(FINL) Reports Second Quarter Fiscal Year 2014 Results

The Finish Line, Inc. (NASDAQ: FINL) today reported results for the 13-weeks ended August 31, 2013.

For the thirteen weeks ended August 31, 2013:

• Consolidated net sales were $436.0 million, an increase of 13.3% over the prior year period.
• Finish Line comparable store sales increased 0.9%.
• Diluted earnings per share increased 10.2% to $0.54.

“We are pleased to have delivered a solid second quarter performance,” said Chairman and Chief Executive Officer, Glenn Lyon. “The combination of positive comparable sales and good expense control drove a 10% increase in earnings per share over last year. At the same time, we continued to make good progress building our business with Macy’s and growing our Running Specialty Group. Looking ahead, we are cognizant of the headwinds currently facing the retail industry and this has been incorporated into our near-term planning. We remain confident that our strategy to create a leading multi-divisional, omni-channel business will lead to sustainable sales and earnings growth and increased shareholder value over the long term.”

Balance Sheet

As of August 31, 2013, consolidated merchandise inventories increased 18.1% to $296.0 million compared to $250.6 million as of September 1, 2012. The increase resulted primarily from the start-up of Macy’s business. For Finish Line, merchandise inventories decreased 0.5%.

The company repurchased 250,000 shares of its common stock in the second quarter, totaling $5.5 million. The company has 4.3 million shares remaining on its current Board authorized repurchase plan.

As of August 31, 2013, the company had no interest-bearing debt and $203.8 million in cash and cash equivalents, compared to $254.2 million a year ago.

Outlook

For the fiscal year ending March 1, 2014, the company now expects Finish Line comparable store sales to increase low single digits compared to its previous expectation for a slight increase. The company still expects earnings per share to increase mid-single digit percent over fiscal year 2013 Non-GAAP diluted earnings per share of $1.47.

Q2 Fiscal 2014 Conference Call Today, September 27, 2013 at 8:30 a.m.

The company will host a conference call for investors today, September 27, 2013, at 8:30 a.m. Eastern. To participate in the live conference call, dial 866-923-8645 (U.S. and Canada) or 660-422-4970 (International), conference ID #52725232. The live conference call will also be accessible online at www.finishline.com. A replay of the conference call can be accessed approximately two hours following the completion of the call by dialing 855-859-2056, conference ID #52725232. This recording will be made available through Sunday, October 27, 2013. The replay will also be accessible online at www.finishline.com.

Disclosure Regarding Non-GAAP Measures

This report refers to certain financial measures that are identified as non-GAAP. The Company believes that these non-GAAP measures, including gross profit, selling, general and administrative expenses, operating income, net income attributable to The Finish Line, Inc., and diluted earnings per share attributable to The Finish Line, Inc. shareholders, are helpful to investors because they allow for a more direct comparison of the Company’s year-over-year performance and are useful in assessing the Company’s progress in achieving its long-term financial objectives. This supplemental information should not be considered in isolation or as a substitute for the related GAAP measures. A reconciliation of the non-GAAP measures to the comparable GAAP measures can be found in the Company’s Form 8-K filed with the Securities and Exchange Commission with this release.

About The Finish Line, Inc.

The Finish Line, Inc. is a premium retailer of athletic shoes, apparel and accessories. Headquartered in Indianapolis, Finish Line has 658 stores in malls across the U.S., manages the athletic footwear inventory in 660 Macy’s stores including 182 branded shops, and employs more than 11,000 sneakerologists who help customers every day connect with their sport, their life and their style. Online shopping is available at www.finishline.com and www.macys.com. Mobile shopping is available at m.finishline.com. Follow Finish Line on Twitter at Twitter.com/FinishLine and “like” Finish Line on Facebook at Facebook.com/FinishLine.

Finish Line also operates, through a venture with Gart Capital Partners, the Running Specialty Group, including 39 specialty running shops in 11 states and the District of Columbia under The Running Company, Run On!, Blue Mile and Boulder Running Company banners. More information is available at www.run.com.

Forward-Looking Statements

This news release includes statements that are or may be considered “forward-looking” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally can be identified by the use of words or phrases such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “may,” “should,” “will,” “estimates,” “outlook,” “potential,” “optimistic,” “confidence,” “continue,” “evolve,” “expand,” “growth” or words and phrases of similar meaning. Statements that describe objectives, plans or goals also are forward-looking statements.

