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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
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ACT OF 1934
For the thirteen week period ended November 25, 2000
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OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________
Commission File number 0-20184
The Finish Line, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 35-1537210
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(State or other jurisdiction (I.R.S. Employer identification number)
of incorporation or organization)
3308 North Mitthoeffer Road Indianapolis, Indiana 46235
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(Address of principal executive offices) (zip code)
317-899-1022
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(Registrant's telephone number, including area code)
______________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
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Shares of common stock outstanding at December 15, 2000:
Class A 18,180,965
Class B 6,267,375
1
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE FINISH LINE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
November 25, February 26,
2000 2000
------------- ------------
ASSETS (unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 15,705 $ 13,061
Marketable securities 8,448 11,420
Accounts receivable 12,719 9,555
Merchandise inventories 177,570 148,979
Income taxes recoverable 2,599 756
Other 1,456 1,473
-------- --------
Total current assets 218,497 185,244
PROPERTY AND EQUIPMENT:
Land 315 315
Building 10,403 10,391
Leasehold improvements 97,879 89,909
Furniture, fixtures, and equipment 44,010 40,737
Construction in progress 1,112 2,087
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153,719 143,439
Less accumulated depreciation 52,499 41,820
-------- --------
101,220 101,619
OTHER ASSETS:
Deferred income taxes 3,462 2,023
Other 154 209
-------- --------
3,616 2,232
-------- --------
Total assets $323,333 $289,095
======== ========
</TABLE>
See accompanying notes.
2
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THE FINISH LINE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
November 25, February 26,
2000 2000
--------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 64,319 $ 42,188
Employee compensation 4,631 4,637
Accrued property and sales tax 4,182 4,097
Deferred income taxes 6,449 3,839
Other liabilities and accrued expenses 5,076 5,585
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Total current liabilities 84,657 60,346
Long-term deferred rent payments 7,352 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 - (November 25, 2000 - 20,022;
February 26, 2000 - 19,988)
Shares outstanding - (November 25, 2000 - 18,181;
February 26, 2000 - 18,203) 200 200
Class B:
Shares authorized - 12,000
Shares issued and outstanding - (November 25, 2000 - 6,267;
February 26, 2000 - 6,268) 63 63
Additional paid-in capital 122,746 122,269
Retained earnings 122,878 114,512
Accumulated other comprehensive loss (30) (41)
Treasury stock - (November 25, 2000 - 1,841;
February 26, 2000 - 1,785) (14,533) (14,611)
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Total stockholders' equity 231,324 222,392
-------- --------
Total liabilities and stockholders' equity $323,333 $289,095
======== ========
</TABLE>
See accompanying notes.
3
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THE FINISH LINE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty Nine Weeks Ended
---------------------------- -----------------------------
Nov. 25, Nov. 27, Nov. 25, Nov. 27,
2000 1999 2000 1999
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Net sales $134,503 $120,776 $471,702 $419,066
Cost of sales (including occupancy expenses) 101,378 91,358 344,687 303,831
-------- -------- -------- --------
Gross profit 33,125 29,418 127,015 115,235
Selling, general, and administrative expenses 37,404 33,208 114,457 101,955
-------- -------- -------- --------
Operating income (loss) (4,279) (3,790) 12,558 13,280
Interest income - net 328 204 720 768
-------- -------- -------- --------
Income (loss) before income taxes (3,951) (3,586) 13,278 14,048
Provision (benefit) for income taxes (1,462) (1,255) 4,913 4,917
-------- -------- -------- --------
Net income (loss) $ (2,489) $ (2,331) $ 8,365 $ 9,131
======== ======== ======== ========
Basic net income (loss) per share $ (.10) $ (.09) $ .34 $ .37
======== ======== ======== ========
Basic weighted average shares 24,479 24,861 24,461 24,888
======== ======== ======== ========
Diluted net income (loss) per share $ (.10) $ (.09) $ .34 $ .36
======== ======== ======== ========
Diluted weighted average shares 24,679 25,002 24,682 25,116
======== ======== ======== ========
</TABLE>
See accompanying notes.
