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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
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 26, 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
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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
_____________
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
_____________
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 __
-
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 28, 2000 was approximately $191,714,700 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 28,
2000 was:
Class A Common Stock: 18,212,015
Class B Common Stock: 6,267,375
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement dated June 8, 2000 for the Annual
Meeting of Stockholders to be held on July 20, 2000 (hereinafter referred to as
the "2000 Proxy Statement") are incorporated into Part III.
Portions of the Registrant's Annual Report to Stockholders for the fiscal year
ended February 26, 2000 (hereinafter referred to as the "2000 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, 2000, the
Company operated 415 stores in 42 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,
Timberland, Asics and Skechers.
The Company attempts to distinguish itself from other athletic footwear
specialty retailers through larger mall-based store formats. Finish Line stores
average 6,061 square feet, and the Company's stores opened during fiscal 2000
averaged approximately 6,500 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 23% of the Company's net sales in
fiscal 2000.
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 415 stores at April 1, 2000. The
Company opened 55 new stores in fiscal 2000 and intends to open 25 to 30 new
stores in fiscal 2001, which represents increases of approximately 14% in fiscal
2000 and 6% to 7% in fiscal 2001. Total square footage increased 18% in fiscal
2000 over the prior year as a result of the Company's strategy of opening larger
traditional stores, as well as selected larger format stores.
For fiscal 2001 the Company plans to increase its total square footage open
by approximately 7% to 8%. Much of this square footage growth will result from a
renewed emphasis on smaller traditional stores averaging approximately 5,000
square feet. 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 5,165 square
feet, traditional concept stores opened in fiscal 2000 averaged 5,476 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. The Company
expects to reduce the number of larger store openings during the next fiscal
year due to slower sales of activewear.
Commitment to Continually Strengthen Infrastructure. Over the last five 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
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. 26, Feb. 27, Feb. 28,
Category 2000 1999 1998
-------- --------- -------- --------
<S> <C> <C> <C>
Footwear 77% 72% 69%
Activewear/Accessories 23% 28% 31%
---- ---- ----
Total 100% 100% 100%
==== ==== ====
</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, Timberland, 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.
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 and Timberland. In addition, the Company offers fashion brands
including NST Nautica Sport Tech, RLX Polo
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Sport, and DADA. 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 continued to build a private label apparel program
through the introduction of two new private label lines, SPK and 808. SPK meets
the needs of our value/performance customers by offering high quality basic
athletic apparel at introductory price points. 808's graphic driven t-shirts
target a college age shopper looking for more contemporary lifestyle apparel.
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 2000 and fiscal 1999 was 1.6% and 1.5%, 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, and Reebok.
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 an Executive Vice
President-Merchandise and Marketing. The buying and merchandise departments are
comprised of approximately 35 people. The footwear and activewear/accessories
divisions consist of a Senior 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 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 140 suppliers and
manufacturers of athletic and fashion products, the largest of which (Nike)
accounted for approximately 49% and 56% of total purchases in fiscal 2000 and
fiscal 1999, respectively. The Company purchased approximately 79% and 87% of
total merchandise in fiscal 2000 and fiscal 1999, respectively, from its five
largest suppliers. The Company and its vendors use EDI technology to streamline
purchasing and distribution operations.
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
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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 four 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 or frame relay 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 an Executive Vice President - Store Operations, Senior 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, 2000, Finish Line operated 415 stores in 42 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 represent 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.
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.
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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 2000, 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 $900,000 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 mass merchandisers, and
internet e-tailers. 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.
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
26, 2000, these periods accounted for approximately 34% of the Company's annual
sales.
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Employees
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As of April 1, 2000, the Company employed approximately 8,630 persons, 1,970 of
whom were full-time and 6,660 of whom were part-time. Of this total, 380 were
employed at the Company's Indianapolis, Indiana corporate headquarters and
distribution center and 36 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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While no assurances can be given that it will do so in the future, the Company
has in the past purchased on the open market its Class A Common Stock and later
contributed it in lieu of cash to the Company's Profit Sharing Plan. During
fiscal 2000 the Company contributed 50,000 shares of Class A Common Stock to the
Profit Sharing Plan representing a non cash contribution of $682,825.
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 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, 2000, the Company operated 415 stores in 42 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
- -------------------------- --------------- ---------------------------- ---------------
<S> <C> 2 <C> <C>
Alabama 7 Missouri 11
Arizona 4 Nebraska 4
Arkansas 11 Nevada 1
California 6 New Hampshire 4
Colorado 4 New Jersey 6
Connecticut 1 New Mexico 1
Delaware 22 New York 22
Florida 16 North Carolina 16
Georgia 1 North Dakota 2
Idaho 32 Ohio 38
Illinois 24 Oklahoma 7
Indiana 7 Oregon 1
Iowa 8 Pennsylvania 24
Kansas 8 South Carolina 5
Kentucky 5 South Dakota 1
Louisiana 1 Tennessee 13
Maine 14 Texas 30
Maryland 6 Virginia 15
Massachusetts 16 Washington 3
Michigan 2 West Virginia 5
Mississippi Wisconsin 9
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Total 415
</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 and Risk Factors
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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 or implied by such forward-looking
statements. Factors that could cause actual results to differ materially
include, but are not limited to: changing consumer
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preferences; the Company's inability to successfully market its footwear,
apparel, accessories and other merchandise; price, product and other competition
from other retailers (including internet and direct manufacturer sales); the
unavailability of products; the inability to locate and obtain favorable lease
terms for the Company's stores; the loss of key employees, general economic
conditions and adverse factors impacting the retail athletic industry;
management of growth, and the other risks detailed in the Company's Securities
and Exchange Commission filings. The Company undertakes no obligation to release
publicly the results of any revisions to these forward looking statements that
may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
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 proceeding 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 and the inside back cover of the 2000 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 2000 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 2000 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 2000 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 2000 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 2000 Proxy Statement to be filed within
120 days of February 26, 2000, the Company's most recent fiscal year end.
Item 11 - EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference
to the Section entitled "Executive Compensation" in the 2000 Proxy Statement to
be filed within 120 days of February 26, 2000, the Company's most recent fiscal
year end.
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 2000 Proxy Statement to be filed within 120 days of February
26, 2000, the Company's most recent fiscal year end.
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 2000 Proxy Statement to be filed
within 120 days of February 26, 2000, the Company's most recent fiscal year end.
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 2000 Annual Report to
Stockholders are incorporated herein by reference:
Report of Independent Auditors
Consolidated Balance Sheets as of February 26, 2000 and February 27,
1999.
Consolidated Statements of Income for the years ended February 26,
2000, February 27, 1999, and February 28, 1998.
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Consolidated Statements of Changes in Stockholders' Equity for the
years ended February 26, 2000, February 27, 1999, and February 28,
1998.
Consolidated Statements of Cash Flows for the years ended February 26,
2000, February 27, 1999 and February 26, 2000.
Notes to Consolidated Financial Statements - February 26, 2000.
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
Exhibit
Number Description
- -------- -----------
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 (5) Holding, Inc., and The
Finish Line, Inc. dated May 4, 1997.
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)
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10.27.1 Revolving Credit Note in the amount of $30,000,000 with NBD Bank, N.A.
dated July 10, 1998. (6)
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 Finish Line, Inc. Non-Employee Director Stock Option Plan, as amended
and restated.(7)
10.29 Amendment to Revolving Credit Agreement among Spike's Holding, Inc.,
and The Finish Line, Inc. dated May 4, 1997.(8)
13 Annual Report to Stockholders for the year ended February 26, 2000
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
13
<PAGE>
10-K (File No. 0-20184) for the year ended February 27, 1999 and
incorporated herein by reference.
(8) Previously filed as a like numbered exhibit to the Registrants'
Quarterly Report on Form 10Q (File No. 0-20184) for the quarter ended
November 27, 1999 and incorporated herein by reference.
(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 24, 2000 By:/s/ Steven J. Schneider,
-----------------------
Steven J. Schneider, Executive 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 24, 2000 /s/ Alan H. Cohen
--------------------------
Alan H. Cohen, Chairman of the Board, President and Chief
Executive Officer (Principal Executive Officer)
Date: May 24, 2000 /s/ David I. Klapper
--------------------------
David I. Klapper, Senior Executive Vice President, and
Director
Date: May 24, 2000 /s/ Larry J. Sablosky
--------------------------
Larry J. Sablosky, Senior Executive Vice President and
Director
Date: May 24, 2000 /s/ Jonathan K. Layne
--------------------------
Jonathan K. Layne, Director
Date: May 24, 2000 /s/ Jeffrey H. Smulyan
--------------------------
Jeffrey H. Smulyan, Director
Date: May 24, 2000 /s/ Stephen Goldsmith
-------------------------
Stephen Goldsmith, 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)
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
- --------------------------------------------------------------------------------
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
====== ====== ====== ====== ======
Year ended
February 26, 2000:
Deducted from asset
account:
