Finish Line Reports Fourth Quarter and Full Fiscal Year 2017 Results

INDIANAPOLIS–(BUSINESS WIRE)–$FINL #earnings–The Finish Line, Inc. (NASDAQ: FINL) today reported results for the
fourth quarter and fiscal year 2017, representing the thirteen and
fifty-two weeks ended February 25, 2017.

For the thirteen weeks ended February 25, 2017:

● Consolidated net sales were $557.5 million, a decrease of 0.4% from
the prior year period.

● Finish Line comparable sales decreased 4.5%.

● Finish Line Macy’s sales increased 35%.

● On a GAAP basis, diluted earnings per share from continuing operations
were $0.30.

● Non-GAAP diluted earnings per share from continuing operations, which
primarily excludes the impact from store impairment charges, were $0.50.

For the fifty-two weeks ended February 25, 2017:

● Consolidated net sales were $1.84 billion, an increase of 2.5% over
the prior year.

● Finish Line comparable sales increased 0.3%.

● Finish Line Macy’s sales increased nearly 30%.

● On a GAAP basis, diluted earnings per share from continuing operations
were $0.85.

● Non-GAAP diluted earnings per share from continuing operations, which
primarily excludes the impact from store impairment charges and
severance related charges, were $1.06.

“Our fourth quarter earnings performance represented a disappointing
finish to a challenging year financially for our company,” said Sam
Sato, Chief Executive Officer of Finish Line. “As elements of our
footwear offering did not resonate with our customers as we expected and
the overall retail environment in February became increasingly
difficult, we made the decision to get more aggressive on pricing to be
competitive and clear slow moving product. While this allowed us to end
fiscal 2017 with clean inventory levels, it put significant pressure on
fourth quarter product margins. We know we must improve the execution of
our merchandise strategies to drive increased full price selling and
fuel sustained comparable sales growth. At the same time, we are
confident that the numerous operational improvements we made throughout
the past year have created a more efficient company with a stronger
foundation to support enhanced profitability and increased shareholder
value over the long-term.”

Balance Sheet

As of February 25, 2017, consolidated merchandise inventories decreased
4.8% to $331.1 million compared to $348.0 million as of February 27,
2016. Merchandise inventories decreased high-single digits at Finish
Line and increased high-single digits at Macy’s.

The company repurchased 250,000 shares of common stock in the fourth
quarter totaling $4.4 million. For the full year, Finish Line
repurchased 2.5 million shares totaling $52.8 million. The company has
4.8 million shares remaining on its current Board authorized repurchase
program.

As of February 25, 2017, the company had no interest-bearing debt and
$90.9 million in cash and cash equivalents, compared to $79.5 million as
of February 27, 2016.

Outlook

The fiscal year ending March 3, 2018 is a 53 week year. For the fiscal
year ending March 3, 2018, Finish Line expects comparable sales to
increase low-single digits and earnings per share to be in the range of
$1.12 to $1.23 which is an increase of approximately 6% to 16% compared
with the $1.06 Non-GAAP diluted earnings per share in this fiscal year
ended February 25, 2017, which was a 52 week year. We estimate the
additional week will contribute approximately $0.06 per share to our
fourth quarter and full year fiscal 2018 results.

Q4 Fiscal 2017 Conference Call Today, March 24,
2017 at 8:30 a.m.

The company will host a conference call for investors today, March 24,
2017, 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 #34406218. 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 #34406218. This recording will be made available through Sunday,
April 30, 2017. The replay will also be accessible online at www.finishline.com.

Annual Meeting July 13, 2017

The company’s Board of Directors has established July 13, 2017 as the
date of the 2017 annual meeting of shareholders, with May 12, 2017 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 from continuing operations, and diluted earnings
per share from continuing operations, 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 this release beginning on
page 6 below.

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 950 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.