4
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THE FINISH LINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands) (Unaudited)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
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November 25, November 27,
2000 2000
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<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 8,365 $ 9,131
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 12,278 10,346
Contribution of treasury stock to profit sharing plan 1,758 683
Deferred income taxes 1,171 3,285
Loss on disposal of property and equipment 174 241
Changes in operating assets and liabilities:
Accounts receivable (3,164) (9,553)
Merchandise inventories (28,591) (38,521)
Other current assets 17 (794)
Other assets 55 20
Accounts payable 22,131 12,418
Employee compensation and related payroll taxes (6) (582)
Accrued income taxes payable/recoverable (1,843) (2,399)
Other liabilities and accrued expenses (424) 138
Deferred rent payments 995 775
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Net cash provided by (used in) operating activities 12,916 (14,812)
INVESTING ACTIVITIES:
Purchases of property and equipment (12,142) (18,682)
Proceeds from disposal of property and equipment 89 289
Proceeds from sale of investments 2,483 --
Proceeds from maturity of marketable securities 500 1,655
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Net cash used in investing activities (9,070) (16,738)
FINANCING ACTIVITIES:
Proceeds from short-term debt 47,415 38,600
Principal payments on short-term debt (47,415) (18,900)
Proceeds and tax benefits from exercise of stock options 191 293
Purchase of treasury stock (1,393) (690)
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Net cash used in (provided by) financing activities (1,202) 19,303
-------- --------
Net increase (decrease) in cash and cash equivalents 2,644 (12,247)
Cash and cash equivalents at beginning of period 13,061 23,113
-------- --------
Cash and cash equivalents at end of period $ 15,705 $ 10,886
======== ========
</TABLE>
See accompanying notes.
5
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The Finish Line, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited 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 quarter to quarter.
Therefore, the results of the interim periods presented herein are not
necessarily indicative of the results to be expected for any other interim
period or the full year.
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.
6
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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. The
following discussion and analysis should be read in conjunction with the
unaudited Financial Statements included elsewhere herein.
<TABLE>
<CAPTION>
Thirteen Thirty - Nine
Weeks Ended Weeks Ended
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Nov. 25, Nov. 27, Nov. 25, Nov. 27,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income Statement Data: (Unaudited)
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales (including occupancy costs) 75.4 75.6 73.1 72.5
-------- -------- -------- --------
Gross profit 24.6 24.4 26.9 27.5
Selling, general and administrative expenses 27.8 27.5 24.3 24.3
-------- -------- -------- --------
Operating income (loss) (3.2) (3.1) 2.6 3.2
Interest income - net .2 .2 .2 .2
-------- -------- -------- --------
Income (loss) before income taxes (3.0) (2.9) 2.8 3.4
Provision (benefit) for income taxes (1.1) (1.0) 1.0 1.2
-------- -------- -------- --------
Net income (loss) (1.9) % (1.9) % 1.8 % 2.2 %
======== ======== ======== ========
</TABLE>
7
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Thirteen Weeks Ended 11/25/00 Compared to Thirteen Weeks Ended 11/27/99
Net sales increased 11.4% to $134.5 million for the thirteen weeks ended
November 25, 2000 from $120.8 million for the thirteen weeks ended November 27,
1999. This increase in net sales was primarily attributable to net sales from
new stores and a comparable store sales increase. As of November 25, 2000, the
number of stores in operation increased 7.6% to 441 from 410 at November 27,
1999. During the thirteen weeks ended November 25, 2000, the Company's
comparable store sales increased 2.2% compared to the same period in the prior
year. Comparable footwear net sales for the thirteen weeks ended November 25,
2000 increased approximately 5.9% versus the thirteen weeks ended November 27,
1999. Comparable activewear and accessories net sales decreased approximately
9.0% for the comparable period. Activewear and accessories continue to be
negatively effected by a significant reduction in the average unit selling
price. Net sales per square foot decreased to $52 from $54 for the same thirteen
week period of the prior year.
Gross profit for the thirteen weeks ended November 25, 2000 was $33.1
million, an increase of $3.7 million over the thirteen weeks ended November 27,
1999. During this same period, gross profit increased to 24.6% of net sales
versus 24.4% for the prior year. Of this .2% increase, .5% was due to an
increase in margins for product sold and a decrease in inventory shrink expense
of .1%, which was partially offset by an increase of .4% in occupancy costs as a
percentage of net sales.
