UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________
FORM 10-K
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(Mark One)
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Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the fiscal year ended
March 1, 2014
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Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the transition period from
to
Commission File Number 0-20184
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THE FINISH LINE, INC.
(Exact name of registrant as specified in its charter)
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Indiana
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35-1537210
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(State of Incorporation)
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(I.R.S. Employer ID No.)
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3308 N. Mitthoeffer Road, Indianapolis, Indiana 46235
Registrant’s telephone number, including area code: (317) 899-1022
Securities registered pursuant to Section 12(b) of the Act:
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(Title of Each Class)
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(Name of each exchange on which registered)
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Class A Common Stock, $.01 par value
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The NASDAQ Stock Market LLC
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
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No
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
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No
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Indicate by check mark whether 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
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No
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Indicate by check mark whether registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
x
No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this form 10-K.
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934.
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Large accelerated filer
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x
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
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No
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The aggregate market value of the voting Class A Common Stock held by non-affiliates of the registrant, which was based on the closing price on the last business day of the registrant’s most recently completed second fiscal quarter, was approximately
$1,005,907,604.
The registrant does not have any outstanding non-voting common equity.
The number of shares of the registrant’s Class A Common Stock outstanding on
April 4, 2014
was 48,252,191.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement (to be filed within 120 days after
March 1, 2014
) for the Annual Meeting of Shareholders to be held on
July 17, 2014
(hereinafter referred to as the “
2014
Proxy Statement”) are incorporated into Part III.
PART I
Item 1. Business
General
Throughout this Annual Report on Form 10-K, the
52
weeks ended
March 1, 2014
, the
52
weeks ended
March 2, 2013
and the
53
weeks ended
March 3, 2012
are referred to as fiscal
2014
,
2013
and
2012
, respectively.
The Finish Line, Inc., together with its subsidiaries (collectively, the “Company”), is one of the largest specialty retailers in the United States, and operates two retail divisions under the Finish Line brand name (“Finish Line”) and the Running Specialty Group (“Running Specialty”).
Finish Line.
Finish Line is a premium retailer of athletic shoes, apparel and accessories. As of
April 4, 2014
, the Company operated
644
Finish Line stores, averaging approximately 5,444 square feet, in 46 states. In addition, the Company operates an e-commerce site, www.finishline.com, as well as mobile commerce via m.finishline.com. Finish Line stores generally carry a large selection of men’s, women’s and kids’ performance and athletic shoes, as well as an assortment of apparel and accessories. Brand names offered by Finish Line include Nike, Brand Jordan, Reebok, adidas, Under Armour, Asics, Brooks, New Balance, Mizuno, Skechers, Converse, Puma, The North Face and many others. Footwear accounts for approximately 89% of Finish Line’s net sales. Finish Line’s goal is to continue to be a premium athletic footwear retailer by offering the most relevant products from the best brands in an engaging and exciting shopping environment with knowledgeable staff trained to deliver outstanding customer service.
Finish Line is the exclusive provider of athletic shoes, both in-store and online at Macy’s, Inc. (“Macy’s”). Finish Line manages the athletic footwear assortment and inventory for all of Macy’s locations and online. This included Finish Line-branded athletic footwear shops in 185 Macy’s department stores (“Branded shops within department stores”) at the end of fiscal
2014
and will include branded shops in more than 400 department stores by the end of Finish Line’s next fiscal year. As of
April 4, 2014
, the Company operated branded shops in
211
department stores. Finish Line began managing the athletic footwear assortment and inventory for all of Macy’s locations on April 14, 2013 and online at www.macys.com on May 14, 2013. Throughout this Annual Report on Form 10-K, the term “shops within department stores” is used to describe our business operations at Macy’s in-store branded and unbranded shops, as well as online at www.macys.com.
Running Specialty.
Running Specialty is a specialty running retailer of precision-fitted running shoes, apparel and accessories. As of
April 4, 2014
, the Company operated
49
Running Specialty stores, which average 3,539 square feet, in eleven states and the District of Columbia. In addition, Running Specialty launched its e-commerce site, www.run.com, in August 2012. Running Specialty stores generally carry men’s and women’s performance running shoes, as well as an assortment of performance apparel and accessories. Brand names offered include Nike, Mizuno, Saucony, Asics, Brooks, New Balance, adidas, ON and Newton. Footwear accounts for approximately 63% of Running Specialty’s net sales. Running Specialty stores were first acquired by the Company on August 31, 2011 as an 18-store chain.
The Company’s principal executive offices are located at 3308 N. Mitthoeffer Road, Indianapolis, Indiana 46235, and its telephone number is (317) 899-1022.
Operating Strategies
The Company seeks to be the premium athletic footwear retailer and specialty running retailer in the markets it serves. To achieve this, the Company has developed the following elements to its operating strategy:
Emphasis on Customer Service and Convenience.
The Company is committed to providing a premium shopping experience that is relevant and rewarding for customers.
Finish Line seeks to achieve this objective in stores by providing convenient mall-based locations that feature a compelling store design. In certain stores, this includes “store-within-a-store” models that feature Nike Track Club and a differentiated customer experience with knowledgeable, trained and courteous customer service professionals as well as a vast selection of fashion-forward and innovative products. In addition, Finish Line has extended the mall-based store model to shops within department stores, a majority of which will feature Finish Line branding and the same trained and courteous customer service professionals to extend the Finish Line brand to the Macy’s customer.
