Finish Line Reports Fourth Quarter and Full Fiscal Year 2016 Results

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INDIANAPOLIS–(BUSINESS WIRE)–The Finish Line, Inc. (NASDAQ: FINL) today reported results for the
fourth quarter and fiscal year 2016, representing the thirteen and
fifty-two weeks ended February 27, 2016.

For the thirteen weeks ended February 27, 2016:

  • Consolidated net sales were $580.3 million, an increase of 5.2% over
    the prior year period.
  • Finish Line comparable store sales increased 4.6%.
  • On a GAAP basis, diluted earnings per share were $0.09.
  • Non-GAAP diluted earnings per share, which primarily excludes the
    impact from the write-off of technology assets and store impairment
    charges, were $0.83.

For the fifty-two weeks ended February 27, 2016:

  • Consolidated net sales were a record $1.89 billion, an increase of
    3.8% over the prior year.
  • Finish Line comparable store sales increased 1.8%.
  • On a GAAP basis, diluted earnings per share were $0.48.
  • Non-GAAP diluted earnings per share, which primarily excludes the
    impact from the write-off of technology assets and store impairment
    charges, were $1.21.

“We worked diligently to improve digital fulfillment rates and flow new
inventory to our stores during the fourth quarter which helped us
achieve a mid-single digit comparable sales increase and adjusted
earnings per share at the high-end of our guidance range,” said Sam
Sato, Chief Executive Officer of Finish Line. “In addition to achieving
optimal performance from our supply chain, our top priorities are
continuing to bolster our vendor relationships and fortifying the
foundational strengths of the company through new leadership and
improved processes. I am confident that elevating our execution across
the organization will result in an enhanced customer experience and
drive profitable growth and increased shareholder value over the
long-term.”

Balance Sheet

As of February 27, 2016, consolidated merchandise inventories increased
9.6% to $376.5 million compared to $343.4 million as of February 28,
2015. The increase was driven in part by a seasonal build in merchandise
inventories associated with an earlier Easter compared to the prior
year. On a segment basis, merchandise inventories increased double
digits at Macy’s and JackRabbit and mid-single digits at Finish Line.

The company repurchased 2.0 million shares of common stock in the fourth
quarter totaling $34.3 million. For the full year, Finish Line
repurchased 3.9 million shares totaling $79.9 million. The company has
2.3 million shares remaining on its current Board authorized repurchase
program.

As of February 27, 2016, the company had no interest-bearing debt and
$79.5 million in cash and cash equivalents, compared to $149.6 million
as of February 28, 2015.

Non-GAAP Adjustments

During the fourth quarter, the company recorded $52.8 million in
non-GAAP adjustments, of which $51.0 million was non-cash. These
adjustments primarily consisted of a $33.3 million write-off of
technology assets. The remaining $19.5 million was primarily related to
store impairment charges.

Outlook

For the fiscal year ending February 25, 2017, Finish Line expects
comparable store sales to increase in the 3% to 5% range and earnings
per share to be between $1.50 and $1.56.

Q4 Fiscal 2016 Conference Call Today, March 24,
2016 at 8:30 a.m.

The company will host a conference call for investors today, March 24,
2016, 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 #69202458. 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 #69202458. This recording will be made available through Sunday,
April 24, 2016. The replay will also be accessible online at www.finishline.com.

Annual Meeting July 14, 2016

The company’s Board of Directors has established July 14, 2016 as the
date of the 2016 annual meeting of shareholders, with May 13, 2016 as
the record date for this meeting.

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
selling, general, and administrative expenses, operating income, income
tax expense, 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
approximately 980 Finish Line branded locations primarily in U.S. malls
and shops inside Macy’s department stores and employs more than 14,000
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
or Twitter.com/FinishLineNews
and “like” Finish Line on Facebook at Facebook.com/FinishLine.
Track loyalty points and find store and product information with the
free Finish Line app downloadable for iOS
and Android
customers.

Finish Line also operates JackRabbit (previously referred to by the
company as Running Specialty Group), which includes 72 specialty running
stores in 16 states and the District of Columbia under the JackRabbit,
The Running Company, Run On!, Blue Mile, Boulder Running Company,
Roncker’s Running Spot, Running Fit, VA Runner, Capital RunWalk,
Richmond RoadRunner, Garry Gribble’s Running Sports, Run Colorado,
Raleigh Running Outfitters, Striders and Indiana Running Company
banners. More information is available at www.jackrabbit.com
or www.boulderrunningcompany.com.
Follow the latest about the brand on Twitter at Twitter.com/JackRabbit
or Instagram via @JackRabbitNYC.