Reserve for inventory
obsolescence........... $3,300 $1,000 -- -- $4,300
------ ------ ------ ------ ------
Total.................. $3,300 $1,000 $0 $0 $4,300
====== ====== ====== ====== ======
17
<PAGE>
Exhibit Index
-------------
Exhibit
Number Description
- ------- ------------------------------------------------------
13 Annual Report to Stockholders for the year ended February 26, 2000
21 Subsidiaries of The Finish Line, Inc.
23 Consent of Ernst & Young LLP (independent auditors).
27 Financial Data Schedule for year ended February 26, 2000 and
February 27, 1999
18
<PAGE>
[COMPANY LOGO]
[COMPANY LOGO][ Subject: Annual Report]
<PAGE>
[COMPANY LOGO] Financial Highlights
<TABLE>
<CAPTION>
<S>
Dollars in thousands (except per share data) Fiscal Fiscal Fiscal
2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
Net sales $ 585,963 $ 522,623 $ 438,911
Operating income 23,185 31,946 40,799
Operating income as a percent of net sales 4.0% 6.1% 9.3%
Net income 15,607 20,687 26,734
Net income as a percent of net sales 2.7% 4.0% 6.1%
Diluted earnings per share $ .62 $ .80 $ 1.02
Number of stores open at end of period 409 358 302
Total retail square footage at end of period 2,478,930 2,095,264 1,586,520
Average store size 6,061 5,853 5,253
Total assets $ 289,095 $ 278,555 $ 255,978
Cash and marketable securities 24,481 40,924 53,809
Total debt -- -- --
Total stockholders' equity 222,392 208,679 197,122
========================================================================================================================
</TABLE>
The Company's fiscal year ends on the Saturday nearest the end of February
starting with fiscal 1998. For fiscal 1997 and prior, the Company's fiscal year
ended at the end of February. As used in this Report, "fiscal 1996," "fiscal
1997," "fiscal 1998," "fiscal 1999," and "fiscal 2000" refer to the Company's
fiscal years ended February 29, 1996; March 1, 1997; February 28, 1998; February
27,1999 and February 26, 2000 respectively. "Fiscal 2001" and "fiscal 2002"
refer to the Company's fiscal years ending March 3, 2001 and March 2, 2002,
respectively.
[graphics appear here]
<PAGE>
[FASHION MODEL PRESENTING PRODUCT PICTURE APPEARS HERE]
Finish Line, Inc. is a leading
athletic retailer specializing in
brand name athletic footwear,
apparel and accessories.
Known for its signature shoe
wall, Finish Line works to
provide customers with 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
41 states through 409 stores.
<TABLE>
<S> <C> <C> <C> <C>
ALABAMA Tallahassee Evansville MASSACHUSETTS Phillipsburg
Dothan Tampa Fort Wayne Brockton Rockaway
Montgomery Greenwood Hanover Voorhees
GEORGIA
Indianapolis Holyoke
ARIZONA Alpharetta NEW MEXICO
Kokomo Leominster
Mesa Athens Albuquerque
Lafayette Saugus
Phoenix Atlanta
Marion Taunton NEW YORK
Scottsdale Decatur
Merrillville Albany
Tucson Duluth MICHIGAN
Michigan City Bay Shore
Kennesaw Adrian
Mishawaka Buffalo
ARKANSAS Morrow
Muncie Battle Creek
Fayetteville Blasdell
Union City Bay City
Richmond Williamsville
Fort Smith Augusta
South Bend Benton Harbor
Little Rock Clay
Buford Burton
Terre Haute Dewitt
N. Little Rock Douglasville
Detroit
IOWA Horseheads
Macon Auburn Hills
CALIFORNIA Ithaca
Savannah Cedar Rapids Flint
Fairfield Lakewood
Coralville Fort Gratiot
Los Angeles IDAHO Massapequa
Davenport Grand Rapids
Cerritos Boise Middletown
Des Moines Holland
Culver City Niagara Falls
ILLINOIS Dubuque Lansing
Montclair Poughkeepsie
Alton Iowa City Midland
Montebello Rochester
Bloomington Sioux City Monroe
Northridge Rotterdam
Orange County Bourbonnais KANSAS Port Huron
Saratoga Springs
Mission Viejo Carbondale Portage
Hutchinson Schenectady
Westminster Champaign Traverse City
Manhattan Staten Island
San Diego Chicago Waterford
Olathe Syracuse
Stockton Aurora
Overland Park MISSISSIPPI Wilton
Bloomingdale
Salina Ridgeland
COLORADO Calumet City NORTH CAROLINA
Topeka Tupelo
Boulder Evergreen Park Burlington
Wichita
Colorado Springs Fairview Heights MISSOURI Cary
Denver Forsyth KENTUCKY Charlotte
Cape Girardeau
Greeley Gurnee Ashland Gastonia
Chesterfield
Lombard Bowling Green Florissant Pineville
CONNECTICUT
Matteson Florence Independence Concord
Meriden
Niles Lexington Joplin Fayetteville
Trumbell
N. Riverside Louisville Kansas City Greensboro
Waterbury
Orland Park Paducah St. Ann Hickory
Waterford
St. Charles St. Louis High Point
LOUISIANA
DELAWARE Schaumburg St. Peters Morrisville
Alexandria
Wilmington Skokie Springfield Raleigh
Bossier City
University Park Rocky Mount
FLORIDA Monroe NEBRASKA
Vernon Hills Winston-Salem
Brandon Shreveport Lincoln
Waukegan
Clearwater NORTH DAKOTA
WestDundee MAINE Omaha
Crystal River Bismark
Danville Bangor
NEVADA Grand Forks
Daytona Beach Marion
Fort Myers MARYLAND Las Vegas
Moline OHIO
Jacksonville Peoria Baltimore NEW HAMPSHIRE
Akron
Lakeland Peru Bethesda
Concord Alliance
Naples Rockford Cumberland
Manchester Ashtabula
Ocoee Springfield Frederick
Newington Beaver Creek
Orlando Sterling Forestville
Salem Canton
Panama City Glen Burnie
INDIANA Cincinnati
Pensacola Hagerstown NEW JERSEY
Cleveland
Port Richey Anderson Laurel Deptford
Euclid
St. Petersburg Bloomington Owings Mills Eatontown
Mentor
Sanford Carmel Salisbury Paramus
Elkhart Towson
Waldorf
</TABLE>
<TABLE>
<S> <C> <C>
N. Olmsted North Wales Midland
N. Randall Pennsdale San Angelo
Parma Philadelphia San Antonio
Richmond Heights Pittsburgh Sherman
Columbus Plymouth Temple
Dayton Scranton Tyler
Dublin Uniontown Waco
Elyria Washington Wichita Falls
Findlay West Mifflin
VIRGINIA
Franklin York
Alexandria
Heath
SOUTH CAROLINA Chesapeake
Lancaster
Charleston Christiansburg
Lima
Columbia Dulles
Mansfield
Greenville Fredericksburg
Marion
Harrisonburg
New Philadelphia SOUTH DAKOTA
Lynchburg
Niles Sioux Falls
Newport News
Northwood
TENNESSEE Norfolk
Piqua
Antioch Richmond
Reynoldsburg
Chattanooga Colonial
St. Clairsville
Clarksville Glen Allen
Sandusky
Franklin Roanoke
Springfield
Goodlettsville Virginia Beach
Toledo
Johnson City Winchester
OKLAHOMA
Memphis WASHINGTON
Midwest City Nashville
Seattle
Oklahoma City
TEXAS Tacoma
Tulsa
Abilene WEST VIRGINIA
OREGON
Amarillo
Barboursville
Portland Austin
Bridgeport
PENNSYLVANIA Beaumont
Charleston
Dallas/Fort Worth
Altoona Martinsburg
Arlington
Bensalem Morgantown
Denton
Bloomsburg
Hurst WISCONSIN
Butler
Irving Green Bay
Camp Hill
Lewisville Greendale
Chambersburg
Mesquite Janesville
Erie
Plano Madison
Exton
Richardson Milwaukee
Greensburg
El Paso Racine
Hanover
Houston Wauwatosa
Indiana
Humble
Johnstown
Katy
Lancaster
Killeen
Media
Longview
</TABLE>
<PAGE>
- ---------------------------
2 LETTER TO SHAREHOLDERS
- ---------------------------
As we close our books on Finish Line's Fiscal 2000, the numbers tell the story
of a company driven to perform in a changing retail environment. We broke sales
records for the 23rd consecutive year posting more than $585,000,000 in net
sales, an increase of 12 percent versus last year. We continued our store and
retail square footage growth and remained profitable in a difficult marketplace
delivering dilut-ed earnings per share of $.62. Although trends in apparel kept
us from reporting same store sales increases, we did achieve comparable store
sales gains of four percent for the year in our primary category - footwear.
But measuring Finish Line's performance in Fiscal 2000 goes deeper than the
numbers. The challenges of this year pushed us to find new ways of doing
business, of marketing our stores, and most importantly meeting the needs of our
customers. We will not be satisfied to simply wait for trends to change. We are
searching for and implementing new ways to operate and grow the business,
creating new partnerships and stepping ahead of the competition. Last year we
raised the bar by challenging ourselves to become the best athletic footwear
retailer in the mall. No small task in a year with shifting apparel fashion
trends and other obstacles dramatically reshaping the athletic retail landscape.
Still, through focused management and a product-driven sales strategy, we
maintained our competitive edge as the best athletic footwear retailer in the
mall, and have now reset our goal and raised the bar to become the best athletic
footwear and apparel retailer, in or out of the mall.
While our competitors closed doors, we grew strategically, took advantage of new
opportunities, and added 55 new stores to truly make Finish Line a national
player. We are closer to our customers than ever, not only operating more than
415 stores in 42 states, but now providing the opportunity to buy athletic
footwear and apparel online at www.finishline.com.
With this fiscal year's addition of new stores, Finish Line now operates
approximately 2.5 million square feet of retail space, an increase of 18 percent
from last year. Our compelling store formats and superior product offerings
continue to set the pace for athletic retailers.
Throughout the year we worked diligently to revitalize our most important
customer brand contact, the Finish Line store. This revitalization of our in-
store merchandising coupled with exclusive product, key vendor partnerships and
new private label initiatives are building a strong foundation for the Finish
Line brand. We have succeeded in raising the level of public awareness of our
stores and our brand in a contracting marketplace.
To begin the new fiscal year we have developed an important partnership with
Nike to further differentiate Finish Line from the competition. By positioning
our stores as the premier destination for Nike running products, we will seize
the momentum of this important and fast-growing category, both from a fashion
and performance standpoint. With Nike's assistance we will develop and introduce
exclusive running shoe styles and also take advantage of introductory lead times
on other key product silhouettes and make-ups to create a vital point of
difference from our competition -- positioning Finish Line as the premier and
most visible retailer in the running category. While we deliver the goods in-
store, our highly effective advertisements and promotions remind viewers that
Finish Line loves runners - or as our recent television spots state, "Maybe We
Love Runners Too Much."
On the apparel side, proprietary brands like our performance-based SPK(TM) line
and 808(TM), our more casual category entry, have allowed Finish Line more
control and greater speed with which to react to the quick and ever-changing
apparel
<PAGE>
----------
3
----------
market. Through these brands, Finish Line is better able to control its own
destiny and enhance the product offerings of our traditional athletic brands.
The rules of retail are changing. Location means much more than choosing the
right malls and getting the high-traffic locations within them. Today location
includes our web site address and virtual affiliations that provide our
customers easy access to our products 24-hours-a-day. Customer service now goes
far beyond the mall, reaching into mailboxes and appearing on computer screens.
Today, we even compete against businesses that have only a warehouse and a URL.
Having anticipated such changes, we are ready and committed to meeting the needs
of our customers, no matter how they shop Finish Line. We intend to remain a
leader in our industry and are making the difficult long-term decisions and
commitments needed to succeed.
The toughest challenges and questions we face are those that we place upon
ourselves. How can we make a difference? How can we get better? What must we do
to secure and then maintain our position as the country's best athletic footwear
and apparel retailer? We have the vision. We have the commitment and drive. We
have the people. As long as we stay focused, we can make a difference.
/S/ Alan Cohen
Alan Cohen
President and CEO, Finish Line Inc.
[LOGO OF FINISH LINE YOUTH FOUNDATION]
[PHOTO OF PARK]
When volunteers from the community and local Finish Line stores showed up in
Chicago's Irving Park early on a Saturday, they were greeted by a vacant lot,
shovels and wheelbarrows. When they left, the sun was beginning to set and the
kids in this close-knit community had a safer place to play. The playground left
behind is just one example of Finish Line giving back to the communities in
which we operate.
1999 marked the second year of existence for The Finish Line Youth
Foundation(TM). We created the Youth Foundation to facilitate our ability to
provide funding and assistance to youth athletics and programs - like the park
in Chicago. During the past two years we've raised more than $1.1 million with
the help of our customers, employees and stores. This year, half of the $580,000
raised in 1999 was earmarked for use by the Foundation's charter partner, the
Boys & Girls Clubs of America. These dollars will benefit both the national
association and local clubs near neighborhood Finish Line stores.
The remaining funds will be distributed by the Youth Foundation based on need.
Our primary focus is to support youth athletic and wellness programs in areas
where we operate. Finish Line believes that education, sports and exercise are
vital to the development of our youths' ability to maintain a healthy lifestyle,
build confidence and leadership skills, and understand the importance of working
as a team. We look forward to another year of making a difference in our home
communities.
<PAGE>
- ----------------------------------------------
4 Plan Your Work Business Strategy
Work Your Plan
- ----------------------------------------------
During the last fiscal year, we realized changes in the way we do business were
necessary if we were to regain the momentum of meaningful growth as we enter the
new year. We carefully analyzed and broke down our business, refocused and got
back to basics. In a time where the only constant is change, we reshaped
ourselves around the time-tested principle of delivering superior product in an
enticing store with old-fashioned customer service.
We are ready. Through outstanding product, new vendor partnerships, exciting
private label initiatives and new information technologies, we are extending our
philosophy of providing an outstanding assortment of products that satisfies key
customer wants and needs. When it comes to athletic footwear and apparel, Finish
Line will offer shoppers the right product at the right time at the right price.
We are positioning our stores as the destination for customers searching for any
of three key product attributes - function, fashion and value.
Function Fashion
[Photos of Shoes]
Value
Function - Authentic. Athletic. Performance. Trend-proof. Designed for the
world's best athletes. Available for use on a track, field, court or
neighborhood.
Fashion - Comfort and style. At home in any arena. Meeting personal needs.
Providing options. Making a statement from head-to-toe.
Value - The right gear at the right price. Staying competitive. Meeting the
needs of our customers, who want functional brand name products at a lower
price.
By focusing on the basics, Finish Line meets the needs of our customers - and
has become the athletic specialty retailer of choice for men, women and children
of all ages.
The Right Product The Right Time
Finish Line spent last year driving home a footwear message. Through every
contact point in and out of the store, our customers saw that above all, Finish
Line is the destination for the best and broadest selection in athletic and
casual footwear. Our customers knew we had their shoe. Now we are taking the
next step.
Exclusive product from key vendors including Nike, adidas and Reebok will allow
Finish Line to meet customer needs better than ever. It's an exciting time to
examine the shoe display walls in our stores - filled with goods available
nowhere else. In addition to exclusive and special make-up product, Finish Line
strives to be first with key items that keep us one step ahead of the
competition. Additional offerings from industry leaders like Timberland, New
Balance,And 1 and K-Swiss, to name a few, round out an enticing assortment. No
one offers a broader or more compelling product mix.
While footwear makes up almost 80 percent of Finish Line sales, apparel also
plays a key role in creating a complete athletic destination for our customers.
A challenging apparel environment has prompted Finish Line to introduce two new
private label apparel brands, SPK and 808.
<PAGE>
---------------------------------------------------------
The Store Footwear Apparel The Look Compelling Shoppable
---------------------------------------------------------
[PICTURE OF STORE APPEARS HERE]
College Mall, Bloomington, Indiana, 4,695 sq. ft
<PAGE>
[FASHION MODEL PRESENTING PRODUCT PICTURE APPEARS HERE]
[FASHION MODEL PRESENTING PRODUCT PICTURE APPEARS HERE]
Walk through a Finish Line today and you'll notice two exciting brands available
nowhere else, SPK and 808.
SPK meets the needs of our value/performance customers by offering high quality
basic athletic apparel at introductory price points. For this current fiscal
year, the SPK line has been expanded in our stores to include: basic t-shirts,
performance running apparel, women's workout apparel, basketball tops and
bottoms, and many more new products for men, women and children.
808 was designed with another customer in mind. This brand's graphic driven
t-shirts target a college-aged shopper looking for more contemporary lifestyle
apparel. Through 808 we can quickly react to fashion trends in the marketplace,
bringing hot new product into our stores quicker than ever. To keep 808 on the
leading edge of fashion, new graphics are slated to be introduced every quarter,
with an emphasis on emerging trends from the West Coast.
Value-driven customers will enjoy the performance of our athletic, on-field
apparel, at a great price. Meanwhile, 808 offers a more affordable casual style
with compelling graphics and contemporary looks.
Finally, we will continue to seek out value merchandise in both footwear and
apparel. Our continued growth and excellent reputation with our vendors has
allowed us to take advantage of opportunity buys. These buys allow us to meet
the needs of our value-conscious customers with great prices on brand name
products.
And It Shows
Having the right product is an important aspect of our business. Displaying and
merchandising the product to create excitement is just as vital. From the store-
front windows to the back wall, Finish Line is striving to improve the way we
tell our product story. New window treatments now invite customers to check out
the newest product while improved display techniques tempt customers to pick up
and touch the merchandise. By working with our vendors, Finish Line is able to
deliver a consistent brand message while highlighting the hottest items
available.
[FASHION MODEL PRESENTING PRODUCT PICTURE APPEARS HERE]
<PAGE>
College Mall, Bloomington, Indiana
[PHOTO]
------------------------------------------------------
The Right Place The Right Combinations
Apparel
Accessories
------------------------------------------------------
<PAGE>
- ----------------
8 People
- ----------------
We understand the role Finish Line people play in making a statement about the
store and products we carry. That's why Finish Line works non-stop to recruit
quality employees and provide them with the right tools and training to offer
our customers a satisfying store visit. As we've grown, we have not forgotten
the importance of staffing our stores with well-trained, motivated sales
associates to assist our customers.
Finish Line strives to provide our sales associates with the right tools and
training to ensure our customers the best possible shopping experience. We will
continue to focus on the basics, stressing customer service and product
knowledge. We are driving this message into our stores where it is being
received and understood, creating a visible difference on the sales floor where
it matters most.
When customers walk into the Finish Line in Barton Creek Mall in Austin, Texas,
they get a first hand look at the efforts of Cesar Ortiz, the store's general
manager. Cesar started with the Company in 1992 as an assistant manager in
Irving, Texas. Five stores and eight years later, Cesar runs the Company's
flagship Texas location and has energized employees with his infectious
enthusiasm. Since his arrival the store has posted dramatic sales gains.
According to Cesar, Finish Line creates an atmosphere where you can succeed. "No
matter where I've been with the Company, the Finish Line people have been
committed to helping me do the best job possible. When I'm recruiting, I love to
tell people that you can make what you want of your opportunities; Finish Line
isn't a job, it's a career."
Cesar attacks the job with a pride and enthusiasm that sets the tone for his
employees and other managers. When Finish Line recruits, we look for people like
Cesar.
[PHOTO OF CESAR ORTIZ]
[FASHION MODEL PRESENTING PRODUCT PICTURE APPEARS HERE]
<PAGE>
---------------------------------------------------------
More Styles
Footwear Statement
More Exclusives
---------------------------------------------------------
[Photo of Store]
College Mall, Bloomington, Indiana
<PAGE>
- -------------------------
10 Knowing Our Business
- -------------------------
Never has our success hinged so greatly on the accurate and timely delivery of
information. To that end, we've recently completed implementation of a chain-
wide, in-store, point-of-sale register system which allows for improved store
reporting, including quicker, more flexible data and report delivery. Now, our
stores and the home office are better able to make decisions regarding product
sales, inventory levels and labor allocation - ultimately leading to more
efficient operation.
Communication from the home office to the field is pivotal in our quest for
further improvement. To that end, we are investing in a new technology
infrastructure, including a wide area network employing frame relay for real-
time voice and data transmission. When completed, access to key information and
instructions between the stores and home office will be instantaneous. This
quicker flow of information will create more consistent, reliable store
operations in all markets.
Finally, we are implementing a new merchandise planning system that more
accurately forecasts product needs and allocations for each store. By improving
the quality and accuracy of information at each step of the business process,
Finish Line is creating a stronger foundation which will allow us to make
intelligent, proactive decisions in order to best serve our customers.
[FASHION MODEL PRESENTING PRODUCT PICTURE APPEARS HERE]
SHOES [PHOTO OF SHOES]
<PAGE>
- ---------------------------------------------------------------
For Her The Right Look Shoes What She's Looking For
Apparel
- ---------------------------------------------------------------
[Photo of Store]
College Mall, Bloomington, Indiana
<PAGE>
- ----------------------
12 The Right Place
- ----------------------
In Fiscal Year 2000 we opened our 400th store. By fiscal year end, we were
operating 409 stores in 41 states, having opened 55 new stores during the year.
While many of our competitors reduced store fronts, we continued our expansion
into new markets and reinforced our presence with additional stores in markets
in which we were already operating. In addition to the new stores, we updated
and remodeled 18 existing stores during the fiscal year.
These new stores and the expansion and remodeling of existing stores totaled
384,000 square feet of additional retail space in fiscal 2000. By fiscal year
end, we were operating nearly 2.5 million square feet of retail space. In
addition to our bricks and mortar retail stores, Finish Line customers can now
shop on-line at www.finishline.com for their athletic footwear and apparel
needs.
- -------------------------------
www.finishline.com the [LOGO]
web
- -------------------------------
[PHOTOS OF SCREEN SHOTS]
This year, for the first time, Finish Line customers were able to purchase their
favorite shoes and apparel from the comfort of their own homes. The introduction
of e-commerce to our existing web site marked a key step in reaching potential
customers in the Internet marketplace.
[PHOTOS OF SCREEN SHOTS]
Prior to making product available for sale on-line, Finish Line worked to make
sure all support and customer service systems were in place. Once these were
ready, a new, customer-friendly homepage greeted virtual shoppers.
Currently a large segment of our in-store product offering is available to
shoppers 24-hours-a-day, seven-days-a-week. The site allows Finish Line to
compete with web-based retailers, without losing our in-mall focus, and more
importantly provides us with another way to conveniently serve our customers.
Actually, our two-pronged approach has benefited both the web site and stores
alike. The stores and Finish Line marketing efforts are able to drive new
customers to our web site, while the web site reinforces Finish Line's national
brand image and commitment to unmatched customer service - and meets the needs
of customers who may not live near a Finish Line location or would rather shop
from home. In addition, programs like our Winner's Circle, which offers free
shipping and many other valuable benefits to participating customers, provide
Finish Line with unique customer information that helps us better understand our
customers and their product needs.
---------------------------------
[LOGO] [FINISH LINE LOGO] [LOGO]
www.FINISHLINE.COM
---------------------------------
<PAGE>
College Mall, Bloomington, Indiana
[ Photo of Store ]
-----------------------------------
A Little Something For Kids
The Right Fit
-----------------------------------
<PAGE>
- ------------------------
14 Telling The Story
- ------------------------
After everything else is in place--the store, the product and the employees--it
is marketing's job to tell our story to our customers. In today's marketplace,
it's not enough to have cool commercials. You have to build a brand by building
a relationship.
[PHOTO OF GIFT CERTIFICATE]
We have intensified our marketing efforts in the development of a truly loyal
Finish Line customer. We tested and introduced the Winner's Circle, Finish
Line's first preferred customer program. The program provides our best customers
with reward certificates for future use, earned based on purchases. In addition
to building customer loyalty, this program will provide Finish Line with
important data and information, helping us better understand the wants and needs
of our customers. While we have been building these relationships for the past
three years through our self-published magalog, SPIKE, the Winner's Circle will
help us take this brand contact to a higher plane. SPIKE will remain an integral
part of this program that also includes more targeted direct mailings and
Internet information.
[PHOTO OF SPIKE MAGALOG]
[SERIES OF PHOTOS REPRESENTING FRAMES OF THE COMPANY'S TELEVISION COMMERCIAL]
- -2:6 Imagine a leisurely run through the neighborhood - the breeze in your hair,
birds quietly chirp - no other sound but the pounding rhythm of Survivor's Eye
of the Tiger blaring from the jambox of your new running companion, a dedicated
Finish Line employee. This is just one of the scenarios we've placed our
employees in to drive home how much we love runners. The campaign, created by
New York's Cliff Freeman & Partners, uses their own brand of humor to showcase
Finish Line's exclusive Nike product offering while positioning the Finish Line
as the premier destination for runners. See the spots and you'll understand.
Maybe We Love Runners Too Much.
<PAGE>
--------------------------------------------------------
Footwear & Apparel [ LOGO
The Best Athletic OF
Retailer THE
COMPANY ]
--------------------------------------------------------
[Photo of Store]
Castelton Square Mall, Indianapolis, Indiana, 9,740 sq. ft.
<PAGE>
No matter where a customer experiences Finish Line, we are working to make sure
that every contact reinforces our commitment to provide the best possible
service and products. We want to make the Finish Line our customers'
destination.
<TABLE>
<CAPTION>
Table of contents...............
<S> <C>
Selected Financial Data 17 [FASHION MODEL PRESENTING PRODUCT PICTURE APPEARS HERE]
- -----------------------------------------------------------
Management's Discussion and Analysis of
Financial Condition and Results of Operations 18
- -----------------------------------------------------------
Consolidated Balance Sheets 22
- -----------------------------------------------------------
Consolidated Statements of Income 23
- -----------------------------------------------------------
Consolidated Statements of Cash Flows 24
- -----------------------------------------------------------
Consolidated Statements of
Changes in Stockholders' Equity 25
- -----------------------------------------------------------
Notes to Consolidated Financial Statements 26
- -----------------------------------------------------------
Report of Independentent Auditors 31
- -----------------------------------------------------------
Market Price of Common Stock 31
- -----------------------------------------------------------
Senior Officers and Directors 32
- -----------------------------------------------------------
Shareholder Information 33
</TABLE>
<PAGE>
--------------------------
Selected Financial Data 17
--------------------------
<TABLE>
<CAPTION>
Year Ended
- ----------------------------------------------------------------------------------------------------------------------------------
February 26, February 27, February 28,
(In thousands, except per share and store operating data) 2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income Statement Data:
- ----------------------------------------------------------------------------------------------------------------------------------
Net sales $585,963 $522,623 $438,911
Cost of sales (including occupancy expenses) 423,505 373,170 303,809
- ----------------------------------------------------------------------------------------------------------------------------------
Gross profit 162,458 149,453 135,102
Selling, general and administrative expenses 139,273 117,507 94,303
- ----------------------------------------------------------------------------------------------------------------------------------
Operating income 23,185 31,946 40,799
Interest expense (income)--net (826) (1,421) (2,495)
- ----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 24,011 33,367 43,294
Income taxes 8,404 12,680 16,560
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 15,607 $ 20,687 $ 26,734
==================================================================================================================================
Earnings Per Share Data:
- ----------------------------------------------------------------------------------------------------------------------------------
Basic earnings per share $ .63 $ .81 $ 1.03
- ----------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share $ .62 $ .80 $ 1.02
==================================================================================================================================
Share Data(1):
- ----------------------------------------------------------------------------------------------------------------------------------
Weighted-average shares 24,848 25,541 25,963
- ----------------------------------------------------------------------------------------------------------------------------------
Diluted weighted-average shares 25,039 25,833 26,317
==================================================================================================================================
Selected Store Operating Data:
- ----------------------------------------------------------------------------------------------------------------------------------
Number of stores:
Opened during period 55 59 53
Closed during period 4 3 2
Open at end of period 409 358 302
Total square feet(2) 2,478,930 2,095,264 1,586,520
Average square feet per store(2) 6,061 5,853 5,253
Net sales per square foot for comparable stores $ 272 $ 310 $ 345
Increase (decrease) in comparable store net sales(3 ) (2.6)% (1.7)% 5.6%
==================================================================================================================================
Balance Sheet Data:
- ----------------------------------------------------------------------------------------------------------------------------------
Working capital $124,898 $106,661 $120,822
Total assets 289,095 278,555 255,978
Total debt - - -
Stockholders' equity 222,392 208,679 197,122
==================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended
- ----------------------------------------------------------------------------------------------------------------------------------
March 1, February 29,
(In thousands, except per share and store operating data) 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income Statement Data:
- ----------------------------------------------------------------------------------------------------------------------------------
Net sales $ 332,002 $ 240,155
Cost of sales (including occupancy expenses) 229,187 168,912
- ----------------------------------------------------------------------------------------------------------------------------------
Gross profit 102,815 71,243
Selling, general and administrative expenses 72,282 54,254
- ----------------------------------------------------------------------------------------------------------------------------------
Operating income 30,533 16,989
Interest expense (income)--net (824) 892
- ----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 31,357 16,097
Income taxes 12,544 6,439
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 18,813 $ 9,658
==================================================================================================================================
Earnings Per Share Data:
- ----------------------------------------------------------------------------------------------------------------------------------
Basic earnings per share $ .81 $ .47
- ----------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share $ .80 $ .47
==================================================================================================================================
Share Data(1):
- ----------------------------------------------------------------------------------------------------------------------------------
Weighted-average shares 23,100 20,630
- ----------------------------------------------------------------------------------------------------------------------------------
Diluted weighted-average shares 23,502 20,671
==================================================================================================================================
Selected Store Operating Data:
- ----------------------------------------------------------------------------------------------------------------------------------
Number of stores:
Opened during period 35 35
Closed during period 4 5
Open at end of period 251 220
Total square feet(2) 1,088,419 870,340
Average square feet per store(2) 4,336 3,956
Net sales per square foot for comparable stores $ 352 $ 308
Increase (decrease) in comparable store net sales(3) 16.0% 3.4%
==================================================================================================================================
Balance Sheet Data:
- ----------------------------------------------------------------------------------------------------------------------------------
Working capital $ 112,079 $ 32,453
Total assets 217,718 114,972
Total debt - 9,500
Stockholders' equity 169,875 63,148
==================================================================================================================================
(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.
</TABLE>
<PAGE>
- ---------------------------------------------------------------
18 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.
<TABLE>
<CAPTION>
Year Ended
- ---------------------------------------------------------------------------------------------------------
February 26, February 27, February 28,
2000 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income Statement Data:
Net sales 100.0% 100.0% 100.0%
Cost of sales (including
occupancy expenses) 72.3 71.4 69.2
- ---------------------------------------------------------------------------------------------------------
Gross profit 27.7 28.6 30.8
Selling, general and
administrative expenses 23.7 22.5 21.5
- ---------------------------------------------------------------------------------------------------------
Operating income 4.0 6.1 9.3
Interest income--net .1 .3 .6
- ---------------------------------------------------------------------------------------------------------
Income before income taxes 4.1 6.4 9.9
Income taxes 1.4 2.4 3.8
- ---------------------------------------------------------------------------------------------------------
Net income 2.7% 4.0% 6.1%
=========================================================================================================
</TABLE>
Fiscal 2000 Compared to Fiscal 1999 Net sales for fiscal 2000 were $586.0
million, an increase of $63.3 million or 12.1% over fiscal 1999. Of this
increase, $40.3 million was attributable to a 14.2% increase in the number of
stores open during the period from 358 at the end of fiscal 1999 to 409 at the
end of fiscal 2000. The balance of the increase in net sales was attributable to
an increase of $32.7 million from the 59 existing stores open only part of
fiscal 1999 along with an increase in sales from stores remodeled. These
increases were partially offset by a comparable store net sales decrease of 2.6%
in fiscal 2000. Comparable net footwear sales increased 3.9% for fiscal 2000
while comparable net activewear and accessories sales decreased 19.4%. Net sales
per square foot decreased in fiscal 2000 to $272 from $310 in fiscal 1999.
Activewear and accessories continue to be negatively effected by a fashion shift
by customers to contemporary non-athletic brands and by significant reduction in
the average unit selling price. Sales per square foot have been negatively
impacted by the decrease in activewear sales along with a 3.6% increase in the
average store size from 5,853 square feet at February 27, 1999 to 6,061 square
feet at February 26, 2000.
Gross profit, which includes product margin less store occupancy costs, for
fiscal 2000 was $162.5 million, an increase of $13.0 million or 8.7% over fiscal
1999, and a decrease of approximately 0.9% as a percentage of net sales. Of this
0.9% decrease, 1.4% was due to an increase in occupancy costs as a percentage of
net sales, partially offset by a 0.3% decrease in inventory shrink and 0.2%
increase in margins for product sold.
Selling, general and administrative expenses were $139.3 million, an increase
of $21.8 million or 18.5% over fiscal 1999, and increased to 23.7% from 22.5% as
a percentage of net sales. The dollar increase was primarily attributable to the
operating costs related to the 55 additional stores opened during 2000. The
increase as a percentage of net sales is a result of increased costs related to
store payroll, depreciation and freight along with a comparable store decrease
in net sales for fiscal 2000.
Net interest income for fiscal 2000 was $826,000 compared to net interest
income of $1.4 million for fiscal 1999. This decrease was the result of reduced
levels of invested cash and marketable securities due to the Company's funding
of fiscal 2000 expansion and the purchase of treasury stock under the Company's
stock repurchase program.
Income tax expense was $8.4 million for fiscal 2000 compared to $12.7 million
for fiscal 1999. The decrease in the Company's provision for federal and state
taxes in 2000 is due to the decreased level of income before taxes along with a
decrease in the effective tax rate to 35% for fiscal 2000 from 38% in fiscal
1999.
Net income decreased 24.6% to $15.6 million for fiscal 2000 compared to
$20.7 million for fiscal 1999. Diluted net income per share decreased 22.5% to
$.62 for fiscal 2000 compared to $.80 for fiscal 1999. Diluted weighted average
shares outstanding were 25,039,000 and 25,833,000, for fiscal 2000 and 1999,
respectively. The reduction in the diluted weighted average shares outstanding
reflects the repurchase during fiscal 2000 of 472,000 shares of Class A Common
Stock through the Company's stock repurchase program.
<PAGE>
-----------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Continued) 19
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter Ended
- -------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data) May 29, 1999 August 28, 1999
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $132,296 100.0% $165,994 100.0%
Cost of sales (including occupancy expenses) 95,170 71.9 117,303 70.7
- -------------------------------------------------------------------------------------------------------------------------------
Gross profit 37,126 28.1 48,691 29.3
Selling, general and administrative expenses 31,705 24.0 37,037 22.3
- -------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 5,421 4.1 11,654 7.0
Interest income--net 281 .2 278 .2
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 5,702 4.3 11,932 7.2
Income taxes 1,996 1.5 4,176 2.5
- -------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 3,706 2.8% $ 7,756 4.7%
- -------------------------------------------------------------------------------------------------------------------------------
Basic earnings (loss) per share $ .15 $ .31
Diluted earnings (loss) per share $ .15 $ .31
===============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
- -------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data) November 27, 1999 February 26, 2000
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $120,776 100.0% $166,897 100.0%
Cost of sales (including occupancy expenses) 91,358 75.6 119,674 71.7
- -------------------------------------------------------------------------------------------------------------------------------
Gross profit 29,418 24.4 47,223 28.3
Selling, general and administrative expenses 33,208 27.5 37,323 22.4
- -------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) (3,790) (3.1) 9,900 5.9
Interest income--net 204 .2 63 .1
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (3,586) (2.9) 9,963 6.0
Income taxes (1,255) (1.0) 3,487 2.1
- -------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (2,331) (1.9)% $ 6,476 3.9%
- -------------------------------------------------------------------------------------------------------------------------------
Basic earnings (loss) per share $ (.09) $ .26
Diluted earnings (loss) per share $ (.09) $ .26
===============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
- ----------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data) May 30,1998 August 29, 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 116,602 100.0% $ 144,719 100.0%
Cost of sales (including occupancy expenses) 81,379 69.8 100,211 69.2
- ----------------------------------------------------------------------------------------------------------------------
Gross profit 35,223 30.2 44,508 30.8
Selling, general and administrative expenses 26,472 22.7 32,170 22.2
- ----------------------------------------------------------------------------------------------------------------------
Operating income 8,751 7.5 12,338 8.6
Interest income--net 490 .4 397 .3
- ----------------------------------------------------------------------------------------------------------------------
Income before income taxes 9,241 7.9 12,735 8.9
Income taxes 3,512 3.0 4,839 3.4
- ----------------------------------------------------------------------------------------------------------------------
Net income $ 5,729 4.9% $ 7,896 5.5%
- ----------------------------------------------------------------------------------------------------------------------
Basic earnings per share $ .22 $ .30
Diluted earnings per share $ .22 $ .30
======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
- ------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data) November 28, 1998 February 27, 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $109,655 100.0% $151,647 100.0%
Cost of sales (including occupancy expenses) 81,874 74.7 109,706 72.3
- ------------------------------------------------------------------------------------------------------------
Gross profit 27,781 25.3 41,941 27.7
Selling, general and administrative expenses 27,454 25.0 31,411 20.7
- ------------------------------------------------------------------------------------------------------------
Operating income 327 .3 10,530 7.0
Interest income--net 313 .3 221 .1
- ------------------------------------------------------------------------------------------------------------
Income before income taxes 640 .6 10,751 7.1
Income taxes 244 .2 4,085 2.7
- ------------------------------------------------------------------------------------------------------------
Net income $ 396 .4% $ 6,666 4.4%
- ------------------------------------------------------------------------------------------------------------
Basic earnings per share $ .02 $ .27
Diluted earnings per share $ .02 $ .27
============================================================================================================
</TABLE>
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
<PAGE>
- ---------------------------------------------------------------
20 Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
- ---------------------------------------------------------------
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, an 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.
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.
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 operating data of the
Company, including such data as a percentage of net sales, for fiscal 2000 and
fiscal 1999. This quarterly information is unaudited but, in management's
opinion, reflects all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the information for the
periods presented.
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
$12,082,000, $37,734,000 and $212,000 respectively, for fiscal 2000, 1999 and
1998. At February 26, 2000, the Company had cash and cash equivalents of $13.1
million and an additional $11.4 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 at February 26, 2000
as available-for-sale and are available to support current operations.
Merchandise inventories were $149.0 million at February 26, 2000 compared to
$135.3 million at February 27, 1999. On a per square foot basis, merchandise
inventories at February 26, 2000 decreased 6.9% compared to February 27, 1999.
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 currently 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 1.25% (this rate is available on the first
$10,000,000 of borrowings), the bank's LIBOR Rate plus .80% 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 26, 2000, 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 $176,148,000 and a leverage ratio (as defined) of not greater than
.63 to 1.0. The Company is in compliance with all such covenants at February 26,
2000.
<PAGE>
--------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued) 21
--------------------------------------------------------------------
Capital expenditures were $26,274,000 and $41,398,000 for fiscal 2000 and
1999, respectively. Expenditures in 2000 were primarily for the build-out of 55
stores that were opened during fiscal 2000 (including 7 large format stores),
the remodeling of 18 existing stores and various corporate projects.
Expenditures in 1999 were primarily for the build-out of 59 stores that were
opened in 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.
The Company anticipates that total capital expenditures for fiscal 2001 will
be approximately $20,000,000 primarily for the build-out of 25-30 new stores,
(including 2 large format stores), the remodeling of 8-12 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 2000, the Company contributed 50,000 shares of Finish Line Class
A Common Stock to the Company's retirement plan for its employees. The Company
had purchased the shares in fiscal 1999 at an aggregate cost of $683,000.
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 Company's Class A Common Stock outstanding. Effective December
28,1999 the Board of Directors extended the stock repurchase program through
December 31, 2000. As of February 26, 2000, the Company holds 1,785,000 shares
of its Class A Common Stock purchased on the open market at an average price of
$8.19 per share for an aggregate purchase amount of $14,611,000. 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 2001 store expansion program and to satisfy the Company's other
capital requirements through fiscal 2001.
Market Risk The Company is exposed to changes in interest rates primarily
from its investments in available-for-sale 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 $165,000 at
February 26, 2000.
Impact of Year 2000 In prior years, the Company has disclosed the nature and
progress of its plans to be Year 2000 compliant. In late 1999, the Company
completed its remediation and testing of systems. As a result of those planning
and implementation efforts, the Company experienced no significant disruptions
in mission critical information technology and non-information technology
systems and believes those systems successfully responded to the Year 2000 date
change. The Company expensed approximately $125,000 during fiscal 2000 in
connection with remediating its systems. The Company is not aware of any
material problems resulting from Year 2000 issues in regards to its internal
systems or the products and services of third parties. The Company will continue
to monitor its mission critical computer applications and those of its material
suppliers and vendors throughout the year 2000 to ensure that any latent Year
2000 issues that may arise are addressed immediately.
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>
- ------------------------------
22 Consolidated Balance Sheets
- ------------------------------
<TABLE>
<CAPTION>
February 26, February 27,
(in thousands) 2000 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 13,061 $ 23,113
Marketable securities 11,420 2,155
Accounts receivable 9,555 6,951
Merchandise inventories 148,979 135,303
Income taxes recoverable 756 -
Deferred income taxes - 2,432
Other 1,473 1,241
- -------------------------------------------------------------------------------
Total current assets 185,244 171,195
===============================================================================
Property and Equipment
Land 315 315
Building 10,391 10,251
Leasehold improvements 89,909 74,948
Furniture, fixtures, and equipment 40,737 30,418
Construction in progress 2,087 4,251
- -------------------------------------------------------------------------------
143,439 120,183
Less accumulated depreciation 41,820 29,749
- -------------------------------------------------------------------------------
101,619 90,434
Other Assets
Marketable securities - 15,656
Deferred income taxes 2,023 1,022
Other 209 248
- -------------------------------------------------------------------------------
2,232 16,926
- -------------------------------------------------------------------------------
Total assets $289,095 $278,555
===============================================================================
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
February 26, February 27,
(in thousands) 2000 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 42,188 $ 50,672
Employee compensation 4,637 5,025
Accrued income taxes - 446
Accrued property and sales tax 4,097 3,533
Deferred income taxes 3,839 -
Other liabilities and accrued expenses 5,585 4,858
- ----------------------------------------------------------------------------
Total current liabilities 60,346 64,534
============================================================================
Long-term deferred rent payments 6,357 5,342
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
(2000--19,988; 1999--18,961)
Shares outstanding
(2000--18,203; 1999--17,598) 200 190
Class B:
Shares authorized--12,000
Shares issued and outstanding
(2000--6,268; 1999--7,244) 63 72
Additional paid-in capital 122,269 121,954
Retained earnings 114,512 98,905
Accumulated other comprehensive loss (41) -
Treasury stock (2000--1,785; 1999--1,363) (14,611) (12,442)
- ---------------------------------------------------------------------------
Total stockholders' equity 222,392 208,679
- ---------------------------------------------------------------------------
Total liabilities and stockholders' equity $289,095 $278,555
===========================================================================
</TABLE>
See accompanying notes.
<PAGE>
-----------------------------------------
Consolidated Statements of Income 23
-----------------------------------------
<TABLE>
<CAPTION>
Year Ended
- ---------------------------------------------------------------------------------------------------------------------
February 26, February 27, February 28,
(in thousands, except per share amounts) 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $585,963 $522,623 $438,911
Cost of sales (including occupancy expenses) 423,505 373,170 303,809
- ---------------------------------------------------------------------------------------------------------------------
Gross profit 162,458 149,453 135,102
Selling, general and administrative expenses 139,273 117,507 94,303
- ---------------------------------------------------------------------------------------------------------------------
Operating income 23,185 31,946 40,799
Interest income--net 826 1,421 2,495
- ---------------------------------------------------------------------------------------------------------------------
Income before income taxes 24,011 33,367 43,294
Income taxes 8,404 12,680 16,560
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 15,607 $ 20,687 $ 26,734
=====================================================================================================================
Basic earnings per share $ .63 $ .81 $ 1.03
=====================================================================================================================
Diluted earnings per share $ .62 $ .80 $ 1.02
=====================================================================================================================
See accompanying notes.
</TABLE>
<PAGE>
- ------------------------------------------
24 Consolidated Statements of Cash Flows
- ------------------------------------------
<TABLE>
<CAPTION>
Year Ended
- ----------------------------------------------------------------------------------------------------------------------------------
February 26, February 27, February 28,
(in thousands) 2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 15,607 $ 20,687 $ 26,734
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 14,369 10,987 7,359
Contribution of treasury stock to pension plan 682 981 1,039
Loss on sale of available-for-sale marketable securities 19 -- --
Deferred income taxes 5,292 772 669
(Gain) loss on disposal of property and equipment 354 (1) (42)
Changes in operating assets and liabilities:
Accounts receivable (2,604) (2,283) 181
Merchandise inventories (13,676) (5,153) (48,159)
Other current assets (232) 747 1,643
Other assets 39 (23) (225)
Accounts payable (8,484) 11,882 11,201
Employee compensation (388) (129) 301
Accrued income taxes (1,202) (2,931) (1,799)
Other liabilities and accrued expenses 1,291 1,454 650
Deferred rent payments 1,015 744 660
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 12,082 37,734 212
Investing activities
Purchases of property and equipment (26,274) (41,398) (29,555)
Proceeds from disposals of property and equipment 366 890 844
Purchases of short-term marketable securities -- (1,971) (3,511)
Proceeds from maturity of held-to-maturity short-term marketable securities 2,155 9,856 12,066
Proceeds from sale of available-for-sale marketable securities 4,154 -- --
Purchase of marketable securities -- -- (2,629)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (19,599) (32,623) (22,785)
Financing activities
Proceeds from short-term debt 84,800 32,200 13,650
Principal payments on short-term debt (84,800) (32,200) (13,650)
Proceeds and tax benefits from exercise of stock options 317 2,331 704
Purchase of treasury stock (2,852) (12,442) (1,230)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (2,535) (10,111) (526)
- ----------------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (10,052) (5,000) (23,099)
Cash and cash equivalents at beginning of year 23,113 28,113 51,212
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 13,061 $ 23,113 $ 28,113
==================================================================================================================================
</TABLE>
<PAGE>
- ---------------------------------------------------------------
Consolidated Statements of Changes in Stockholders' Equity 25
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Shares Amount
---------------------------------- ---------------------
(in thousands) Class A Class B Treasury Class A Class B
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at March 1, 1997 17,192 8,750 - $172 $87
================================================================================================================================
Net income for 1998
- --------------------------------------------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------------------------------------------------------
Treasury Stock purchased (94) 94
- --------------------------------------------------------------------------------------------------------------------------------
Contribution of Treasury Stock to profit sharing plan 54 (54)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at February 28, 1998 18,130 7,842 40 182 78
================================================================================================================================
Net income for 1999
- --------------------------------------------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------------------------------------------------------
Treasury Stock purchased (1,363) 1,363
- --------------------------------------------------------------------------------------------------------------------------------
Contribution of Treasury Stock to profit sharing plan 40 (40)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at February 27, 1999 17,598 7,244 1,363 190 72
================================================================================================================================
Comprehensive income:
Net income for 2000
- --------------------------------------------------------------------------------------------------------------------------------
Other comprehensive loss - Net unrealized loss on available-for-sale
securities, net of tax benefit of $22
================================================================================================================================
Total comprehensive income
- --------------------------------------------------------------------------------------------------------------------------------
Conversion of Class B Common Stock to Class A Common Stock 976 (976) 9 (9)
- --------------------------------------------------------------------------------------------------------------------------------
Non-qualified Class A Common Stock options exercised 51 1
- --------------------------------------------------------------------------------------------------------------------------------
Treasury Stock purchased (472) 472
- --------------------------------------------------------------------------------------------------------------------------------
Contribution of Treasury Stock to profit sharing plan 50 (50)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at February 26, 2000 18,203 6,268 1,785 $200 $ 63
================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Additional Other
Paid-In Retained Comprehensive Treasury
(in thousands) Capital Earnings Loss Stock Totals
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at March 1, 1997 $ 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 --
- ------------------------------------------------------------------------------------------------------------------------------------
Non-qualified Class A Common Stock options exercised 703 704
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury Stock purchased (1,230) (1,230)
- ------------------------------------------------------------------------------------------------------------------------------------
Contribution of Treasury Stock to profit sharing plan 346 693 1,039
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at February 28, 1998 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 --
- ------------------------------------------------------------------------------------------------------------------------------------
Non-qualified Class A Common Stock options exercised 2,329 2,331
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury Stock purchased (12,442) (12,442)
- ------------------------------------------------------------------------------------------------------------------------------------
Contribution of Treasury Stock to profit sharing plan 444 537 981
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at February 27, 1999 121,954 98,905 -- (12,442) 208,679
====================================================================================================================================
Comprehensive income:
Net income for 2000 15,607 15,607
- ------------------------------------------------------------------------------------------------------------------------------------
Other comprehensive loss - Net unrealized loss on available-for-sale
securities, net of tax benefit of $22 (41) (41)
====================================================================================================================================
Total comprehensive income 15,607 (41) 15,566
- ------------------------------------------------------------------------------------------------------------------------------------
Conversion of Class B Common Stock to Class A Common Stock --
- ------------------------------------------------------------------------------------------------------------------------------------
Non-qualified Class A Common Stock options exercised 316 317
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury Stock purchased (2,852) (2,852)
- ------------------------------------------------------------------------------------------------------------------------------------
Contribution of Treasury Stock to profit sharing plan (1) 683 682
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at February 26, 2000 $ 122,269 $ 114,512 $ (41) $(14,611) $222,392
====================================================================================================================================
</TABLE>
See accompanying notes.
<PAGE>
- -----------------------------------------------
26 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 26, 2000, February 27,
1999 and February 28, 1998 are referred to as 2000, 1999 and 1998, respectively.
The Company uses a "Retail" calendar. The Company's fiscal year ends on the
Saturday closest to the last day of February and included 52 weeks in 2000,
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. The Company manages it business on the basis of one reportable
segment. Finish Line stores average approximately 6,060 square feet in size and
are primarily located in enclosed malls throughout most of the United States.
In 2000, the Company purchased approximately 79% of its merchandise from its
five largest suppliers. The largest supplier, Nike, accounted for approximately
49%, 56% and 63% of merchandise purchases in 2000, 1999 and 1998, 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 dilative 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 dilative 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 2000, 1999 and 1998
amounted to $9,203,000, $7,657,000, and $7,326,000, 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 26, 2000 and February 27, 1999, 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. 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.
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. Available-for-sale securities are
carried at fair value with unrealized gains and losses recorded as a seperate
component of accumulated other comprehensive income. The Company has no trading
securities.
<PAGE>
----------------------------------------------------------
Notes To Consolidated Financial Statements (Continued) 27
----------------------------------------------------------
2. Marketable Securities
In January 2000, the Company sold $2,155,000 of investments that were
previously classified as held-to-maturity. The Company's decision was based on
increased borrowing costs in comparison to the rate of return on the
investments. At that time, the Company also transferred all remaining
investments from held-to-maturity to available-for-sale. The amortized cost
transferred was $14,001,000 and the net unrealized loss on these investments at
the date of transfer was $69,000. 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 26, 2000--available-for-sale
securities-municipal obligations $11,483 $10 $(73) $11,420
- ---------------------------------------------------------------------------------------------------------
February 27, 1999--held-to-maturity
securities-municipal obligations $17,811 $350 $(15) $18,146
=========================================================================================================
</TABLE>
The amortized cost and estimated fair value of marketable securities at
February 26, 2000 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 $ 3,002 $ 3,006
Due after one year through three years 7,981 7,920
Due after three years through four years 500 494
- ---------------------------------------------------------------------------------
$11,483 $11,420
=================================================================================
</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 26, 2000, there were no borrowings outstanding under
the Facility.
The Facility contains restrictive covenants which limit, among other things,
mergers, and acquisitions, redemptions of common stock, and payment of
dividends. In addition, the Company must maintain a minimum fixed charge
coverage ratio (as defined) and consolidated tangible net worth, and a maximum
leverage ratio (as defined). The Company was in compliance with all restrictive
covenants of the debt agreement in effect at February 26, 2000.
The interest rate on the Facility is, at the Company's election, either a
negotiated rate approximating the federal funds effective rate plus 1.25% (this
rate is available on the first $10,000,000 of borrowings), the bank's LIBOR Rate
plus .80% 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, which approximated
interest paid, for 2000, 1999 and 1998 was $185,000, $57,000 and $4,000,
respectively. The Company pays a commitment fee on the unused portion of the
Facility at an effective annual rate of .20%.
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>
2000 1999 1998
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Base Rent $44,211 $34,697 $ 25,067
Deferred Rent 1,628 744 660
Contingent Rent 1,014 2,871 2,940
- --------------------------------------------------------------------------
Rent Expense $46,853 $38,312 $ 28,667
==========================================================================
</TABLE>
A schedule of future base rent payments by fiscal year for signed operating
leases at February 26, 2000 with initial or remaining noncancelable terms of one
year or more is as follows (in thousands):
<TABLE>
<S> <C>
2001 $ 48,610
2002 48,992
2003 48,770
2004 46,717
2005 43,527
Thereafter 157,150
- --------------------------------------------------------------------------
$393,766
==========================================================================
</TABLE>
This schedule of future base rent payments includes lease commitments for five
new stores and one remodel which were not open as of February 26, 2000.
<PAGE>
- ----------------------------------------------------------
28 Notes To Consolidated Financial Statements (Continued)
- ----------------------------------------------------------
5. Income Taxes
The components of income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
Federal $2,756 $10,028 $13,268
State 356 1,880 2,623
- ------------------------------------------------------------------------------------
3,112 11,908 15,891
Deferred:
Federal 4,687 650 560
State 605 122 109
- ------------------------------------------------------------------------------------
5,292 772 669
- ------------------------------------------------------------------------------------
$8,404 $12,680 $16,560
====================================================================================
</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 liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
February 26, February 27,
2000 1999
- -----------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Deferred rent accrual $ 2,225 $ 2,030
Uniform capitalization 1,111 1,513
Vacation accrual 476 471
Pension accrual 240 279
Bonus accrual -- 114
Other 122 163
- -----------------------------------------------------------------------------------
Total deferred tax assets 4,174 4,570
- -----------------------------------------------------------------------------------
Deferred tax liabilities:
Inventory (5,707) --
Property and Equipment (283) (1,116)
- -----------------------------------------------------------------------------------
Total deferred tax liabilities (5,990) (1,116)
- -----------------------------------------------------------------------------------
Net deferred tax asset (liability) $(1,816) $ 3,454
===================================================================================
</TABLE>
The effective income tax rate varies from the statutory federal income tax
rate for 2000, 1999 and 1998 due to the following:
<TABLE>
<CAPTION>
2000 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax at statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefit 2.6% 3.9% 4.1%
Tax exempt interest (4.3)% (4.4)% (5.8)%
Other 1.7% 3.5% 4.9%
- ---------------------------------------------------------------------------------------------------------
35.0% 38.0% 38.2%
=========================================================================================================
</TABLE>
Payments of income taxes for 2000, 1999 and 1998 were $4,751,000, $13,672,000
and $17,572,000, 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 2000, 1999 and 1998 amounted to $1,626,000, $1,621,000 and $1,789,000,
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 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 2000 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.
<PAGE>
--------------------------------------------------------------
Notes To Consolidated Financial Statements (Continued) 29
--------------------------------------------------------------
Under the fair value method, the Company's net income and earnings per share
would have been as follows:
<TABLE>
<CAPTION>
2000 1999 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (in thousands)
As reported $15,607 $20,687 $26,734
Pro forma 14,154 19,165 25,768
- --------------------------------------------------------------------------------------------------
Diluted earnings per share
As reported $ .62 $ .80 $ 1.02
Pro forma .58 .75 .99
==================================================================================================
</TABLE>
The estimated weighted-average fair value of the individual options granted
during 2000, 1999 and 1998 was $4.20, $7.59 and $12.70, 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:
<TABLE>
<CAPTION>
2000 1999 1998
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend yield 0% 0% 0%
- ----------------------------------------------------------------------------------
Volatility 77.9% 81.6% 74.8%
- ----------------------------------------------------------------------------------
Risk-free interest rate 6.58% 5.70% 6.18%
- ----------------------------------------------------------------------------------
Expected life 7 years 7 years 7 years
==================================================================================
</TABLE>
A reconciliation of the Company's stock option activity and related
information is as follows:
<TABLE>
<CAPTION>
Number Weighted-Average
of Options Exercise Price
- ---------------------------------------------------------------------------
<S> <C> <C>
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
Granted 439,300 5.52
Exercised (50,751) 3.92
Canceled (166,825) 12.73
- ---------------------------------------------------------------------------
February 26, 2000 1,809,040 $9.55
</TABLE>
The following table summarizes information concerning outstanding and exercis-
able options at February 26, 2000:
<TABLE>
<CAPTION>
Weighted-
Average Weighted- Weighted-
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 3-$ 5 417,700 5.3 $ 3.97 417,700 $ 3.97
$ 5-$10 807,500 9.0 $ 7.10 90,800 $ 7.81
$10-$15 345,345 7.9 $13.72 114,132 $13.77
$15-$25 238,495 7.1 $21.53 98,560 $21.68
=========================================================================================================
</TABLE>
Options exercisable were 721,192, 425,128 and 317,126 at fiscal year end 2000,
1999 and 1998, 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).
<TABLE>
<CAPTION>
2000 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income available to common stockholders $15,607 $20,687 $26,734
- ---------------------------------------------------------------------------------------------------------
Basic earnings per share:
Weighted-average number of
common shares outstanding 24,848 25,541 25,963
Basic earnings per share $ .63 $ .81 $ 1.03
- ---------------------------------------------------------------------------------------------------------
Diluted earnings per share:
Weighted-average number of
common shares outstanding 24,848 25,541 25,963
Stock options 191 292 354
- ---------------------------------------------------------------------------------------------------------
Diluted weighted-average number of common
shares outstanding 25,039 25,833 26,317
- ---------------------------------------------------------------------------------------------------------
Diluted earnings per share $ .62 $ .80 $ 1.02
=========================================================================================================
</TABLE>
<PAGE>
- ----------------------------------------------------------
30 Notes To Consolidated Financial Statements (Continued)
- ----------------------------------------------------------
9. Common Stock
At February 26, 2000, 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 founding 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. Effective December 28, 1999, the
Company's Board of Directors extended the stock repurchase program through
December 31, 2000. As of February 26, 2000, the Company holds as treasury shares
under this repurchase plan 1,785,000 shares of its Class A Common Stock at an
average price of $8.19 per share for an aggregate purchase amount of
$14,611,000. The treasury shares may be issued upon the exercise of employee
stock options or for other corporate purposes.
<PAGE>
----------------------------------
Report of Independent Auditors 31
----------------------------------
The Board of Directors and Stockholders of The Finish Line, Inc.
We have audited the accompanying consolidated balance sheets of The Finish
Line, Inc. as of February 26, 2000 and February 27, 1999, 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 26,
2000. 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 auditing standards generally
accepted in the United States. 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. at February 26, 2000 and February 27, 1999 and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended February 26, 2000, in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
Fort Wayne, Indiana
March 21, 2000
MARKETPRICE OF COMMON STOCK
<TABLE>
<CAPTION>
Quarter Ended Fiscal 2000 Fiscal 1999
- ---------------------------------------------------------------------
High Low High Low
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
May $15.88 $11.13 $26.50 $15.63
August 12.50 8.00 31.06 8.25
November 9.38 5.56 11.44 7.50
February 7.00 4.44 12.19 7.00
=====================================================================
</TABLE>
The Class A Common Stock has traded on the Nasdaq National Market 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>
- ---------------------------------
32 Senior Officers and Directors
- ---------------------------------
<TABLE>
<CAPTION>
Name Age Position Officer or Director Since
====================================================================================================================================
<S> <C> <C> <C>
Alan H. Cohen(1) 53 Chairman of the Board of Directors
President and Chief Executive Officer 1976
- ------------------------------------------------------------------------------------------------------------------------------------
David I. Klapper(3) 51 Senior Executive Vice President, Director 1976
- ------------------------------------------------------------------------------------------------------------------------------------
Larry J. Sablosky 51 Senior Executive Vice President, Director 1982
- ------------------------------------------------------------------------------------------------------------------------------------
Steven J. Schneider 44 Executive Vice President--Finance, CFO and Assistant Secretary 1989
- ------------------------------------------------------------------------------------------------------------------------------------
Gary D. Cohen 47 Executive Vice President--General Counsel and Secretary 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph W. Wood 52 Executive Vice President--Merchandising and Marketing 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Donald E. Courtney 45 Executive Vice President--MIS and Distribution 1989
- ------------------------------------------------------------------------------------------------------------------------------------
George S. Sanders 42 Executive Vice President--Real Estate and Store Development 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Michael L. Marchetti 49 Executive Vice President--Store Operations 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Kevin S. Wampler 37 Senior Vice President--Corporate Controller and Asst. Secretary 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Robert A. Edwards 37 Senior Vice President--Distribution 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas R. Sicari 46 Senior Vice President--General Merchandise Manager 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Kevin G. Flynn 36 Senior Vice President--Marketing 1997
- ------------------------------------------------------------------------------------------------------------------------------------
James B. Davis 37 Senior Vice President--Real Estate 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph L. Gravitt 40 Senior Vice President--Store Personnel 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Jonathan K. Layne(2)(3)(4) 46 Director 1992
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey H. Smulyan(1)(2)(5) 52 Director 1992
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen Goldsmith(1)(6) 53 Director 1999
- ------------------------------------------------------------------------------------------------------------------------------------
</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
(6) Mr. Goldsmith is a partner in the law firm of Baker & Daniels LLP
<PAGE>
[Shareholder Information] [Company Logo] [2000]
Transfer Agent and Registrar:
American Stock Transfer & Trust Co.
Shareholder Services
40 Wall Street
New York, NY 10005
Stock Market Information:
The Company's Class A Common Stock is traded on the NASDAQ National Market
under the symbol FINL. As of March 31, 2000, the approximate number of holders
of record of Class A Common Stock was 341. 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 March 31, 2000, the closing price for the Company's Class A Common
Stock, as reported by NASDAQ was $9.75.
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
Certain statements contained in this Annual report regard matters that are
not historical facts and are forward looking statements (as such term is
defined in the rules promulgated pursuant to the Securities Act of 1933, as
amended). Because such forward looking statements contain risks and
uncertainties, actual results may differ materially from those expressed in
or implied by such forward looking statements. Factors that could cause
actual results to differ materially include, but are not limited to: changing
consumer preferences; the Company's inability to successfully market its
footwear, apparel, accessories and other merchandise; price, product and
other competition from other retailers (including internet and direct
manufacturer sales); the unavailability of products; the inability to locate
and obtain favorable lease terms for the Company's stores; the loss of key
employees, general economic conditions and adverse factors impacting the
retail athletic industry; management of growth, and the other risks detailed
in the Company's Securities and Exchange Commission filings. The Company
undertakes no obligation to release publicly the results of any revisions to
these forward looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Architectural Photography - Dan Francis/Mardan Photography
Fashion Photography - E. Anthony Valainis
<PAGE>
[COMPANY LOGO]
Corporate Mark: Address: Web Address/Phone:
- ------------------- -----------------
www.finishline.com
[LOGO] Finish Line ---------------------
3308 North Mitthoeffer Rd. 317.899.1022
Indianapolis, IN 46235
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE FINISH LINE, INC.
Subsidiary State of Incorporation Percentage of Ownership
- ---------- ---------------------- -----------------------
Spike's Holding, Inc. Delaware 100%
19
<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 21, 2000, included in the
2000 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 21, 2000, 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 23, 2000
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from financial
statements for the years ended February 26, 2000 and February 27, 1999 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-26-2000 FEB-27-1999
<PERIOD-START> FEB-28-1999 MAR-01-1998
<PERIOD-END> FEB-26-2000 FEB-27-1999
<CASH> 13,061 23,113
<SECURITIES> 11,420 2,155
<RECEIVABLES> 9,555 6,951
<ALLOWANCES> 0 0
<INVENTORY> 148,979 135,303
<CURRENT-ASSETS> 185,244 171,195
<PP&E> 143,439 120,183
<DEPRECIATION> 41,820 29,749
<TOTAL-ASSETS> 289,095 278,555
<CURRENT-LIABILITIES> 60,346 64,534
<BONDS> 0 0
0 0
0 0
<COMMON> 263 262
<OTHER-SE> 222,129 208,417
<TOTAL-LIABILITY-AND-EQUITY> 289,095 278,555
<SALES> 585,963 522,623
<TOTAL-REVENUES> 585,963 522,623
<CGS> 423,505 373,170
<TOTAL-COSTS> 423,505 373,170
<OTHER-EXPENSES> 139,273 117,507
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (826) (1,421)
<INCOME-PRETAX> 24,011 33,367
<INCOME-TAX> 8,404 12,860
<INCOME-CONTINUING> 15,607 20,687
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 15,607 20,687
<EPS-BASIC> .63 .81
<EPS-DILUTED> .62 .80
</TABLE>
