Finish Line Reports Fourth Quarter and Full Fiscal Year 2014 Results

INDIANAPOLIS--(BUSINESS WIRE)--

The Finish Line, Inc. FINL today reported results for the fourth quarter and fiscal year 2014, representing the 13 and 52 weeks ended March 1, 2014.

Fourth Quarter Results:

• Consolidated net sales were $518.9 million, an increase of 17.2% over the prior year period.
• Finish Line comparable store sales increased 6.3%.
• On a GAAP basis, diluted earnings per share increased 26.1% over the prior year to $0.87.
• Non-GAAP diluted earnings per share, which excludes the impact of impairment charges and the gain on the sale of an investment, increased 14.5% to $0.87.

Fiscal Year 2014 Results:

• Consolidated net sales were a record $1.67 billion, an increase of 15.7% over the prior year.
• Finish Line comparable store sales increased 4.2%.
• On a GAAP basis, diluted earnings per share increased 11.4% over the prior year to $1.56.
• Non-GAAP diluted earnings per share, which excludes the impact of start up costs related to the launch of Macy's business, impairment charges and the gain on the sale of an investment, increased 12.9% to $1.66.

“Our strong fourth quarter performance represented a great finish to a transformative year,” said Glenn Lyon, Chairman and Chief Executive Officer. “The successful execution of our consumer centric omni-channel strategy drove solid gains in our core business while growth initiatives contributed meaningfully to our record full year revenue and profits. We have a clear vision for building on our strong market position through innovative product, superior service, and effective consumer engagements. With that vision and our strong team, we move forward optimistic about our near and long-term growth prospects.”

Balance Sheet

As of March 1, 2014, consolidated merchandise inventories increased 24.8% to $304.2 million compared to $243.8 million as of March 2, 2013. The increase resulted primarily from the start-up of Macy's business. For Finish Line, merchandise inventories increased 0.2%.

The company repurchased 200,000 shares of its common stock in the fourth quarter, totaling $5.1 million. For the full year, Finish Line repurchased 1.0 million shares totaling $22.6 million. The company has 3.9 million shares remaining on its current Board authorized repurchase plan.

As of March 1, 2014, the company had no interest-bearing debt and $229.1 million in cash and cash equivalents, compared to $227.0 million a year ago.

Outlook

For the fiscal year ending February 28, 2015, Finish Line expects comparable store sales to be up mid single digits and earnings per share to increase in the high single to low double digit range over fiscal year 2014 non-GAAP diluted earnings per share of $1.66.

Q4 Fiscal 2014 Conference Call Today, March 28, 2014 at 8:30 a.m.

The company will host a conference call for investors today, March 28, 2014, 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 #12828513. 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 #12828513. This recording will be made available through Monday, April 28, 2014. The replay will also be accessible online at www.finishline.com.

Annual Meeting July 17, 2014

The company's Board of Directors has established July 17, 2014 as the date of the 2014 annual meeting of shareholders, with May 16, 2014 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 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 644 stores in malls across the U.S., manages the athletic footwear inventory in 651 Macy's stores including 210 branded or staffed shops, 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 and “like” Finish Line on Facebook at Facebook.com/FinishLine.

Finish Line also operates the Running Specialty Group through a venture with Gart Capital Partners. This includes 49 specialty running shops in 11 states and the District of Columbia under The Running Company, Run On!, Blue Mile, Boulder Running Company, Roncker's Running Spot and VA Runner banners. More information, including the particular states in which stores are located, 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
			(In thousands, except per share and store/shop data)
			Thirteen Weeks Ended												Fifty-Two Weeks Ended
			March 1,						March 2,						March 1,						March 2,
			2014						2013						2014						2013
			(Unaudited)						(Unaudited)						(Unaudited)
Net sales			$	518,872					$	442,682					$	1,670,410					$	1,443,365
Cost of sales (including occupancy costs)			332,609						287,237						1,122,967						958,921
Gross profit			186,263						155,445						547,443						484,444
Selling, general and administrative expenses			117,668						94,907						424,571						365,883
Store closing costs			344						250						713						671
Impairment charges			1,213						5,565						2,054						5,593
Operating income			67,038						54,723						120,105						112,297
Interest income, net			10						31						37						198
Gain on sale of investment			2,076						—						2,076						—
Income before income taxes			69,124						54,754						122,218						112,495
Income tax expense			26,370						21,281						47,166						43,314
Net income			42,754						33,473						75,052						69,181
Net loss attributable to redeemable noncontrolling interest			249						856						1,851						2,292
Net income attributable to The Finish Line, Inc.			$	43,003					$	34,329					$	76,903					$	71,473
Diluted earnings per share attributable to The Finish Line, Inc. shareholders			$	0.87					$	0.69					$	1.56					$	1.40
Diluted weighted average shares			48,605						49,034						48,701						50,491
Dividends declared per share			$	0.08					$	0.07					$	0.29					$	0.25
Finish Line store activity for the period:
Beginning of period			658						651						645						637
Opened			—						2						22						29
Closed			(13			)			(8			)			(22			)			(21			)
End of period			645						645						645						645
Square feet at end of period															3,507,865						3,511,128
Average square feet per store															5,439						5,444
Branded shops within department stores activity for the period:
Beginning of period			181						—						3						—
Opened			5						3						183						3
Closed			(1			)			—						(1			)			—
End of period			185						3						185						3
Square feet at end of period															229,685						3,483
Average square feet per shop															1,242						1,161
Running Specialty store activity for the period:
Beginning of period			47						25						27						19
Acquired			2						1						15						6
Opened			—						1						7						2
Closed			(1			)			—						(1			)			—
End of period			48						27						48						27
Square feet at end of period															155,930						80,195
Average square feet per store															3,429						2,970
			Thirteen Weeks Ended												Fifty-Two Weeks Ended
			March 1,						March 2,						March 1,						March 2,
			2014						2013						2014						2013
Net sales			100.0		%				100.0		%				100.0		%				100.0		%
Cost of sales (including occupancy costs)			64.1						64.9						67.2						66.4
Gross profit			35.9						35.1						32.8						33.6
Selling, general and administrative expenses			22.7						21.4						25.4						25.3
Store closing costs			0.1						0.1						0.1						0.1
Impairment charges			0.2						1.2						0.1						0.4
Operating income			12.9						12.4						7.2						7.8
Interest income, net			—						—						—						—
Gain on sale of investment			0.4						—						0.1						—
Income before income taxes			13.3						12.4						7.3						7.8
Income tax expense			5.1						4.8						2.8						3.0
Net income			8.2						7.6						4.5						4.8
Net loss attributable to redeemable noncontrolling interest			0.1						0.2						0.1						0.2
Net income attributable to The Finish Line, Inc.			8.3		%				7.8		%				4.6		%				5.0		%

				Condensed Consolidated
				Balance Sheets
				March 1,					March 2,
				2014					2013
				(Unaudited)
ASSETS
Cash and cash equivalents				$	229,079				$	226,982
Merchandise inventories, net				304,209					243,770
Other current assets				33,675					20,942
Property and equipment, net				223,182					180,601
Goodwill and other intangible assets				26,158					14,438
Other assets, net				8,642					19,689
Total assets				$	824,945				$	706,422
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities				$	193,670				$	134,037
Deferred credits from landlords				27,658					27,215
Other long-term liabilities				19,659					16,638
Redeemable noncontrolling interest				1,774					3,669
Shareholders' equity				582,184					524,863
Total liabilities and shareholders' equity				$	824,945				$	706,422

The Finish Line, Inc.
Reconciliation of Gross Profit, GAAP to Gross Profit, Non-GAAP (unaudited)
(In thousands)
			Thirteen Weeks Ended															Fifty-Two Weeks Ended
			March 1, 2014							March 2, 2013								March 1, 2014							March 2, 2013
Gross profit, GAAP			$	186,263			35.9	%		$	155,445			35.1	%			$	547,443			32.8	%		$	484,444			33.6	%
Start up costs			—				—			—				—				5,758				0.3			—				—
Gross profit, Non-GAAP			$	186,263			35.9	%		$	155,445			35.1	%			$	553,201			33.1	%		$	484,444			33.6	%

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
			March 1, 2014							March 2, 2013								March 1, 2014							March 2, 2013
Selling, general and administrative expenses, GAAP			$	117,668			22.7	%		$	94,907			21.4	%			$	424,571			25.4	%		$	365,883			25.3	%
Start up costs			—				—			—				—				(2,202		)		(0.1	)		—				—
Selling, general and administrative expenses, Non-GAAP			$	117,668			22.7	%		$	94,907			21.4	%			$	422,369			25.3	%		$	365,883			25.3	%

Reconciliation of Operating Income, GAAP to Operating Income, Non-GAAP (unaudited)
(In thousands)
			Thirteen Weeks Ended															Fifty-Two Weeks Ended
			March 1, 2014							March 2, 2013								March 1, 2014							March 2, 2013
Operating income, GAAP			$	67,038			12.9	%		$	54,723			12.4	%			$	120,105			7.2	%		$	112,297			7.8	%
Impairment charges			1,213				0.2			5,565				1.2				2,054				0.1			5,593				0.4
Start up costs			—				—			—				—				7,960				0.5			—				—
Operating income, Non-GAAP			$	68,251			13.1	%		$	60,288			13.6	%			$	130,119			7.8	%		$	117,890			8.2	%

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
			March 1, 2014							March 2, 2013								March 1, 2014							March 2, 2013
Net income attributable to The Finish Line, Inc., GAAP			$	43,003			8.3	%		$	34,329			7.8	%			$	76,903			4.6	%		$	71,473			5.0	%
Impairment charges			1,213				0.2			5,565				1.2				2,054				0.1			5,593				0.4
Start up costs			—				—			—				—				7,960				0.5			—				—
Gain on sale of investment*			(1,567		)		(0.3	)		—				—				(1,567		)		(0.1	)		—				—
Decrease (increase) in income tax expense			136				—			(2,175		)		(0.5	)			(3,300		)		(0.2	)		(2,187		)		(0.2	)
Net income attributable to The Finish Line, Inc., Non-GAAP			$	42,785			8.2	%		$	37,719			8.5	%			$	82,050			4.9	%		$	74,879			5.2	%
* Net of increase to net loss attributable to redeemable noncontrolling interest related to gain on sale of investment of $509

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
			March 1, 2014				March 2, 2013					March 1, 2014				March 2, 2013
Diluted earnings per share attributable to The Finish Line, Inc. shareholders, GAAP			$	0.87			$	0.69				$	1.56			$	1.40
Impairment charges, net of income taxes			0.02				0.07					0.02				0.07
Start up costs, net of income taxes			—				—					0.10				—
Gain on sale of investment, net of income taxes and redeemable noncontrolling interest			(0.02		)		—					(0.02		)		—
Diluted earnings per share attributable to The Finish Line, Inc. shareholders, Non-GAAP			$	0.87			$	0.76				$	1.66			$	1.47

Note: See Disclosure Regarding Non-GAAP Measures above