------------
February 29, 1996 1,168,502 $ 4.61
Granted 16,000 17.00
Exercised (311,650) 5.51
Canceled (34,000) 4.41
- -----------------------------------------------------------------------------
March 1, 1997 838,852 4.52
Granted 691,675 17.11
Exercised (70,000) 4.77
Canceled (50,500) 14.50
- -----------------------------------------------------------------------------
February 28, 1998 1,410,027 10.33
Granted 406,000 9.96
Exercised (192,791) 4.67
Canceled (35,920) 14.88
- -----------------------------------------------------------------------------
FEBRUARY 27, 1999 1,587,316 $ 10.81
=============================================================================
The following table summarizes information concerning outstanding and
exercisable options at February 27, 1999:
Weighted-
Average Weighted- Weighted-
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
- -------------------------------------------------------------------------------
$ 3-$ 5 483,101 6.3 $ 3.97 295,301 $ 4.01
$ 5-$10 448,400 9.2 $ 9.13 56,400 $ 6.75
$10-$15 385,875 8.8 $13.87 49,387 $13.65
$15-$25 269,940 8.1 $21.51 24,040 $21.43
===============================================================================
Options exercisable were 425,128, 317,126 and 108,702 at fiscal year end
1999, 1998 and 1997, respectively.
8. EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators used
in computing earnings per share (in thousands, except per share amounts).
1999 1998 1997
- --------------------------------------------------------------------------------
Income available to common stockholders $ 20,687 $ 26,734 $ 18,813
- --------------------------------------------------------------------------------
Basic earnings per share:
Weighted-average number of
common shares outstanding 25,541 25,963 23,100
Basic earnings per share $ .81 $ 1.03 $ .81
- --------------------------------------------------------------------------------
Diluted earnings per share:
Weighted-average number of
common shares outstanding 25,541 25,963 23,100
Stock options 292 354 402
- --------------------------------------------------------------------------------
Diluted weighted-average number of common
shares outstanding 25,833 26,317 23,502
- --------------------------------------------------------------------------------
Diluted earnings per share $ .80 $ 1.02 $ .80
================================================================================
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
9. COMMON STOCK
At February 27, 1999, 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.
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 Class A 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 Class A and Class B Common
Stock do not have cumulative voting rights.
While 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 of Class A Common Stock at the option of
the Class B Stockholders.
Shares of Class B Common Stock may not be transferred to third parities
(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
the Principal Stockholders and their family members.
Effective September 2, 1998, the Company's Board of Directors approved a
stock repurchase program. The Company was authorized to purchase on the open
market or in privately negotiated transactions, through December 31, 1999, up to
2,600,000 shares of Class A Common Stock outstanding. As of February 27, 1999,
the Company has repurchased under this plan 1,313,000 shares of its Class A
Common Stock in the open market at an average price of $8.96 per share for an
aggregate purchase amount of $11,758,000. The treasury shares may be issued upon
the exercise of employee stock options or for other corporate purposes.
On November 14, 1996, the Company increased the number of authorized shares
of Class A Common Stock to 30,000,000 from 20,000,000 in order to implement a
two-for-one stock split as discussed in Note 10.
10. STOCK SPLIT
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.
11. PUBLIC OFFERINGS
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) were
$33,559,000. These proceeds were used to repay bank indebtedness of $15,000,000
and for general corporate purposes.
The Company completed a secondary public offering (the "December 1996
Secondary Offering") of its Class A Common Stock on December 18, 1996, pursuant
to which the Company sold 2,400,000 shares of its Class A Common at an offering
price of $22.50 per share. Net proceeds to the Company from the December 1996
Secondary Offering (after deducting the underwriting discount of $2,700,000 and
expenses of $392,000) were $50,908,000. These proceeds were used to finance the
accelerated expansion of the Company's store base and general corporate
purposes.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders of The Finish Line, Inc.
We have audited the accompanying consolidated balance sheets of The Finish
Line, Inc. and subsidiary as of February 27, 1999 and February 28, 1998, and the
related consolidated statements of income, cash flows, and changes in
stockholders' equity for each of the three years in the period ended February
27, 1999. 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 consolidated financial position of The Finish
Line, Inc. and subsidiary at February 27, 1999 and February 28, 1998 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended February 27, 1999, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Fort Wayne, Indiana
March 23, 1999
MARKET PRICE OF COMMON STOCK
<TABLE>
<CAPTION>
Quarter Ended FISCAL 1999 Fiscal 1998
- --------------------------------------------------------------------
HIGH LOW High Low
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
May $26.50 $15.63 $27.25 $ 9.25
August 31.06 8.25 15.63 11.75
November 11.44 7.50 19.88 13.88
February 12.19 7.00 19.25 11.88
====================================================================
</TABLE>
The Class A Common Stock has traded on the Nasdaq Stock Marke(R) under
the symbol FINL since the Company became a public entity in June 1992. Since its
initial public offering in June 1992, the Company has not declared any cash
dividends and does not anticipate paying any cash dividends in the foreseeable
future. See Management's Discussion and Analysis and Note 3 of Notes to
Consolidated Financial Statements for restrictions on the Company's ability to
pay dividends.
<PAGE>
OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION OFFICER OR DIRECTOR SINCE
===================================================================================================================================
<S> <C> <C> <C>
Alan H. Cohen/(1)/ 52 Chairman of the Board of Directors
President and Chief Executive Officer 1976
- ------------------------------------------------------------------------------------------------------------------------------------
David I. Klapper/(3)/ 50 Executive Vice President, Director 1976
- ------------------------------------------------------------------------------------------------------------------------------------
David M. Fagin 55 Executive Vice President, Director 1982
- ------------------------------------------------------------------------------------------------------------------------------------
Larry J. Sablosky 50 Executive Vice President, Director 1982
- ------------------------------------------------------------------------------------------------------------------------------------
Steven J. Schneider 43 Sr. Vice President--Finance, Assistant Secretary and CFO 1989
- ------------------------------------------------------------------------------------------------------------------------------------
Gary D. Cohen 46 Sr. Vice President--General Counsel and Secretary 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph W. Wood 51 Sr. Vice President--Merchandising and Marketing 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Donald E. Courtney 44 Sr. Vice President--MIS and Distribution 1989
- ------------------------------------------------------------------------------------------------------------------------------------
George S. Sanders 41 Sr. Vice President--Real Estate and Store Development 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Michael L. Marchetti 48 Sr. Vice President--Store Operations 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Kevin S. Wampler 36 Vice President--Corporate Controller and Asst. Secretary 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Robert A. Edwards 36 Vice President--Distribution 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas R. Sicari 45 Vice President--General Merchandise Manager 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Paul C. Wagner 33 Vice President--Information Systems 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Kevin G. Flynn 35 Vice President--Marketing 1997
- ------------------------------------------------------------------------------------------------------------------------------------
James B. Davis 36 Vice President--Real Estate 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph L. Gravitt 39 Vice President--Store Personnel 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Jonathan K. Layne/(1)(2)(3)(4)/ 45 Director 1992
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey H+. Smulyan/(1)(2)(5)/ 51 Director 1992
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/ Member of the Audit Committee
/(2)/ Member of the Compensation and Stock Option Committee
/(3)/ Member of the Finance Committee
/(4)/ Mr. Layne is a partner in the law firm of Gibson, Dunn & Crutcher LLP
/(5)/ Mr. Smulyan is Chairman of the Board and President of Emmis Communications
Corporation
<PAGE>
SHAREHOLDER INFORMATION
TRANSFER AGENT AND REGISTRAR:
American Stock Transfer & Trust Co.
Shareholder Services
40 Wall Street
New York, NY 1005
STOCK MARKET INFORMATION:
The Company's Class A Common Stock is traded on the NASDAQ National Market
System under the symbol FINL. As of April 2, 1999, the approximate number of
holders of record of Class A Common Stock was 364. The Company believes that the
number of beneficial holders of its Class A Common Stock was in excess of 500 as
of that date. On April 2, 1999, the closing price for the Company's Class A
Common Stock, as reported by NASDAQ was $12.25.
FINANCIAL REPORTS:
A copy of Form 10-K, the Company's annual report to the Securities and Exchange
Commission, for the current period can be obtained without charge by writing to:
The Finish Line, Inc.
Attn: Chief Financial Officer
3308 N. Mitthoeffer Road
Indianapolis, IN 46235
Internet Address:
www.finishline.com
Except for the historical information contained herein, the matters discussed in
this Annual Report are forward looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those
expressed in any of the forward looking statements. Such risks and uncertainties
include, but are not limited to, product demand and market acceptance risks, the
effect of economic conditions, the effect of competitive products and pricing,
the availability of products, management of growth, and other risks detailed in
the Company's Securities and Exchange Commission filings.
<PAGE>
FINISH LINE
3308 N. Mitthoeffer Road
Indianapolis, IN 46235
317-899-1022
www.finishline.com
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE FINISH LINE, INC.
Subsidiary State of Incorporation Percentage of Ownership
- ---------- ---------------------- -----------------------
Spike's Holding, Inc. Delaware 100%
<PAGE>
EXHIBIT 23
[LETTERHEAD OF ERNST & YOUNG LLP]
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of The Finish Line, Inc. of our report dated March 23, 1999, included in the
1999 Annual Report to Stockholders of The Finish Line, Inc.
Our audits also included the financial statement schedule of The Finish Line,
Inc. listed in Item 14(d). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 33-95720, 33-51392 and 333-62063) pertaining to The Finish Line,
Inc. 1992 Employee Stock Incentive Plan and the Registration Statement (Form S-8
No. 33-84590) pertaining to The Finish Line, Inc. Non-Employee Director Stock
Option Plan of our report dated March 23, 1999, with respect to the consolidated
financial statements incorporated herein by reference, and our report included
in the preceding paragraph with respect to the financial statement schedule
included in this Annual Report (Form 10-K) of The Finish Line, Inc.
ERNST & YOUNG LLP
Fort Wayne, Indiana
May 5, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE YEARS ENDED FEBRUARY 27, 1999 AND FEBRUARY 28, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> FEB-27-1999 FEB-28-1998
<PERIOD-START> MAR-01-1998 MAR-02-1997
<PERIOD-END> FEB-27-1999 FEB-28-1998
<CASH> 23,113 28,113
<SECURITIES> 2,155 7,886
<RECEIVABLES> 6,951 4,668
<ALLOWANCES> 0 0
<INVENTORY> 135,303 130,150
<CURRENT-ASSETS> 171,195 175,080
<PP&E> 120,183 82,756
<DEPRECIATION> 29,749 21,844
<TOTAL-ASSETS> 278,555 255,978
<CURRENT-LIABILITIES> 64,534 54,258
<BONDS> 0 0
0 0
0 0
<COMMON> 262 260
<OTHER-SE> 208,417 196,862
<TOTAL-LIABILITY-AND-EQUITY> 278,555 255,978
<SALES> 522,623 438,911
<TOTAL-REVENUES> 522,623 438,911
<CGS> 373,170 303,809
<TOTAL-COSTS> 373,170 303,809
<OTHER-EXPENSES> 117,507 94,303
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (1,421) (2,495)
<INCOME-PRETAX> 33,367 43,294
<INCOME-TAX> 12,680 16,560
<INCOME-CONTINUING> 20,687 26,734
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 20,687 26,734
<EPS-PRIMARY> .81 1.03
<EPS-DILUTED> .80 1.02
</TABLE>