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,” “future,” “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 macroeconomic 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); cybersecurity risks, including
breach of customer data; a major failure of technology and information
systems; 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
(In thousands, except per share and store/shop data)
Thirteen Weeks Ended     Fifty-Two Weeks Ended
February 27,     February 28, February 27,     February 28,
2016 2015 2016 2015
(Unaudited) (Unaudited) (Unaudited)
 
Net sales $ 580,254 $ 551,347 $ 1,888,888 $ 1,820,586
Cost of sales (including occupancy costs) 383,961   363,298   1,305,896   1,236,783  
Gross profit 196,293 188,049 582,992 583,803
Selling, general, and administrative expenses 144,580 123,754 503,660 459,455
Impairment charges and store closing costs 48,183   763   48,692   3,918  
Operating income 3,530 63,532 30,640 120,430
Interest expense, net 61   21   65   15  
Income before income taxes 3,469 63,511 30,575 120,415
Income tax (benefit) expense (567 ) 23,078   8,779   40,673  
Net income 4,036 40,433 21,796 79,742
Net loss attributable to redeemable noncontrolling interest   390   96   2,251  
Net income attributable to The Finish Line, Inc. $ 4,036   $ 40,823   $ 21,892   $ 81,993  
Diluted earnings per share attributable to The Finish Line, Inc.
shareholders
$ 0.09   $ 0.87   $ 0.48   $ 1.70  
Diluted weighted average shares 43,513   46,593   44,787   47,658  
Dividends declared per share $ 0.10   $ 0.09   $ 0.37   $ 0.33  
 
Finish Line store activity for the period:
Beginning of period 617 642 637 645
Opened 1 8 10
Closed (26 ) (6 ) (54 ) (18 )
End of period 591   637   591   637  
Square feet at end of period 3,278,039 3,471,448
Average square feet per store 5,547 5,450
Branded shops within department stores activity for the period:
Beginning of period 394 397 395 185
Opened 1 213
Closed (2 ) (2 ) (4 ) (3 )
End of period 392   395   392   395  
Square feet at end of period 476,533 404,521
Average square feet per shop 1,216 1,024
JackRabbit store activity for the period:
Beginning of period 74 66 71 48
Acquired 5 4 20
Opened 1 3
Closed (2 )   (4 )  
End of period 72   71   72   71  
Square feet at end of period 262,761 262,148
Average square feet per store 3,649 3,692
 
    Thirteen Weeks Ended     Fifty-Two Weeks Ended
February 27,     February 28, February 27,     February 28,
2016 2015 2016 2015
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales (including occupancy costs) 66.2   65.9   69.1   67.9  
Gross profit 33.8 34.1 30.9 32.1
Selling, general, and administrative expenses 24.9 22.4 26.7 25.3

Impairment charges and store closing costs

8.3   0.1   2.6   0.2  
Operating income 0.6 11.6 1.6 6.6
Interest expense, net        
Income before income taxes 0.6 11.6 1.6 6.6
Income tax (benefit) expense (0.1 ) 4.2   0.4   2.2  
Net income 0.7 7.4 1.2 4.4
Net loss attributable to redeemable noncontrolling interest       0.1  
Net income attributable to The Finish Line, Inc. 0.7 % 7.4 % 1.2 % 4.5 %
 
    Condensed Consolidated
Balance Sheets
February 27,     February 28,
2016 2015
(Unaudited)
ASSETS
Cash and cash equivalents $ 79,495 $ 149,569
Merchandise inventories, net 376,506 343,403
Other current assets 65,352 37,685
Property and equipment, net 243,393 274,360
Goodwill 44,029 34,719
Other assets, net 8,773   10,119
Total assets $ 817,548   $ 849,855
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities $ 221,187 $ 191,282
Deferred credits from landlords 32,327 29,143
Other long-term liabilities 36,390 39,696
Redeemable noncontrolling interest, net 90
Shareholders’ equity 527,644   589,644
Total liabilities and shareholders’ equity $ 817,548   $ 849,855
 