Running Specialty stores carry a deep assortment of performance running shoes, apparel and accessories. Running Specialty stores have trained experts to advise everyone from beginner to advanced runners and provide free gait analysis to ensure the proper fit. The stores are tightly connected to their communities, hosting regular neighborhood group runs and sponsoring local races, which typically begin and end near the store.
Through e-commerce and mobile commerce, Finish Line and Running Specialty seek to provide an easy shopping experience, robust product selection and outstanding service.
Product Diversity; Target Customer Appeal.
The Company stocks its stores with a combination of the leading and newest brand name merchandise, including in-line offerings and unique products offered exclusively by the Company. The focus is on the Company’s stores maintaining its status as a leader in the running category; however, several other product categories are represented. Product diversity, in combination with the Company’s store formats and commitment to customer service, is intended to attract a core customer (typically male, age 18-29 for the Finish Line stores, females, age 30-50 for shops within department stores and technical and performance runners for the Running Specialty stores) as well as other key demographics. The Company is focused on premium product, meaning the best brands, trend-right styles and most relevant selection, and not necessarily dictated by price.
Merchandise
The following table sets forth net sales along with the percentage of net sales for the Company attributable to the categories of footwear and softgoods during the years indicated. These amounts and percentages fluctuate substantially during the different consumer buying seasons. To take advantage of this seasonality, the Company’s stores have been designed to allow for a shift in emphasis in the merchandise mix between footwear and softgoods items.
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Category
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2014
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2013
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2012
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(in thousands)
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Footwear
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$
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1,466,039
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88
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%
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$
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1,237,685
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86
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%
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$
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1,177,114
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86
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%
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Softgoods
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204,371
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12
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%
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205,680
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14
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%
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192,145
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14
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%
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Total net sales
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$
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1,670,410
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100
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%
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$
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1,443,365
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100
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%
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$
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1,369,259
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100
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%
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All merchandising decisions, including merchandise mix, pricing, promotions and markdowns, are made at Finish Line Customer Central (“Customer Central”). The merchandising management at Customer Central, along with store sales managers and district sales managers review the merchandise mix to adapt to trends in the marketplace.
Technology
The Company continues to redesign and update its e-commerce sites to enhance the quality and functionality of the sites. The Company has committed capital and other resources specifically for its growing e-commerce channel, which includes design and content upgrades, mobile and tablet applications, expanded presence on social media and platform enhancements. Finishline.com, run.com and related mobile sites are collectively the Company’s most visited store with approximately 422,000 visitors per day.
To support the omnichannel commitment as a customer-centric organization, the Company also continuously evaluates and implements improvements to technological platforms. This includes stores, merchandising, planning, allocation, warehouse management, order management and customer relationship management. With these updates, the Company engages the customer, remains flexible and scalable to support growth, provides integrated service and has information for real-time decision making.
Within our Finish Line stores, we fully upgraded our POS software and hardware during fiscal
2013
, including the addition of hand-held scanners, allowing our customer service associates to check customers out anywhere in the store via credit or debit card. During fiscal 2014, the Company had additional POS and hand-held scanner software upgrades to increase their functionality and further enhance the customer experience.
The Company is focused on creating an omnichannel customer experience which will deliver a consistent, seamless brand experience for customers at all touch points – brick and mortar stores, shops within department stores, web, mobile, social media, phone, email and direct mail.
Marketing
The Company attempts to reach its target audience by using a multifaceted approach to marketing on national, regional and local levels. The Company utilizes its store windows, direct mail, e-mail, viral media, search engine optimization, key word searches and online ads in its marketing efforts. Running Specialty also markets through participating in expositions throughout the year at different running events, as well as through local race events.
The Company takes advantage of advertising and promotional assistance from many of its suppliers. This assistance takes the form of cooperative advertising programs, in-store sales incentives, point-of-purchase materials, product training for employees and other programs. Total advertising expense was
1.9%
of net sales after deducting co-op reimbursements in fiscal
2014
compared to
2.1%
in fiscal
2013
. These percentages fluctuate substantially during the different consumer buying seasons. The Company believes that it benefits from the multi-million dollar advertising campaigns of its key suppliers, such as Nike, adidas, Reebok and Under Armour.
Finish Line has a customer loyalty program called “Winners Circle.” Customers earn a $20 reward certificate for every $200 they spend with Finish Line within a 12 month period, in addition to receiving special member offers on footwear and apparel. Finish Line maintains a Winners Circle database with information that it uses to communicate with members regarding key initiatives, product offerings and promotions. Finish Line continues to put an emphasis on growing the membership base of the Winners Circle program, which increased 13% in fiscal
2014
to 9.0 million active members as of year-end, and improving the marketing effectiveness of the Winners Circle program to drive sales.
Merchandising and Distribution
In addition to merchandise procurement for both footwear and softgoods, the merchandising department for the Company is also responsible for determining initial pricing and working with the planning and allocation department to establish appropriate stock levels and product mix. The merchandising department is also responsible for communicating with store and digital operations to monitor shifts in customer tastes and market trends.
The planning and allocation department is responsible for merchandise allocation, inventory movements and the automated replenishment system. The department acts as the central processing intermediary between the merchandising department and locations with inventory and also tracks the effectiveness of each marketing effort to allow the merchandising and marketing departments to determine the relative success of each promotional program. In addition, this department also manages the implementation of price changes, creation of vendor purchase orders and determination of inventory levels for each store.
The Company believes that its ability to buy in large quantities directly from suppliers enables it to obtain favorable pricing and trade terms. Currently, the Company purchases product from approximately 100 suppliers and manufacturers of athletic and fashion products, the largest of which (Nike) accounted for approximately 70% and 69% of total purchases in fiscal
2014
and
2013
, respectively. The Company purchased approximately 88% of its total merchandise in both fiscal
2014
and
2013
from its five largest suppliers. The Company and its vendors use EDI technology to streamline purchasing and distribution operations.
Nearly all of the Company’s merchandise is shipped directly from suppliers to the Company’s distribution center, where the Company processes and ships the merchandise by contract and common carriers to its stores. Each day shipments are made to approximately one-third of the Company’s stores. In any three-week period, each store will receive approximately five shipments. A shipment is normally received by the store one to four days from the date that the order is filled depending on the store’s distance from the distribution center.
Store Operations
The Company’s corporate and regional senior management visit the stores regularly to review and receive feedback from the stores related to the implementation of the Company’s plans and policies, monitor operations and review inventories and the presentation of merchandise. Accounting and general financial functions for the stores are conducted at Customer Central. Each store has a sales manager or co-sales managers that are responsible for supervision and overall operations, one or more assistant sales managers and additional full and part-time sales associates.
Finish Line brand regional, district and store sales managers receive a fixed salary (except store managers in California) and are eligible for bonuses, based primarily on sales, payroll and shrinkage performance goals of the stores for which they are responsible. All store sales managers in California, assistant store sales managers and sales associates are paid on an hourly basis. The Company utilizes a national commission program for its Finish Line stores to motivate employees to provide outstanding customer service and drive sales.
Competition
The athletic footwear business is highly competitive. Many of the products the Company sells are also sold in department stores, national and regional full-line sporting goods stores, athletic footwear specialty stores, athletic footwear superstores, discount stores, traditional shoe stores, mass merchandisers and e-tailers. Some of the Company’s primary competitors are large national chains that have substantially greater financial and other resources than the Company. Among the Company’s competition are stores along with e-commerce sites that are owned by major suppliers to the Company. To a lesser extent, the Company competes with local sporting goods and athletic specialty stores. The majority of Finish Line’s stores are located in enclosed malls or shopping centers in which one or more competitors also operate. Typically, the leases that the Company enters into do not restrict the opening of stores by competitors.
The Company attempts to differentiate itself from its competition by operating more attractive, well-stocked stores in high retail traffic areas, with competitive prices and knowledgeable and courteous customer service. The Company attempts to keep its prices competitive with athletic specialty and sporting goods stores in each trade area, including competitors that are not necessarily located inside the mall. The Company believes it accomplishes this by effectively assorting its stores with the most relevant premium brands and products in the market.
Seasonal Business
The Company’s business follows a seasonal pattern, peaking over a total of approximately 12 weeks during the back-to-school (mid July through early September) and holiday (Thanksgiving through Christmas) periods. During fiscal
2014
and
2013
, these periods accounted for approximately 30% and 32%, respectively, of the Company’s annual sales.
Employees
As of
March 1, 2014
, the Company employed approximately 12,600 persons, 3,900 of whom were full-time and 8,700 of whom were part-time. Of this total, approximately 1,000 were employed at the Company’s Customer Central corporate headquarters and distribution center and approximately 70 were employed as Regional Vice Presidents and District Sales Managers. Additional part-time employees are typically hired during the back-to-school and holiday seasons. None of the Company’s employees are represented by a union, and employee relations are generally considered good.
Retirement Plan
The Company’s Profit Sharing Plan includes a 401(k) feature. Effective January 1, 2012, the Company amended its Profit Sharing Plan whereby the Company matches 100 percent of employee contributions to the plan on the first three percent of employee’s wages and matches an additional 50 percent of employee contributions to the plan up to an additional two percent of their wages. Prior to this amendment, the Company matched 50 percent of employee contributions to the plan up to six percent of employee wages.
Intellectual Property
The Company has registered in the United States and other countries, trademarks, service marks and domain names relating to its business. The Company believes its registrations are valid. It intends to be vigilant with regard to infringing or diluting uses by other parties, and to enforce vigorously its rights in its trademarks, service marks and domain names.
Available Information
The Company’s Internet address is www.finishline.com
.
The Company makes available free of charge through its website the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after such reports and amendments are electronically filed with or furnished to the Securities and Exchange Commission. In addition, the Company’s Code of Ethics and other corporate governance documents are available on its Investor Relations page under “Corporate Governance.”
Item 1A. Risk Factors
Forward-Looking Statements
Forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as elsewhere in this Annual Report on Form 10-K, involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond the Company’s control. Accordingly, future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Investors should not place undue reliance on forward-looking statements as a prediction of actual results. You can identify these statements as those that may predict, forecast, indicate or imply future results, performance or advancements and by forward-looking words such as, but not limited to,
“believe”, “expect”, “anticipate”, “estimate”, “intend”, “future”, “forecast”, “outlook”, “foresee”, “predict”, “potential”, “plan”, “project”, “goal”, “will”, “will be”, “continue”, “lead to”, “expand”, “grow”, “confidence”, “could”, “should”, “may”, “might”
or any variations of such words or other words or phrases with similar meanings
.
Forward-looking statements address or describe, among other things, expectations, growth strategies, including plans to open and close stores, projections of future profitability, results of operations, capital expenditures, financial condition or other “forward-looking” information and may include statements about net sales, product margin, occupancy costs, selling, general and administrative expenses, operating margins, liquidity, operations and/or inventory. 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 forward-looking statements included herein are made only as of the date of this Annual Report on Form 10-K and the Company undertakes no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances.
Current, recent past and future economic and financial conditions have caused and may continue to cause a decline in consumer spending and may adversely affect the Company’s business, operations, liquidity, financial results and stock price.
The Company’s operating results are affected by the relative condition of the U.S. economy. Business and financial performance may be adversely affected by current, recent past and future economic conditions that cause a decline in business and consumer spending, including a reduction in the availability of credit, increased unemployment levels, higher energy and fuel costs, rising interest rates, financial market volatility and recession. Additionally, the Company may experience difficulties in operating and growing its operations to react to economic pressures in the U.S.
As a business that depends on consumer discretionary spending, the Company’s customers may reduce their spending and purchases due to job losses or fear of job losses, foreclosures, bankruptcies, higher consumer debt and interest rates, reduced access to credit, falling home prices, increased taxes and/or lower consumer confidence. Decreases in comparable store net sales, customer traffic or average dollar per transaction negatively affect the Company’s financial performance, and a prolonged period of depressed consumer spending could have a material adverse effect on the Company’s business and results. Promotional activities and decreased demand for consumer products could affect profitability and margins. Customer traffic is difficult to forecast and mitigate. As a consequence, sales, operating and financial results for a particular period are difficult to predict, and, therefore, it is difficult to forecast expected results for future periods. Any of the foregoing factors could have a material adverse effect on the Company’s business, results of operations and financial condition and could adversely affect the Company’s stock price.
Additionally, many of the effects and consequences of U.S. and global financial and economic conditions could potentially have a material adverse effect on the Company’s liquidity and capital resources, including the ability to raise additional capital, if needed, or the ability of banks to honor draws on the Company’s credit facility, or could otherwise negatively affect the Company’s business and financial results. Although the Company normally generates funds from operations to pay operating expenses and fund capital expenditures and has a revolving credit agreement in place until November 30, 2017 (but does not have any borrowings under it other than amounts used for stand-by letters of credit as of
March 1, 2014
), the ability to continue to meet these cash requirements over the long-term may require access to additional sources of funds, including capital and credit markets. Continuing market volatility, the impact of government intervention in financial markets and general economic conditions may adversely affect the ability of the Company to access capital and credit markets.
Global economic conditions may also adversely affect our vendors’ access to capital and liquidity with which to maintain their inventory, production levels and product quality and to operate their businesses, all of which could adversely affect the Company’s supply chain. Furthermore, our vendors might reduce their offerings of customer incentives and vendor allowances, cooperative marketing expenditures and product promotions. Market instability could make it more difficult for the Company and its vendors to accurately forecast future product demand trends, which could cause the Company to carry too much or too little merchandise in various product categories. Current, recent past and future financial and economic conditions may also adversely affect landlords and real estate developers of retail space, which may limit the availability of attractive leased store
locations. Current, recent past and future conditions may also adversely affect the Company’s product liquidation efforts.
The Company’s business faces a great deal of competitive pressure.
The athletic footwear and softgood business is highly competitive. The Company competes for customers, customer service professionals, locations, merchandise, services and other important aspects of its business with many other local, regional, national and branded vendor operated retailers. Those competitors, some of whom have a greater market presence than the Company, include traditional brick and mortar store-based retailers, Internet and digital businesses and other forms of retail commerce. A factor in the Company’s success is its ability to differentiate itself from its competitors. Unanticipated changes in the pricing and other practices of those competitors may adversely affect the Company’s performance. The Company cannot guarantee that it will be able to compete successfully against current and/or future firms within the Company’s industry and market space.
The Company may experience fluctuations in results of operations due to seasonality of the business.
The Company’s business is subject to seasonal influences, with a major portion of sales and income historically realized during the second and fourth quarters of the fiscal year, which include the back-to-school and holiday seasons, respectively. This seasonality causes operating results to vary considerably from quarter to quarter and could materially and adversely affect the Company’s results and stock price. In addition, comparable store sales are subject to significant fluctuation, on a monthly, quarterly and annual basis, and we anticipate this fluctuation to continue in the future.
The Company’s business is dependent on consumer preferences and fashion trends and successful management of inventory.
The athletic footwear and softgood industry is subject to changing fashion trends and customer preferences. The Company cannot guarantee that its merchandise selection will accurately reflect customer preferences when it is offered for sale or that the Company will be able to identify and respond quickly to fashion trends and changes, particularly given the long lead times for ordering much of the Company’s merchandise from vendors. For example, athletic footwear is ordered six to nine months prior to delivery to stores. Sufficient inventory levels must be maintained for the Company to operate its business successfully. However, the Company must guard against accumulating excess or irrelevant inventory. If the Company fails to accurately anticipate either the market for merchandise or customers’ purchasing habits, the Company may be forced to rely on markdowns or promotional sales to dispose of excess, irrelevant and/or slow moving inventory, which may adversely affect performance and results.
The Company’s business may be adversely affected by changes in merchandise sourcing.
All of the Company’s vendors must comply with applicable laws and required standards of conduct. The ability to find qualified vendors and access products in a timely and efficient manner can be a challenge, especially with respect to goods sourced outside the United States. Political or financial instability, vendor employment relations, trade restrictions, tariffs, currency exchange rates, transport capacity and costs and other factors relating to foreign trade, and the ability to access suitable merchandise on acceptable terms, are beyond the Company’s control and could adversely impact performance and results.
Changes in relationships with any of the Company’s key vendors may have an adverse impact on future results.
The Company’s business is dependent, to a significant degree, upon the ability to purchase premium brand-name merchandise at competitive prices, including the receipt of volume discounts, cooperative advertising and markdown allowances from vendors. The Company purchased approximately 88% of its merchandise in fiscal
2014
from its top five vendors and expects to continue to obtain a significant percentage of its product from these vendors in future periods. Approximately 70% of merchandise was purchased from one vendor (Nike). The inability to obtain merchandise in a timely manner from major vendors (particularly Nike) as a result of business decisions by vendors or any disruption in the supply chain could have a material adverse effect on the business, financial condition and results of operations of the Company. Because of the strong dependence on Nike, any adverse development in Nike’s distribution strategy, financial condition or results of operations or the inability of Nike to develop and manufacture products that appeal to the Company’s target customers could also have an adverse effect on the business, financial condition and results of operations of the Company.
The Company’s operations are dependent primarily on a single distribution center, and the loss of, or disruption in, the distribution center and other factors affecting the distribution of merchandise could have a material adverse effect on the Company’s business and operations.
The distribution functions for the Company are primarily handled from a single facility in Indianapolis, Indiana. Any significant interruption in the operation of the distribution center due to natural disasters, accidents, system failures or other unforeseen causes could delay or impair the ability to distribute merchandise to stores and/or fulfill digital orders, which could cause sales to decline.
The Company depends upon third-party carriers for shipment of a significant amount of merchandise to both its stores and directly to its consumers. An interruption in service by these third-party carriers for any reason could cause temporary disruptions in business, a loss of sales and profits and other material adverse effects.
Freight costs are impacted by changes in fuel prices through surcharges among other factors. Fuel prices and surcharges affect freight costs both on inbound freight from vendors to the distribution center as well as outbound freight from the distribution center to stores and shipments of product to customers. Increases in fuel prices and surcharges and other factors may increase freight costs.
The Company may need to record significant non-cash impairment charges if its long-lived assets become impaired.
The Company reviews its property and equipment when events indicate that the carrying value of such assets may be impaired.
Goodwill and other indefinite lived intangible assets are reviewed for impairment annually, at a minimum. Fair value is determined based on a combination of a discounted cash flow approach and market-based approach. If an impairment trigger is identified, the carrying value is compared to its estimated fair value and provisions for impairment are recorded as appropriate.
Impairment losses are significantly affected by estimates of future operating cash flows and estimates of fair value. Estimates of future operating cash flows are identified from strategic long-range plans, which are based upon experience, knowledge and expectations; however, these estimates can be affected by such factors as future operating results, future store profitability and future economic conditions, all of which can be difficult to predict accurately. Any significant deterioration in macroeconomic conditions could affect the fair value of our long-lived assets and could result in future impairment charges, which would adversely affect our results of operations.
The Company’s business may be adversely affected by the failure to identify suitable store locations and acceptable lease terms.
To take advantage of customer traffic and shopping preferences, the Company needs to obtain and retain stores in desirable locations, such as in regional and neighborhood malls anchored by major department stores. The Company cannot be certain that desirable mall or other locations will continue to be available. Several large landlords dominate the ownership of prime malls in the United States and because of the dependence upon these landlords for a substantial number of the Company’s store locations, any significant erosion of the relationships with these landlords or their financial condition would negatively affect our ability to obtain and retain locations. Additionally, further landlord consolidation may negatively affect our ability to obtain and retain store locations at acceptable lease terms. The Company’s average remaining store lease term is relatively short. Due to the short-term nature, the Company is subject to potential market changes, which could increase occupancy costs and adversely affect profitability.
The Company’s future results may be adversely affected if it is unable to implement its strategic plan and growth initiatives.
The Company’s ability to succeed in its strategic plan and growth initiatives could require significant capital investment and management attention, which may result in the diversion of these resources from the core business and other business issues and opportunities. Additionally, any new initiative is subject to certain risks, including customer acceptance, competition, product differentiation, challenges to economies of scale in merchandise sourcing and/or the ability to attract and retain qualified management and other personnel. There can be no assurance that the Company will be able to develop and successfully implement its strategic plan and growth initiatives to a point where they will become profitable or generate positive cash flow. If the Company cannot successfully execute its strategic plan and growth initiatives, the Company’s financial condition and results of operations may be adversely impacted.
Changes in labor conditions, as well as the Company’s inability to attract and retain the talent required for the business, may negatively affect operating results.
Future performance will depend upon the Company’s ability to attract, retain and motivate qualified employees, including
store personnel, field management, senior management and other key personnel. Many sales associates are in entry level or part-time positions with historically high rates of turnover. The ability to meet the Company’s labor needs while controlling costs is subject to external factors such as unemployment levels, prevailing wage rates, health care and minimum wage legislation and changing demographics. If the Company is unable to attract and retain quality sales associates, management and other key personnel the ability to meet growth goals or to sustain expected levels of profitability may be compromised. In addition, a large number of the Company’s retail employees are paid the prevailing minimum wage, which if increased would negatively affect profitability and could, if the increase were material, require the Company to adjust its business strategy, which may include the closure of less profitable and/or under-performing stores. Although none of the Company’s employees are currently covered under collective bargaining agreements, the Company cannot guarantee that employees will not elect to be represented by labor unions in the future. If some, or all, of the Company’s workforce were to become unionized and collective bargaining agreement terms were significantly different from the Company’s current compensation arrangements or work practices, it could have a material adverse effect on the Company’s business, financial condition and results of operations.
Because the Company’s stock price may be volatile, it could experience substantial declines.
The market price of the Company’s common stock has historically experienced and may continue to experience volatility. The Company’s quarterly operating results, changes in general conditions in the economy or the financial markets, and other developments affecting the Company, its key vendors or competitors, could cause the market price of the Company’s common stock to fluctuate substantially. While in recent years, the U.S. broader stock market has experienced sustained price increases, significant stock price and volume fluctuations may return depending on national and international macroeconomic factors, changes in monetary policy or other factors. As we have seen in the recent past, this volatility would likely affect the market prices of securities issued by many companies, often for reasons unrelated to their operating performance, and may adversely affect the price of the Company’s common stock.
The Company cannot provide any guaranty of future dividend payments or that it will continue to repurchase stock pursuant to its stock repurchase program.
The Company’s Board of Directors determines if it is in the best interest of the Company to pay a dividend to its shareholders and the amount of any dividend, and declares all dividend payments. There is no assurance that the Board of Directors will continue to declare dividends in the future or that the Company’s results of operations and financial condition will allow for a dividend to be declared. The Company’s current repurchase program, as amended, authorizes the purchase of an additional 5 million shares through December 31, 2017. However, the Company is not obligated to make any purchases under the repurchase program and the program may be discontinued at any time.
A security breach of the Company’s information technology systems could damage the Company’s reputation and have an adverse effect on operations and results.
The Company accepts electronic payment cards from customers. The Company also receives and maintains certain personal information about customers and employees. A number of retailers have experienced security breaches in which credit and debit card information has been stolen or compromised. While the Company has taken significant steps to prevent the occurrence of security breaches in this respect, including complying with the highest level of Payment Card Industry Security Standards, the Company may, in the future, become subject to claims for purportedly fraudulent transactions arising out of the theft or compromise of credit or debit card information, and may also be subject to lawsuits or other proceedings in the future relating to these types of incidents. Any such proceeding could be a distraction to the Company and cause significant unplanned losses and expenses. If the Company’s security and information systems are compromised, if computer and mobile telephone equipment is lost or stolen, or if employees fail to comply with the applicable laws and regulations and electronic payment card or personal information is obtained by unauthorized persons or used inappropriately or illegally, it could adversely affect the Company’s reputation, as well as results of operations, and could result in litigation, the imposition of penalties, or significant expenditures to remediate any damage to persons whose credit card, debit card or personal information has been compromised. The Company is continuously working to install new, and upgrade its existing, information technology systems to ensure that the Company is protected, to the greatest extent possible, against cyber risks and security breaches. However, there is no guarantee that the Company will not be affected by cyber risks or security breaches.
A major failure of technology and information systems could adversely affect the Company’s business.
The efficient operation of the Company’s business is dependent on technology and information systems. In particular, the Company relies on information systems to effectively manage sales, distribution, merchandise planning and allocation functions. The Company possesses offsite recovery capabilities for its information systems. However, the failure of technology and information systems to perform as designed could disrupt the Company’s business and adversely affect sales and profitability. There is the risk that the Company could experience problems with its information systems due to system implementation issues, which will include the replacement of the Company’s supply chain management, warehouse management and merchandising systems now and over the next few years, system outages or failures, viruses, hackers or other causes.
Various risks associated with digital sales may adversely affect the Company’s business.
The Company sells merchandise digitally over the Internet through www.finishline.com, www.run.com and www.macys.com, as well as mobile at m.finishline.com. The digital operations are subject to numerous risks, including but not limited to, unanticipated operating problems, reliance on third party computer hardware and software providers, system failures and the need to invest in additional computer systems. The digital operations also involve other risks that could have an impact on the Company’s results of operations, including hiring, retention and training of personnel to conduct the digital operations, diversion of sales from the stores, rapid technological changes and liability for online content, credit card fraud and risks related to the failure of the computer systems that operate the website and its related support systems, such as computer viruses, telecommunication failures and electronic break-ins and similar disruptions. There can be no assurance that the digital operations will continue to achieve sales and profitability growth or remain at their current or any anticipated levels.
The Company’s business may be adversely affected by regulatory and litigation developments.
Various aspects of the Company’s operations are subject to federal, state or local laws, rules and regulations, any of which may change from time to time. Sales and results of operations may be adversely affected by new legal requirements, including but not limited to, comprehensive federal health care legislation enacted in 2010, and attendant regulations. For example, new legislation or regulations may result in increased costs directly for compliance or indirectly to the extent that such requirements increase prices of goods and services because of increased compliance costs. Additionally, the Company is regularly involved in various litigation matters that arise in the ordinary course of doing business. Litigation or regulatory developments could adversely affect the business operations and financial performance of the Company.
Anti-takeover provisions under the Indiana Business Corporation Law and the Company’s Restated Articles of Incorporation and Bylaws may render more difficult the accomplishment of mergers or the assumption of control by a principal shareholder, making more difficult the removal of management.
Certain provisions of the Indiana Business Corporation Law (the “IBCL”), specifically the provision in Section 23-1-35-1, the control share acquisitions provisions in Sections 23-1-42-1 to 23-1-42-11, and the business combination provisions in Sections 23-1-43-1 to 23-1-43-24, and certain provisions of the Company’s Restated Articles of Incorporation and Bylaws, specifically the provisions regarding preferred stock, the provisions requiring a supermajority vote for certain business combinations and for certain amendments to the Restated Articles of Incorporation, the provisions requiring approval of certain transactions by the continuing directors, the provisions for a staggered board and the provisions limiting removal of directors to removal for cause, may have the effect of discouraging an unsolicited attempt by another person or entity to acquire control of the Company. These provisions may make mergers, tender offers, the removal of management and certain other transactions more difficult or more costly and could discourage or limit shareholder participation in such types of transactions, whether or not such transactions are favored by the majority of the Company’s shareholders. Such provisions also could limit the price that investors might be willing to pay in the future for shares of the Company’s common stock. Further, the existence of these anti-takeover measures may cause potential bidders to look elsewhere, rather than initiating acquisition discussions with the Company. Any of these factors could reduce the price of the Company’s common stock.
The Company’s shops within department stores operations are reliant on the department stores that the Company engages with.
The Company’s shops within department stores use selling space within another company’s department stores. These shops within department stores are dependent on the department store’s point of sale and other technological platforms, including those related to the department store’s website. In addition, the department store’s management team, corporate strategy and marketing and advertising campaigns have an effect on the success of the Company’s shops within department stores. The Company has limited influence over these factors, so a strategic shift in any of these factors or a significant disruption in the department store’s business could result in a deterioration in the operations of the Company’s shops within department stores.
Other factors may negatively affect the Company’s business and results.
The foregoing list of risk factors is not exhaustive or exclusive. Other factors and unanticipated events could adversely affect the Company and its business and results. The Company does not undertake to revise any forward-looking statement to reflect events or circumstances that occur after the date the statement is made.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
The Company’s Customer Central corporate headquarters and distribution center are located on 54 acres in Indianapolis, Indiana. The facility consists of 142,000 square feet of office space and 647,000 square feet of warehouse space. The facility, which is owned by the Company, was designed and constructed to the Company’s specifications and includes automated conveyor and storage rack systems, a high speed shipping sorter and a tilt-tray sortation system. The Company also leases 12,501 square feet of corporate office space for the Company’s Digital team in Boulder, Colorado and 5,026 square feet of corporate office space for Running Specialty in Denver, Colorado.
Store Locations
At
April 4, 2014
, the Company operated 904 stores in 47 states and the District of Columbia. The Finish Line stores and Branded shops within department stores are primarily located in enclosed shopping malls and the Running Specialty stores are primarily located on street front locations. The following table sets forth information concerning the Company’s stores and shops as of