All of these forward-looking statements are subject to risks, management assumptions and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statements. The principal risk factors that could cause actual performance and future actions to differ materially from the forward-looking statements include, but are not limited to, the company’s reliance on a few key vendors for a majority of its merchandise purchases (including a significant portion from one key vendor); the availability and timely receipt of products; the ability to timely fulfill and ship products to customers; fluctuations in oil prices causing changes in gasoline and energy prices, resulting in changes in consumer spending as well as increases in utility, freight and product costs; product demand and market acceptance risks; deterioration of macro-economic and business conditions; the inability to locate and obtain or retain acceptable lease terms for the company’s stores; the effect of competitive products and pricing; loss of key employees; execution of strategic growth initiatives (including actual and potential mergers and acquisitions and other components of the company’s capital allocation strategy); and the other risks detailed in the company’s Securities and Exchange Commission filings. Readers are urged to consider these factors carefully in evaluating the forward-looking statements. The forward-looking statements included herein are made only as of the date of this report and Finish Line undertakes no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances.

					The Finish Line, Inc.
					Consolidated Statements of Income (Unaudited)
					(In thousands, except per share and store/shop data)
					Thirteen Weeks Ended								Twenty-Six Weeks Ended
					August 31,				September 1,				August 31,				September 1,
					2013				2012				2013				2012
Net sales					$	436,030			$	385,011			$	787,083			$	704,060
Cost of sales (including occupancy costs)						289,693				250,461				533,751				464,851
Gross profit						146,337				134,550				253,332				239,209
Selling, general and administrative expenses						103,455				94,711				202,811				179,557
Store closing costs						17				325				203				420
Operating income						42,865				39,514				50,318				59,232
Interest income, net						10				58				24				129
Income before income taxes						42,875				39,572				50,342				59,361
Income tax expense						16,682				15,136				19,635				22,844
Net income						26,193				24,436				30,707				36,517
Net loss attributable to redeemable noncontrolling interest						314				537				875				734
Net income attributable to The Finish Line, Inc.					$	26,507			$	24,973			$	31,582			$	37,251
Diluted earnings per share attributable to The Finish Line, Inc. shareholders					$	0.54			$	0.49			$	0.64			$	0.72
Diluted weighted average shares						48,757				50,866				48,744				51,135
Dividends declared per share					$	0.07			$	0.06			$	0.14			$	0.12
Finish Line store activity for the period:
Beginning of period						651				640				645				637
Opened						9				4				19				13
Closed						(1)				(6)				(5)				(12)
End of period						659				638				659				638
Square feet at end of period														3,571,267				3,449,041
Average square feet per store														5,419				5,406
Branded shops within department stores activity for the period:
Beginning of period						44				–				3				–
Opened						89				–				130				–
Closed						–				–				–				–
End of period						133				–				133				–
Square feet at end of period										–				158,948				–
Average square feet per shop										–				1,195				–
Running Company store activity for the period:
Beginning of period						38				19				27				19
Acquired						–				–				9				–
Opened						1				–				3				–
Closed						–				–				–				–
End of period						39				19				39				19
Square feet at end of period														119,964				60,436
Average square feet per store														3,076				3,181
					Thirteen Weeks Ended								Twenty-Six Weeks Ended
					August 31,				September 1,				August 31,				September 1,
					2013				2012				2013				2012
Net sales						100.0	%			100.0	%			100.0	%			100.0	%
Cost of sales (including occupancy costs)						66.4				65.0				67.8				66.0
Gross profit						33.6				35.0				32.2				34.0
Selling, general and administrative expenses						23.8				24.6				25.8				25.5
Store closing costs						–				0.1				–				0.1
Operating income						9.8				10.3				6.4				8.4
Interest income, net						–				–				–				–
Income before income taxes						9.8				10.3				6.4				8.4
Income tax expense						3.8				3.9				2.5				3.2
Net income						6.0				6.4				3.9				5.2
Net loss attributable to redeemable noncontrolling interest						–				0.1				0.1				0.1
Net income attributable to The Finish Line, Inc.						6.0	%			6.5	%			4.0	%			5.3	%

									Condensed Consolidated Balance Sheets
									August 31,			September 1,			March 2,
									2013			2012			2013
									(Unaudited)			(Unaudited)
ASSETS
Cash and cash equivalents									$	203,832		$	254,225		$	226,982
Merchandise inventories, net										295,952			250,634			243,770
Other current assets										23,852			25,742			20,942
Property and equipment, net										202,450			157,539			180,601
Goodwill										21,544			8,503			13,888
Other assets										19,932			24,770			20,239
Total assets									$	767,562		$	721,413		$	706,422
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities									$	172,122		$	138,814		$	134,037
Deferred credits from landlords										28,544			26,748			27,215
Other long-term liabilities										17,131			15,970			16,638
Redeemable noncontrolling interest										2,772			5,248			3,669
Shareholders’ equity										546,993			534,633			524,863
Total liabilities and shareholders’ equity									$	767,562		$	721,413		$	706,422

The Finish Line, Inc.
Reconciliation of Gross Profit, GAAP to Gross Profit, Non-GAAP (unaudited)
(In thousands)
					Thirteen Weeks Ended													Twenty-Six Weeks Ended
					August 31, 2013						September 1, 2012							August 31, 2013						September 1, 2012
Gross profit, GAAP					$	146,337		33.6	%		$	134,550		35.0	%			$	253,332		32.2	%		$	239,209		34.0	%
Start up costs						–		–				–		–					5,758		0.7				–		–
Gross profit, Non-GAAP					$	146,337		33.6	%		$	134,550		35.0	%			$	259,090		32.9	%		$	239,209		34.0	%
Reconciliation of Selling, General and Administrative Expenses, GAAP to
Selling, General and Administrative Expenses, Non-GAAP (unaudited)
(In thousands)
					Thirteen Weeks Ended													Twenty-Six Weeks Ended
					August 31, 2013						September 1, 2012							August 31, 2013						September 1, 2012
Selling, general and administrative expenses, GAAP					$	103,455		23.8	%		$	94,711		24.6	%			$	202,811		25.8	%		$	179,557		25.5	%
Start up costs						–		–				–		–					(2,202)		(0.3)				–		–
Selling, general and administrative expenses, Non-GAAP					$	103,455		23.8	%		$	94,711		24.6	%			$	200,609		25.5	%		$	179,557		25.5	%
Reconciliation of Operating Income, GAAP to Operating Income, Non-GAAP (unaudited)
(In thousands)
					Thirteen Weeks Ended													Twenty-Six Weeks Ended
					August 31, 2013						September 1, 2012							August 31, 2013						September 1, 2012
Operating income, GAAP					$	42,865		9.8	%		$	39,514		10.3	%			$	50,318		6.4	%		$	59,232		8.4	%
Start up costs						–		–				–		–					7,960		1.0				–		–
Operating income, Non-GAAP					$	42,865		9.8	%		$	39,514		10.3	%			$	58,278		7.4	%		$	59,232		8.4	%
Reconciliation of Net Income Attributable to The Finish Line, Inc., GAAP to
Net Income Attributable to The Finish Line, Inc., Non-GAAP (unaudited)
(In thousands)
					Thirteen Weeks Ended													Twenty-Six Weeks Ended
					August 31, 2013						September 1, 2012							August 31, 2013						September 1, 2012
Net income attributable to The Finish Line, Inc., GAAP					$	26,507		6.0	%		$	24,973		6.5	%			$	31,582		4.0	%		$	37,251		5.3	%
Start up costs						–		–				–		–					7,960		1.0				–		–
Tax effect of start up costs						–		–				–		–					(3,109)		(0.4)				–		–
Net income attributable to The Finish Line, Inc., Non-GAAP					$	26,507		6.0	%		$	24,973		6.5	%			$	36,433		4.6	%		$	37,251		5.3	%
Reconciliation of Diluted Earnings Per Share Attributable to The Finish Line, Inc. Shareholders, GAAP to
Diluted Earnings Per Share Attributable to The Finish Line, Inc. Shareholders, Non-GAAP (unaudited)
					Thirteen Weeks Ended													Twenty-Six Weeks Ended
					August 31, 2013						September 1, 2012							August 31, 2013						September 1, 2012
Diluted earnings per share attributable to The Finish Line, Inc. shareholders, GAAP					$	0.54					$	0.49						$	0.64					$	0.72
Start up costs, net of income taxes						–					–								0.10					–
Diluted earnings per share attributable to The Finish Line, Inc. shareholders, Non-GAAP					$	0.54					$	0.49						$	0.74					$	0.72
* See Non-GAAP Financial Measures Disclosure Above