Selling, general and administrative expenses increased $4.2 million (12.6%)
to $37.4 million (27.8% of net sales) for the thirteen weeks ended November 25,
2000 from $33.2 million (27.5% of net sales) for the thirteen weeks ended
November 27, 1999. This dollar increase was primarily attributable to the
operating costs related to operating 31 additional stores at November 25, 2000
versus November 27, 1999. The increase as a percentage of net sales is primarily
attributable to increased costs related to wages and benefits.
Net interest income was $328,000 (.2% of net sales) for the thirteen weeks
ended November 25, 2000, compared to net interest income of $204,000 (.2% of net
sales) for the thirteen weeks ended November 27, 1999, an increase of $124,000.
This increase was the result of increased invested cash balances for the
thirteen weeks ended November 25, 2000 compared to the same period of the prior
year.
The Company had a benefit for income taxes of $1.5 million for the thirteen
weeks ended November 25, 2000, as compared to a benefit for income taxes of $1.3
million for the thirteen weeks ended November 27, 1999. The increase is due to
the decreased level of income before income taxes for the thirteen weeks ended
November 25, 2000, along with an increase in the effective tax rate to 37.0% for
the thirteen weeks ended November 25, 2000 from 35.0% for the thirteen weeks
ended November 27, 1999.
Diluted net loss per share was $.10 for the thirteen weeks ended November
25, 2000 compared to diluted net loss per share of $.09 for the thirteen weeks
ended November 27, 1999. Diluted weighted average shares outstanding were
24,679,000 and 25,002,000 respectively, for the periods ended November 25, 2000
and November 27, 1999. The decrease of 1.3% in diluted weighted average shares
outstanding reflects the repurchase of 613,400 shares of Class A Common Stock
since November 27,1999 through the stock buyback program authorized by the Board
of Directors in September 1998.
8
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Thirty Nine Weeks Ended 11/25/00 Compared to Thirty Nine Weeks Ended 11/27/99
Net sales increased 12.6% to $471.7 million for the thirty nine weeks ended
November 25, 2000 from $419.1 million for the thirty nine weeks ended November
27, 1999. Of this increase, $16.3 million was attributable to a 7.6% increase in
the number of stores open during the period from 410 at November 27, 1999 to 441
at November 25, 2000. The balance of the increase was attributable to a $30.4
million increase in net sales from the existing stores open only part of the
first thirty nine weeks of last year along with a comparable store net sales
increase of 1.7% for the thirty nine weeks ended November 25, 2000. Comparable
footwear net sales for the thirty nine weeks ended November 25, 2000 increased
approximately 4.9%. Comparable activewear and accessories net sales decreased
approximately 10.0% for the comparable period. Activewear and accessories
continue to be negatively effected by a significant reduction in the average
unit selling price. Net sales per square foot decreased to $186 from $199 for
the same period of the prior year. Sales per square foot have been negatively
impacted by the decrease in activewear sales.
Gross profit for the thirty nine weeks ended November 25, 2000 was $127.0
million, an increase of $11.8 million over the thirty nine weeks ended November
27, 1999. During this same period, gross profit decreased to 26.9% of net sales
versus 27.5% for the prior year. Of this .6% decrease, .5% was due to an
increase in occupancy costs as a percentage of net sales. Additionally, margin
for product sold decreased .2%, however it was offset by a .1 % decrease in
inventory shrink expense.
Selling, general and administrative expenses increased $12.5 million
(12.3%) to $114.5 million (24.3% of net sales) for the thirty nine weeks ended
November 25, 2000 from $102.0 million (24.3% of net sales) for the thirty nine
weeks ended November 27, 1999. This dollar increase was primarily attributable
to the operating costs related to operating 31 additional stores at November 25,
2000 versus November 27, 1999.
Net interest income was $720,000 (.2% of net sales) for the thirty nine weeks
ended November 25, 2000, compared to net interest income of $768,000 (.2% of net
sales) for the thirty nine weeks ended November 27, 1999, a decrease of $48,000.
The Company's provision for federal and state income taxes was $4.9 million
for the thirty nine weeks ended November 25, 2000 and the thirty nine weeks
ended November 27, 1999. The provision was effected by the decreased level in
income before income taxes for the thirty nine weeks ended November 25, 2000,
offset by an increase in the effective tax rate to 37.0% for the thirty nine
weeks ended November 25, 2000 from 35.0% for the thirty nine weeks ended
November 27, 1999.
Diluted net income per share decreased 5.6% to $.34 for the thirty nine
weeks ended November 25, 2000 compared to diluted net income per share of $.36
for the thirty nine weeks ended November 27, 1999. Diluted weighted average
shares outstanding were 24,682,000 and 25,116,000 respectively for the periods
ended November 25, 2000 and November 27, 1999. The decrease of 1.7% in diluted
weighted average shares outstanding reflects the repurchase of 613,400 shares of
Class A Common Stock since November 27,1999 through the stock buy back program
authorized by the Board of Directors in September 1998.
9
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Liquidity and Capital Resources
The Company provided cash of $12.9 million from its operating activities
during the thirty nine weeks ended November 25, 2000 as compared to using cash
from its operating activities of $14.8 million during the thirty nine weeks
ended November 27, 1999. The increase in cash generated by operating activities
was primarily the result of decreased growth in inventory levels net of accounts
payable.
The Company had a net use of cash from its investing activities, of $9.1
million and $16.7 million for the thirty nine week periods ended November 25,
2000 and November 27, 1999, respectively. Of the $9.1 million used in fiscal
2001, $12.1 million was used primarily for new store construction and remodeling
of existing stores, which was partially offset by $3.0 million in net maturities
and proceeds from marketable securities.
The Company anticipates that total capital expenditures for fiscal 2001 and
fiscal 2002 will be approximately $18-$20 million and $15-$20 million,
respectively, primarily for the opening of new stores and the remodeling of
existing stores.
At November 25, 2000 the Company had cash equivalents of $15.7 million,
marketable securities of $8.4 million and no interest bearing debt. Cash
equivalents are primarily invested in tax exempt instruments with maturities of
one to twenty-eight days. Marketable securities range in maturity from 90 days
to four years from date of purchase and are primarily invested in tax exempt
municipal obligations. Marketable securities are classified as available-for-
sale and are available to support current operations.
In addition to the cash and marketable securities, the Company has in place
with a syndicate of banks a newly executed $60,000,000 revolving line of credit
which expires September 2003. The line of credit 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. At November 25, 2000 the
Company had no borrowings under the line and is in compliance with all
restrictive covenants.
The Company had positive working capital of $133.8 million at November 25,
2000, an increase of $8.9 million from the working capital of $124.9 million at
February 26, 2000.
Merchandise inventories were $177.6 million at November 25, 2000 compared
to $149.0 million at February 26, 2000. On a per square foot basis, merchandise
inventories at November 25, 2000 decreased approximately 5.2% compared to
November 27, 1999. The Company continues to monitor slower selling inventory and
promote it as necessary to compete in the current difficult retail environment.
The Company's current plans are to increase its retail square footage by
approximately 6-7% for fiscal 2002. Management believes that cash on hand,
operating cash flow and the Company's existing bank facility will provide
sufficient capital to complete the Company's fiscal 2002 store expansion program
and to satisfy the Company's other capital requirements through fiscal 2002.
10
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ITEM 1: Legal Proceedings
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None.
ITEM 2: Changes in Securities
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None.
ITEM 3: Defaults Upon Senior Securities
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None.
ITEM 4: Submission of Matters to a Vote of Security-Holders
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None.
ITEM 5: Other Information
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None.
ITEM 6: Exhibits and Reports on Form 8-K:
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(a) Exhibits
10.30-Credit Agreement among The Finish Line, Inc. the Lenders
Signatory Thereto and National City Bank of Indiana, as Agent,
dated September 20, 2000.
27-Financial Data Schedule
(b) Reports on Form 8-K
None.
11
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE FINISH LINE, INC.
Date: December 19, 2000 By: /s/ Steven J. Schneider
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Steven J. Schneider
Exec. Vice President - Finance, Chief
Financial Officer and Assistant
Secretary
12