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 Operations (Unaudited)
(In thousands, except per share and store/shop data)
Thirteen Weeks Ended     Fifty-Two Weeks Ended
February 25,     February 27, February 25,     February 27,
2017 2016 2017 2016
 
 
Net sales $ 557,452 $ 559,845 $ 1,844,393 $ 1,798,982
Cost of sales (including occupancy costs) 395,298   368,845   1,295,989   1,242,960  
Gross profit 162,154 191,000 548,404 556,022
Selling, general, and administrative expenses 128,705 136,594 480,897 469,836
Impairment charges and store closing costs 13,129   43,142   13,312   43,637  
Operating income 20,320 11,264 54,195 42,549
Interest expense, net 101   61   279   65  
Income from continuing operations before income taxes 20,219 11,203 53,916 42,484
Income tax expense 7,919   2,444   18,760   13,562  
Net income from continuing operations 12,300 8,759 35,156 28,922
Net loss from discontinued operations, net of tax (21,771 ) (4,723 ) (53,364 ) (7,126 )
Net (loss) income (9,471 ) 4,036 (18,208 ) 21,796
Net loss attributable to redeemable noncontrolling interest of
discontinued operations
      96  
Net (loss) income attributable to The Finish Line, Inc. $ (9,471 ) $ 4,036   $ (18,208 ) $ 21,892  
Diluted (loss) earnings per share attributable to The Finish Line,
Inc. shareholders:
Continuing operations 0.30 0.20 0.85 0.64
Discontinued operations (0.53 ) (0.11 ) (1.29 ) (0.16 )
Diluted (loss) earnings per share attributable to The Finish Line,
Inc. shareholders
(0.23 ) 0.09   (0.44 ) 0.48  
Diluted weighted average shares 40,790   43,513   41,367   44,787  
Dividends declared per share $ 0.11   $ 0.10   $ 0.41   $ 0.37  
 
Finish Line store activity for the period:
Beginning of period 580 617 591 637
Opened 6 8
Closed (7 ) (26 ) (24 ) (54 )
End of period 573   591   573   591  
Square feet at end of period 3,187,942 3,278,039
Average square feet per store 5,564 5,547
Branded shops within department stores activity for the period:
Beginning of period 392 394 392 395
Opened 1 1
Closed (18 ) (2 ) (19 ) (4 )
End of period 374   392   374   392  
Square feet at end of period 526,286 476,533
Average square feet per shop 1,407 1,216
       
Thirteen Weeks Ended Fifty-Two Weeks Ended
February 25,     February 27, February 25,     February 27,
2017 2016 2017 2016
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales (including occupancy costs) 70.9   65.9   70.3   69.1  
Gross profit 29.1 34.1 29.7 30.9
Selling, general, and administrative expenses 23.1 24.4 26.1 26.1
Impairment charges and store closing costs 2.4   7.7   0.7   2.4  
Operating income 3.6 2.0 2.9 2.4
Interest expense, net        
Income from continuing operations before income taxes 3.6 2.0 2.9 2.4
Income tax expense 1.4   0.4   1.0   0.8  
Net income from continuing operations 2.2 1.6 1.9 1.6
Net loss from discontinued operations (3.9 ) (0.9 ) (2.9 ) (0.4 )
Net (loss) income (1.7 ) 0.7 (1.0 ) 1.2
Net loss attributable to redeemable noncontrolling interest of
discontinued operations
       
Net (loss) income attributable to The Finish Line, Inc. (1.7 )% 0.7 % (1.0 )% 1.2 %
   
Condensed Consolidated
Balance Sheets (Unaudited)
February 25,     February 27,
2017 2016
ASSETS
Cash and cash equivalents $ 90,856 $ 79,495
Merchandise inventories, net 331,146 347,966
Other current assets 69,408 62,368
Assets held for sale 80,795
Property and equipment, net 247,897 239,067
Other assets, net 7,161   7,857
Total assets $ 746,468   $ 817,548
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities, excluding the revolving credit facility and
liabilities held for sale
$ 221,971 $ 207,906
Liabilities held for sale 15,185
Deferred credits from landlords 32,133 30,503
Other long-term liabilities 40,866 36,310
Shareholders’ equity 451,498   527,644
Total liabilities and shareholders’ equity $ 746,468   $ 817,548
       
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 25, 2017     February 27, 2016 February 25, 2017     February 27, 2016
Selling, general, and administrative expenses, GAAP $ 128,705       23.1 % $ 136,594     24.4 % $ 480,897     26.1 % $ 469,836     26.1 %
Employee severance, retirement, and other costs     (3,710 ) (0.7 ) (2,132 ) (0.2 ) (3,710 ) (0.2 )
Selling, general, and administrative expenses, Non-GAAP $ 128,705   23.1 % $ 132,884   23.7 % $ 478,765   25.9 % $ 466,126   25.9 %
       
Reconciliation of Operating Income, GAAP to Operating Income,
Non-GAAP (Unaudited)
(In thousands)
 
Thirteen Weeks Ended Fifty-Two Weeks Ended
February 25, 2017     February 27, 2016 February 25, 2017     February 27, 2016
Operating income, GAAP $ 20,320       3.6 % $ 11,264       2.0 % $ 54,195       2.9 % $ 42,549       2.4 %
Employee severance, retirement, and other costs 3,710 0.7 2,132 0.2 3,710 0.2
Impairment charges and store closing costs 13,129   2.4   43,142   7.7   13,312   0.7   43,637   2.4  
Operating income, Non-GAAP $ 33,449   6.0 % $ 58,116   10.4 % $ 69,639   3.8 % $ 89,896   5.0 %
       
Reconciliation of Income Tax Expense, GAAP to Income Tax Expense,
Non-GAAP (Unaudited)
(In thousands)
 
Thirteen Weeks Ended Fifty-Two Weeks Ended
February 25, 2017     February 27, 2016 February 25, 2017     February 27, 2016
Income tax expense, GAAP $ 7,919       1.4 % $ 2,444       0.4 % $ 18,760       1.0 % $ 13,562       0.8 %
Tax affect of:
Employee severance, retirement, and other costs 1,428 0.3 1,453 0.1 1,428 0.1
Impairment charges and store closing costs 5,053   0.9   16,610   3.0   5,125   0.3   16,799   0.9  
Income tax expense, Non-GAAP $ 12,972   2.3 % $ 20,482   3.7 % $ 25,338   1.4 % $ 31,789   1.8 %
       
Reconciliation of Net Income From Continuing Operations, GAAP to
Net Income From Continuing Operations, Non-GAAP (Unaudited)
(In thousands)
 
Thirteen Weeks Ended Fifty-Two Weeks Ended
February 25, 2017     February 27, 2016 February 25, 2017     February 27, 2016
Net income from continuing operations, GAAP $ 12,300       2.2 % $ 8,759       1.6 % $ 35,156       1.9 % $ 28,922       1.6 %
Employee severance, retirement, and other costs, net of income taxes 2,282 0.4 679 0.1 2,282 0.1
Impairment charges and store closing costs, net of income taxes 8,076   1.5   26,532   4.7   8,187   0.4   26,838   1.5  
Net income from continuing operations, Non-GAAP $ 20,376   3.7 % $ 37,573   6.7 % $ 44,022   2.4 % $ 58,042   3.2 %
       
Reconciliation of Diluted Earnings Per Share From Continuing
Operations, GAAP to
Diluted Earnings Per Share From Continuing Operations, Non-GAAP
(Unaudited)
 
Thirteen Weeks Ended Fifty-Two Weeks Ended
February 25,     February 27, February 25,     February 27,
2017 2016 2017 2016
Diluted earnings per share from continuing operations, GAAP $ 0.30 $ 0.20 $ 0.85 $ 0.64
Employee severance, retirement, and other costs, net of income taxes 0.05 0.02 0.05
Impairment charges and store closing costs, net of income taxes and
redeemable noncontrolling interest
0.20   0.60   0.19   0.59
Diluted earnings per share from continuing operations, Non-GAAP $ 0.50   $ 0.85   $ 1.06   $ 1.28

Note: See Disclosure Regarding Non-GAAP Measures above.

Contacts

The Finish Line, Inc.
Media Contact:
Dianna L. Boyce,
317-613-6577
Corporate Communications
or
Investor
Contact:

Ed Wilhelm, 317-613-6914
Chief Financial Officer

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