April 4, 2014
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State
|
|
Finish Line
|
|
Running
Specialty
|
|
Branded shops
within
department stores
|
|
State
|
|
Finish Line
|
|
Running
Specialty
|
|
Branded shops
within
department stores
|
Alabama
|
|
12
|
|
|
|
|
|
|
Nebraska
|
|
6
|
|
|
|
|
|
Arizona
|
|
12
|
|
|
|
|
10
|
|
Nevada
|
|
5
|
|
|
|
|
2
|
|
Arkansas
|
|
6
|
|
|
|
|
|
|
New Hampshire
|
|
5
|
|
|
|
|
1
|
California
|
|
41
|
|
|
|
|
77
|
|
New Jersey
|
|
13
|
|
|
6
|
|
|
15
|
|
Colorado
|
|
12
|
|
|
4
|
|
|
|
New Mexico
|
|
4
|
|
|
|
|
2
|
Connecticut
|
|
8
|
|
|
1
|
|
|
3
|
|
New York
|
|
26
|
|
|
5
|
|
|
21
|
|
Delaware
|
|
|
|
|
|
|
1
|
|
North Carolina
|
|
15
|
|
|
|
|
|
Florida
|
|
47
|
|
|
|
|
|
11
|
|
North Dakota
|
|
2
|
|
|
|
|
|
Georgia
|
|
19
|
|
|
|
|
7
|
|
Ohio
|
|
38
|
|
|
3
|
|
|
Idaho
|
|
2
|
|
|
|
|
|
|
Oklahoma
|
|
6
|
|
|
|
|
|
Illinois
|
|
33
|
|
|
|
|
6
|
|
Oregon
|
|
1
|
|
|
|
|
1
|
Indiana
|
|
24
|
|
|
4
|
|
3
|
|
|
Pennsylvania
|
|
39
|
|
|
|
|
3
|
Iowa
|
|
8
|
|
|
|
|
|
|
Rhode Island
|
|
1
|
|
|
|
|
|
Kansas
|
|
7
|
|
|
|
|
|
|
South Carolina
|
|
12
|
|
|
|
|
|
Kentucky
|
|
8
|
|
|
3
|
|
|
|
South Dakota
|
|
1
|
|
|
|
|
|
Louisiana
|
|
9
|
|
|
|
|
1
|
|
Tennessee
|
|
17
|
|
|
|
|
|
Maine
|
|
1
|
|
|
|
|
|
|
Texas
|
|
62
|
|
|
12
|
|
|
8
|
|
Maryland
|
|
18
|
|
|
1
|
|
|
5
|
|
Utah
|
|
2
|
|
|
|
|
|
Massachusetts
|
|
13
|
|
|
6
|
|
|
6
|
|
|
Virginia
|
|
25
|
|
|
3
|
|
|
2
|
Michigan
|
|
24
|
|
|
|
|
7
|
|
|
Washington
|
|
10
|
|
|
|
|
16
|
Minnesota
|
|
8
|
|
|
|
|
1
|
|
West Virginia
|
|
7
|
|
|
|
|
|
Mississippi
|
|
7
|
|
|
|
|
|
|
Wisconsin
|
|
12
|
|
|
|
|
1
|
Missouri
|
|
14
|
|
|
|
|
|
|
Wyoming
|
|
1
|
|
|
|
|
|
Montana
|
|
1
|
|
|
|
|
|
|
District of
Columbia
|
|
|
|
1
|
|
|
1
|
|
|
|
|
|
|
|
|
Totals
|
|
644
|
|
|
49
|
|
|
211
|
|
Finish Line and Running Specialty lease all of their stores. Initial lease terms for the Company’s leased stores are generally 10 years in duration without renewal options, although some of the stores are subject to leases for five years with one or more renewal options. The leases generally provide for a fixed minimum rental plus contingent rent, which is determined as a percentage of gross sales in excess of specified levels. Shops within department stores are under a license agreement based on a percentage of sales.
Item 3. Legal Proceedings
The Company is subject from time to time to certain legal proceedings and claims in the ordinary course of conducting its business. The Company establishes a liability related to its legal proceedings and claims when it has determined that it is probable that the Company has incurred a liability and the related amount can be reasonably estimated. If the Company determines that an obligation is reasonably possible, the Company will, if material, disclose the nature of the loss contingency and the estimated range of possible loss, or include a statement that no estimate of loss can be made. The Company believes there are no pending legal proceedings in which the Company is currently involved which will have a material adverse effect on the Company’s financial position, results of operations or cash flows.
Item 4. Mine Safety Disclosures
Not applicable.
Item 4.5. Directors and Executive Officers of the Registrant
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Officer or
Director
Since
|
Glenn S. Lyon(7)
|
|
63
|
|
Chairman and Chief Executive Officer
|
|
2001
|
Samuel M. Sato(8)
|
|
50
|
|
President, Finish Line Brand
|
|
2007
|
Edward W. Wilhelm
|
|
55
|
|
Executive Vice President, Chief Financial Officer
|
|
2009
|
Mark S. Landau(1)(8)
|
|
56
|
|
Executive Vice President, Chief Business Development Officer
|
|
2010
|
Steven J. Schneider
|
|
58
|
|
Executive Vice President, Strategic Initiatives
|
|
1989
|
Michael L. Marchetti(2)
|
|
63
|
|
Executive Vice President, General Manager of Finish Line Macy’s Stores
|
|
1995
|
Melissa A. Greenwell
|
|
47
|
|
Executive Vice President, Chief Human Resources Officer
|
|
2013
|
Daniel S. Marous
|
|
46
|
|
Executive Vice President, IT and Supply Chain
|
|
2013
|
Bill Kirkendall(3)
|
|
60
|
|
Executive Vice President, President of Running Specialty Group
|
|
2001
|
Stephen Goldsmith(6)(7)(9)
|
|
67
|
|
Director
|
|
1999
|
William P. Carmichael(4)(10)
|
|
70
|
|
Director
|
|
2003
|
Catherine A. Langham(4)(5)(11)
|
|
55
|
|
Director
|
|
2006
|
Dolores A. Kunda(5)(6)(12)
|
|
58
|
|
Director
|
|
2008
|
Norman H. Gurwitz(4)(5)(13)
|
|
66
|
|
Director
|
|
2009
|
Richard P. Crystal(5)(7)(14)
|
|
69
|
|
Director
|
|
2009
|
Torrence Boone(6)(7)(15)
|
|
44
|
|
Director
|
|
2011
|
_________________________
|
|
(1)
|
Mr. Landau has served as Executive Vice President, Chief Business Development Officer of the Company since January 2012. Previously he had served as a member of the Board of Directors since 2010. