<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the thirteen week period ended May 27, 2000
------------
OR
--- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- -----------------
Commission File number 0-20184
The Finish Line, Inc.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 35-1537210
--------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer identification number)
of incorporation or organization)
3308 North Mitthoeffer Road Indianapolis, Indiana 46235
--------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
317-899-1022
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
______________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Shares of common stock outstanding at June 16, 2000:
Class A 18,212,615
Class B 6,267,375
1
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE FINISH LINE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
May 27, February 26,
2000 2000
---------------- ----------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,621 $ 13,061
Marketable securities 8,878 11,420
Accounts receivable 12,583 9,555
Merchandise inventories 169,013 148,979
Income taxes recoverable -- 756
Other 2,071 1,473
----------- -----------
Total current assets 202,166 185,244
PROPERTY AND EQUIPMENT:
Land 315 315
Building 10,385 10,391
Leasehold improvements 94,047 89,909
Furniture, fixtures, and equipment 40,947 40,737
Construction in progress 1,051 2,087
----------- -----------
146,745 143,439
Less accumulated depreciation 45,389 41,820
----------- -----------
101,356 101,619
OTHER ASSETS:
Deferred income taxes 2,467 2,023
Other 190 209
----------- -----------
2,657 2,232
----------- -----------
$306,179 $289,095
=========== ===========
</TABLE>
See accompanying notes.
2
<PAGE>
THE FINISH LINE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
May 27, February 26,
2000 2000
------------- ---------------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 56,864 $ 42,188
Employee compensation 2,906 4,637
Accrued income taxes 705 --
Accrued property and sales taxes 3,694 4,097
Deferred income taxes 4,807 3,839
Other liabilities and accrued expenses 3,672 5,585
-------- --------
Total current liabilities 72,648 60,346
Long-term deferred rent payments 6,572 6,357
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,000 shares authorized; none
issued -- --
Common stock, $.01 par value
Class A:
Shares authorized - 30,000
Shares issued and outstanding - (May 27, 2000 - 19,994;
February 26, 2000 - 19,988) 200 200
Class B:
Shares authorized - 12,000
Shares issued and outstanding - (May 27, 2000 - 6,268;
February 26, 2000 - 6,268) 63 63
Additional paid-in capital 122,593 122,269
Retained earnings 118,305 114,512
Accumulated other comprehensive loss (74) (41)
Treasury stock - (May 27, 2000 - 1,781; February 26, 2000 - (14,128) (14,611)
1,785)
-------- --------
Total stockholders' equity 226,959 222,392
-------- --------
Total liabilities and stockholders' equity $306,179 $289,095
======== ========
</TABLE>
See accompanying notes.
3
<PAGE>
THE FINISH LINE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
May 27, May 29,
2000 1999
-------- --------
<S> <C> <C>
Net sales $146,657 $132,296
Cost of sales (including occupancy expense) 106,013 95,170
-------- --------
Gross profit 40,644 37,126
Selling, general, and administrative expenses 34,846 31,705
-------- --------
Operating income 5,798 5,421
Interest income - net 223 281
-------- --------
Income before income taxes 6,021 5,702
Provision for income taxes 2,228 1,996
-------- --------
Net income $ 3,793 $ 3,706
======== ========
Basic net income per share $.16 $.15
======== ========
Basic weighted average shares 24,413 24,885
======== ========
Diluted net income per share $.15 $.15
======== ========
Diluted weighted average shares 24,665 25,198
======== ========
</TABLE>
See accompanying notes.
4
<PAGE>
THE FINISH LINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) - (Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
May 27, May 29,
2000 1999
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 3,793 $ 3,706
Adjustments to reconcile net income to net cash used
in operating activities:
Depreciation and amortization 4,074 3,680
Contribution of treasury stock to pension plan 1,758 683
Deferred income taxes 524 (352)
Loss on disposal of property and equipment 18 150
Changes in operating assets and liabilities:
Accounts receivable (3,028) (3,465)
Merchandise inventories (20,034) (15,125)
Other current assets (598) (430)
Other assets 19 (7)
Accounts payable 14,676 6,850
Employee compensation and related payroll taxes (1,731) (1,735)
Accrued income taxes 1,461 1,736
Other liabilities and accrued expenses (2,316) (865)
Deferred rent payments 215 325
---------- ----------
Net cash used in operating activities (1,169) (4,849)
INVESTING ACTIVITIES:
Purchases of property and equipment (3,878) (4,562)
Proceeds from disposal of property and equipment 49 166
Proceeds from sale of marketable securities 2,509 504
---------- ----------
Net cash used in investing activities (1,320) (3,892)
FINANCING ACTIVITIES:
Proceeds and tax benefits from exercise of stock options 37 165
Purchase of treasury stock (988) --
---------- ----------
Net cash provided by (used in) financing activities (951) 165
---------- ----------
Net decrease in cash and cash equivalents (3,440) (8,576)
Cash and cash equivalents at beginning of period 13,061 23,113
---------- ----------
Cash and cash equivalents at end of period $ 9,621 $ 14,537
========= ==========
</TABLE>
See accompanying notes
5
<PAGE>
The Finish Line, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of The
Finish Line, Inc. and its wholly-owned subsidiary Spike's Holding, Inc.
(collectively, the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
considered necessary for a fair presentation, have been included.
The Company has experienced, and expects to continue to experience,
significant variability in sales and net income from reporting period to
reporting period. Therefore, the results of the interim periods presented
herein are not necessarily indicative of the results to be expected for any
other interim period or the full year.
Except for the historical information contained herein, the matters
discussed in this filing are forward looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those
expressed in any of the forward looking statements. Such risks and
uncertainties include, but are not limited to, product demand and market
acceptance risks, the effect of economic conditions, the effect of competitive
products and pricing, the availability of products, management of growth, and
the other risks detailed in the Company's Securities and Exchange Commission
filings.
These financial statements should be read in conjunction with the
financial statements and notes thereto for the year ended February 26, 2000.
2. Revenue Recognition
On December 3, 1999, the SEC staff released Staff Accounting Bulletin No.
101, "Revenue Recognition" ("SAB No. 101") to provide guidance on the
recognition, presentation and disclosure of revenue in financial statements.
SAB No. 101 does not change existing literature on revenue recognition, but
rather it clarifies the staff's position on pre-existing literature. The new
standard did not require management to change existing revenue recognition
policies and therefore had no impact on the Company's reported financial
position or results of operations as of May 27, 2000.
6
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table and subsequent discussion sets forth operating data
of the Company as a percentage of net sales for the periods indicated below.
<TABLE>
<CAPTION>
Thirteen Weeks Ended
May 27, May 29,
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
Net Sales 100.0% 100.0%
Cost of sales (including occupancy expenses) 72.3 71.9
---------- ----------
Gross profit 27.7 28.1
Selling, general and administrative expenses 23.8 24.0
---------- ----------
Operating income 3.9 4.1
Interest income - net (.2) (.2)
---------- ----------
Income before income taxes 4.1 4.3
Provision for income taxes 1.5 1.5
---------- ----------
Net income 2.6% 2.8%
========== ==========
</TABLE>
THIRTEEN WEEKS ENDED MAY 27, 2000 COMPARED TO THIRTEEN WEEKS ENDED MAY 29, 1999
Net sales increased 10.9% to $146.7 million for the thirteen weeks ended
May 27, 2000 from $132.3 million for the thirteen weeks ended May 29, 1999. Of
this increase, $14.2 million was attributable to a 14.0% increase in the number
of stores open during the period from 371 at May 29, 1999 to 423 at May 27,d
2000. The balance of the increase was attributable to a $900,000 increase in
net sales from the fourteen existing stores open only part of the first three
months of last year. These increases were partially offset by a comparable
store sales decrease of 0.7% for the thirteen weeks ended May 27, 2000 for those
stores opened during the entire three months of last year. Comparable net
footwear sales for the thirteen weeks ended May 27, 2000 increased 2.6% versus
the thirteen weeks ended May 29, 1999. Comparable net activewear and
accessories sales decreased 13.3% for the comparable period. Activewear and
accessories continue to be negatively effected by a fashion shift by customers
to contemporary non-athletic brands and by a significant reduction in the
average unit selling price. Net sales per square foot decreased 9.1% to $60 for
the thirteen weeks ended May 27, 2000 compared to $66 for the comparable period
of the prior year. Sales per square foot have been negatively impacted by the
decrease in activewear sales along with an 2.4% increase in the average store
size from 5,924 square feet at May 29, 1999 to 6,068 square feet at May 27,
2000.
7
<PAGE>
Gross profit for the thirteen weeks ended May 27, 2000 was $40.6 million,
an increase of $3.5 million over the thirteen weeks ended May 29, 1999. During
this same period, gross profit decreased to 27.7% of net sales versus 28.1% for
the prior year. Of this 0.4% decrease, 0.7% was due to an increase in occupancy
costs as a percentage of net sales which was partially offset by a 0.3% increase
in margin for products sold.
Selling, general and administrative expenses increased $3.1 million (9.9%)
to $34.8 million (23.8% of net sales) for the thirteen weeks ended May 27, 2000
from $31.7 million (24.0% of net sales) for the thirteen weeks ended May 29,
1999. This dollar increase was primarily attributable to the operating costs
related to operating 52 additional stores at May 27, 2000 versus May 29, 1999.
In addition, current year selling, general and administrative expenses are net
of a $493,000 settlement of an insurance claim related to a store fire.
Net interest income was $223,000 (.2% of net sales) for the thirteen week
period ended May 27, 2000 compared to $281,000 (.2% of net sales) for the
thirteen weeks ended May 29, 1999, a decrease of $58,000.
The Company's provision for income taxes increased $232,000 for the
thirteen weeks ended May 27, 2000 over the thirteen weeks ended May 29, 1999.
The increase is due to the increased level of income before income taxes for the
thirteen weeks ended May 27, 2000, and an increase in the effective tax rate to
37% for the thirteen weeks ended May 27, 2000 from 35% for the thirteen weeks
ended May 29, 1999. The increase in the effective tax rate is due to reduced tax
exempt interest income and increased state taxes.
Net income increased 2.3% to $3.8 million for the thirteen weeks ended May
27, 2000 compared to $3.7 million for the thirteen weeks ended May 29, 1999.
Diluted net income per share was $.15 for both comparable periods ended May 27,
2000 and May 29, 1999. Diluted weighted average shares outstanding were
24,665,000 and 25,198,000, respectively, for the thirteen weeks ended May 27,
2000 and May 29, 1999. The decrease of 2.1% in diluted average shares
outstanding is principally the result of the repurchase of 633,400 shares of
Class A Common Stock since May 29, 1999 through the stock buyback program
authorized by the Board of Directors in September 1998 which expires on December
31, 2000.
Liquidity and Capital Resources
The Company had a net use of cash of $1.2 million from its operating
activities during the thirteen weeks ended May 27, 2000 as compared to a net use
of cash from operating activities of $4.8 during the quarter ended May 29, 1999.
The Company had a net use of cash from its investing activities of $1.3
million and $3.9 million for the thirteen weeks ended May 27, 2000 and May 29,
1999, respectively. The $1.3 million use of cash in 2000 is primarily due to
new and remodeled stores construction totaling $3.9 million, partially offset by
the proceeds from the sale of marketable securities.
The Company's working capital was $129.5 million at May 27, 2000 which was
a $4.6 million increase from $124.9 million at February 26, 2000.
Merchandise inventories were $169.0 million at May 27, 2000 compared to
$149.0 million at February 26, 2000. On a per square foot basis, merchandise
inventories at May 27, 2000 decreased 3.8% compared to May 29, 1999, and were
9.6% higher than at February 26, 2000. The Company believes present levels are
appropriate for the selling season.
8
<PAGE>
At May 27, 2000, the Company had cash and cash equivalents of $9.6 million
and an additional $8.9 million in marketable securities. Cash equivalents are
primarily invested in tax exempt instruments with maturities of one to twenty-
eight days. Marketable securities represent securities that range in maturity
from 90 days to four years and are primarily invested in tax exempt municipal
obligations. Marketable securities are classified as available-for-sale and are
available to support current operations.
The Company's previously announced expansion plans are to increase its
retail square footage by approximately 7-8% for fiscal 2001. Management
believes that cash and marketable securities on hand, operating cash flow and
the Company's existing bank facility in the amount of $75,000,000 which
expires on July 10, 2003, will provide sufficient capital to complete the
Company's fiscal 2001 store expansion program and to satisfy the Company's other
capital requirements through fiscal 2001.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings
-----------------
None.
ITEM 2: Changes in Securities
---------------------
None.
ITEM 3: Defaults Upon Senior Securities
-------------------------------
None.
ITEM 4: Submission of Matters to a Vote of Security-Holders
---------------------------------------------------
None.
ITEM 5: Other Information
-----------------
None.
ITEM 6: Exhibits and Reports on Form 8-K:
---------------------------------
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
None.
10
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE FINISH LINE, INC.
Date: June 27, 2000 By: /s/ Steven J. Schneider
-----------------------
Steven J. Schneider,
Executive Vice
President - Finance,
Chief Financial Officer
and Assistant Secretary
11