The Finish Line, Inc.
Reconciliation of Selling, General, and Administrative Expenses,
GAAP to
Selling, General, and Administrative Expenses, Non-GAAP (Unaudited)
(In thousands)
       
Thirteen Weeks Ended Fifty-Two Weeks Ended
February 27, 2016     February 28, 2015 February 27, 2016     February 28, 2015
Selling, general, and administrative expenses, GAAP $ 144,580     24.9 % $ 123,754       22.4 % $ 503,660     26.7 % $ 459,455     25.3 %
Employee severance, retirement, and other costs (4,586 ) (0.8 )     (4,586 ) (0.2 ) (842 ) (0.1 )
Selling, general, and administrative expenses, Non-GAAP $ 139,994   24.1 % $ 123,754   22.4 % $ 499,074   26.5 % $ 458,613   25.2 %
 
Reconciliation of Operating Income, GAAP to Operating Income,
Non-GAAP (Unaudited)
(In thousands)
       
Thirteen Weeks Ended Fifty-Two Weeks Ended
February 27, 2016     February 28, 2015 February 27, 2016     February 28, 2015
Operating income, GAAP $ 3,530       0.6 % $ 63,532       11.6 % $ 30,640       1.6 % $ 120,430       6.6 %
Employee severance, retirement, and other costs 4,586 0.8 4,586 0.2 842 0.1
Impairment charges and store closing costs 48,183   8.3   763   0.1   48,692   2.6   3,918   0.2  
Operating income, Non-GAAP $ 56,299   9.7 % $ 64,295   11.7 % $ 83,918   4.4 % $ 125,190   6.9 %
 
Reconciliation of Income Tax (Benefit) Expense, GAAP to Income Tax
Expense, Non-GAAP (Unaudited)
(In thousands)
       
Thirteen Weeks Ended Fifty-Two Weeks Ended
February 27, 2016     February 28, 2015 February 27, 2016     February 28, 2015
Income tax (benefit) expense, GAAP $ (567 )     (0.1 )% $ 23,078       4.2 % $ 8,779       0.4 % $ 40,673       2.2 %
Tax affect of:
Employee severance, retirement, and other costs 1,766 0.3 1,766 0.1 324
Impairment charges and store closing costs 18,551 3.2 293 18,747 1.0 1,508 0.1
One-time tax benefit             4,313   0.3  
Income tax expense, Non-GAAP $ 19,750   3.4 % $ 23,371   4.2 % $ 29,292   1.5 % $ 46,818   2.6 %
 
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 Fifty-Two Weeks Ended
February 27, 2016     February 28, 2015 February 27, 2016     February 28, 2015
Net income attributable to The Finish Line, Inc., GAAP $ 4,036       0.7 % $ 40,823       7.4 % $ 21,892       1.2 % $ 81,993     4.5 %
Employee severance, retirement, and other costs, net of income taxes 2,820 0.5 2,820 0.1 518
Impairment charges and store closing costs, net of income taxes* 29,632 5.1 470 0.1 29,945 1.6 2,354 0.2
One-time tax benefit             (4,313 ) (0.3 )
Net income attributable to The Finish Line, Inc., Non-GAAP $ 36,488   6.3 % $ 41,293   7.5 % $ 54,657   2.9 % $ 80,552   4.4 %
 

* Net of decrease to net loss attributable to redeemable
noncontrolling interest for the fifty-two weeks ended February 28,
2015 related to impairment charges of $56.

 

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 Fifty-Two Weeks Ended
February 27,     February 28, February 27,     February 28,
2016 2015 2016 2015
Diluted earnings per share attributable to The Finish Line, Inc.
shareholders, GAAP
$ 0.09 $ 0.87 $ 0.48 $ 1.70
Employee severance, retirement, and other costs, net of income taxes 0.07 0.07 0.01
Impairment charges and store closing costs, net of income taxes and
redeemable noncontrolling interest
0.67 0.01 0.66 0.05
One-time tax benefit       (0.09 )
Diluted earnings per share attributable to The Finish Line, Inc.
shareholders, Non-GAAP
$ 0.83   $ 0.88   $ 1.21   $ 1.67  
 

Note: See Disclosure Regarding Non-GAAP Measures above.

 

Contacts

The Finish Line, Inc.
Media:
Dianna Boyce
Corporate
Communications
317-613-6577
or
Investors:
Ed
Wilhelm
Chief Financial Officer
317-613-6914