SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the thirteen week period ended May 28, 2005
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File number 0-20184
The Finish Line, Inc.
(Exact name of registrant as specified in its charter)
| Indiana | 35-1537210 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer identification number) | |
| 3308 North Mitthoeffer Road Indianapolis, Indiana | 46235 | |
| (Address of principal executive offices) | (zip code) | |
317-899-1022
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes x No ¨
Shares of common stock outstanding at June 17, 2005:
| Class A |
43,851,007 | |
| Class B |
5,141,336 |
PART 1. FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
THE FINISH LINE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
| May 28, 2005 |
May 29, (Restated) |
February 26, 2005 | |||||||
| (unaudited) | (unaudited) | ||||||||
| ASSETS | |||||||||
| CURRENT ASSETS: |
|||||||||
| Cash and cash equivalents |
$ | 41,788 | $ | 78,266 | $ | 55,991 | |||
| Marketable securities |
38,800 | 9,350 | 57,175 | ||||||
| Accounts receivable, net |
12,070 | 9,714 | 14,230 | ||||||
| Merchandise inventories, net |
259,838 | 221,609 | 241,242 | ||||||
| Other |
7,168 | 16,003 | 3,162 | ||||||
| Total current assets |
359,664 | 334,942 | 371,800 | ||||||
| PROPERTY AND EQUIPMENT: |
|||||||||
| Land |
1,557 | 315 | 315 | ||||||
| Building |
31,617 | 11,673 | 23,309 | ||||||
| Leasehold improvements |
226,570 | 191,629 | 217,371 | ||||||
| Furniture, fixtures, and equipment |
81,449 | 70,042 | 77,945 | ||||||
| Construction in progress |
6,671 | 13,274 | 10,616 | ||||||
| 347,864 | 286,933 | 329,556 | |||||||
| Less accumulated depreciation |
145,960 | 125,889 | 141,258 | ||||||
| 201,904 | 161,044 | 188,298 | |||||||
| Deferred income taxes |
2,180 | 5,687 | 3,578 | ||||||
| Intangible assets |
11,283 | — | 11,343 | ||||||
| Total assets |
$ | 575,031 | $ | 501,673 | $ | 575,019 | |||
See accompanying notes.
2
THE FINISH LINE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
| May 28, 2005 |
May 29, (Restated) |
February 26, 2005 |
||||||||||
| (unaudited) | (unaudited) | |||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
| CURRENT LIABILITIES: |
||||||||||||
| Accounts payable |
$ | 78,894 | $ | 89,615 | $ | 92,378 | ||||||
| Employee compensation |
7,028 | 5,933 | 12,883 | |||||||||
| Accrued property and sales tax |
5,522 | 5,405 | 6,914 | |||||||||
| Deferred income taxes |
10,768 | 8,869 | 7,645 | |||||||||
| Other liabilities and accrued expenses |
18,699 | 11,669 | 17,196 | |||||||||
| Total current liabilities |
120,911 | 121,491 | 137,016 | |||||||||
| Deferred credits from landlords |
51,875 | 47,994 | 50,532 | |||||||||
| Other long-term liabilities |
1,500 | — | 1,500 | |||||||||
| SHAREHOLDERS’ EQUITY: |
||||||||||||
| Preferred stock, $.01 par value; 1,000 shares authorized; none issued |
— | — | — | |||||||||
| Common stock, $.01 par value |
||||||||||||
| Class A: |
||||||||||||
| Shares authorized – 100,000 |
||||||||||||
| Shares issued – (May 28, 2005 – 47,649; May 29, 2004 – 47,060; February 26, 2005 – 47,649) |
476 | 235 | 476 | |||||||||
| Shares outstanding – (May 28, 2005 – 43,833; May 29, 2004 – 42,416; February 26, 2005 – 43,578) |
||||||||||||
| Class B: |
||||||||||||
| Shares authorized – 10,000 |
||||||||||||
| Shares issued and outstanding – (May 28, 2005 – 5,141; May 29, 2004 – 5,730; February 26, 2005 – 5,141) |
52 | 29 | 52 | |||||||||
| Additional paid-in capital |
140,567 | 133,474 | 138,130 | |||||||||
| Retained earnings |
275,495 | 216,732 | 263,971 | |||||||||
| Treasury stock – (May 28, 2005 – 3,816; May 29, 2004 – 4,644; February 26, 2005 – 4,071) |
(15,845 | ) | (18,282 | ) | (16,658 | ) | ||||||
| Total shareholders’ equity |
400,745 | 332,188 | 385,971 | |||||||||
| Total liabilities and shareholders’ equity |
$ | 575,031 | $ | 501,673 | $ | 575,019 | ||||||
See accompanying notes.
3
THE FINISH LINE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
| Thirteen Weeks Ended |
|||||||
| May 28, 2005 |
May 29, (Restated) |
||||||
| Net sales |
$ | 291,267 | $ | 257,966 | |||
| Cost of sales (including occupancy expense) |
200,593 | 178,448 | |||||
| Gross profit |
90,674 | 79,518 | |||||
| Selling, general, and administrative expenses |
70,826 | 63,094 | |||||
| Insurance settlement |
— | (114 | ) | ||||
| Operating income |
19,848 | 16,538 | |||||
| Interest income – net |
549 | 226 | |||||
| Income before income taxes |
20,397 | 16,764 | |||||
| Provision for income taxes |
7,649 | 6,371 | |||||
| Net income |
$ | 12,748 | $ | 10,393 | |||
| Basic net income per share |
$ | .26 | $ | .22 | |||
| Basic weighted average shares |
48,890 | 48,117 | |||||
| Diluted net income per share |
$ | .26 | $ | .21 | |||
| Diluted weighted average shares |
49,903 | 49,320 | |||||
| Dividends declared per share |
$ | .025 | $ | — | |||
See accompanying notes.
4
THE FINISH LINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) - (Unaudited)
| Thirteen Weeks Ended |
||||||||
| May 28, 2005 |
May 29, (Restated) |
|||||||
| OPERATING ACTIVITIES: |
||||||||
| Net income |
$ | 12,748 | $ | 10,393 | ||||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
||||||||
| Depreciation and amortization |
7,359 | 6,422 | ||||||
| Deferred income taxes |
4,521 | 4,537 | ||||||
| Loss on disposal of property and equipment |
18 | 114 | ||||||
| Tax benefit from exercise of stock options |
1,441 | 452 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
2,160 | (3,453 | ) | |||||
| Merchandise inventories |
(18,596 | ) | (29,010 | ) | ||||
| Other current assets |
(4,006 | ) | (13,177 | ) | ||||
| Accounts payable |
(13,484 | ) | 33,283 | |||||
| Employee compensation |
(5,855 | ) | (5,727 | ) | ||||
| Other liabilities and accrued expenses |
105 | (2,445 | ) | |||||
| Deferred credits from landlords |
1,343 | 1,239 | ||||||
| Net cash provided by (used in) operating activities |
(12,246 | ) | 2,628 | |||||
| INVESTING ACTIVITIES: |
||||||||
| Purchases of property and equipment |
(20,906 | ) | (11,554 | ) | ||||
| Lease acquisition costs |
(17 | ) | — | |||||
| Purchases of available-for-sale marketable securities |
(81,300 | ) | — | |||||
| Proceeds from sale of available-for-sale marketable securities |
99,675 | 9,425 | ||||||
| Net cash used in investing activities |
(2,548 | ) | (2,129 | ) | ||||
| FINANCING ACTIVITIES: |
||||||||
| Dividends paid to shareholders |
(1,218 | ) | — | |||||
| Proceeds from issuance of common stock |
1,809 | 690 | ||||||
| Net cash provided by financing activities |
591 | 690 | ||||||
| Net increase (decrease) in cash and cash equivalents |
(14,203 | ) | 1,189 | |||||
| Cash and cash equivalents at beginning of period |
55,991 | 77,077 | ||||||
| Cash and cash equivalents at end of period |
$ | 41,788 | $ | 78,266 | ||||
See accompanying notes
5
THE FINISH LINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| 1. | Summary of Significant Accounting Policies |
Basis of Presentation
The accompanying unaudited consolidated financial statements of The Finish Line, Inc., along with its wholly-owned subsidiaries, (collectively, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. Preparation of the financial statements require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included. The Company’s consolidated results of operations include those of Man Alive for the period presented since the acquisition date of January 29, 2005.
The Company has experienced, and expects to continue to experience, significant variability in sales and net income from reporting period to reporting period. Therefore, the results of the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year.
Certain amounts in the financial statements of prior year have been reclassified to conform with the current year presentation. These reclassifications had no effect on net income.
These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended February 26, 2005 (fiscal 2005).
Recently Issued Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board (FASB) issued Statement No. 123R “Share-Based Payment”. See Note 3 for further discussion.
| 2. | Restatement of Prior Financial Information |
The Company restated its consolidated balance sheet at May 29, 2004 and its consolidated statements of income and cash flows for the thirteen weeks ended May 29, 2004. The restatement also affects periods prior to fiscal 2005. The restatement corrects the Company’s historical accounting for operating leases. For information with respect to the restatement, see “Note 2” to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for fiscal 2005. The Company did not amend its previously filed Quarterly Reports on Form 10-Q for the restatement. Therefore, the financial statements and related financial information contained in such reports should no longer be relied upon. Throughout this Form 10-Q, all referenced amounts for affected prior periods and prior comparisons reflect the balances and amounts on a restated basis.
6
As a result of this restatement, the Company’s financial results have been adjusted as follows (in thousands, except per share data):
| Consolidated Statements of Income |
|||||||||||
| Thirteen weeks ended May 29, 2004 |
As reported |
Adjustments |
As restated |
||||||||
| Cost of sales (including occupancy costs) |
$ | 179,700 | $ | (1,252 | ) | $ | 178,448 | ||||
| Selling, general and administrative expenses |
61,559 | 1,535 | 63,094 | ||||||||
| Operating income |
16,821 | (283 | ) | 16,538 | |||||||
| Income before income taxes |
17,047 | (283 | ) | 16,764 | |||||||
| Income taxes |
6,478 | (107 | ) | 6,371 | |||||||
| Net income |
10,569 | (176 | ) | 10,393 | |||||||
| Basic earnings per share |
$ | .22 | $ | — | $ | .22 | |||||
| Diluted earnings per share |
$ | .21 | $ | — | $ | .21 | |||||
| Consolidated Balance Sheets |
|||||||||||
| May 29, 2004 |
As | ||||||||||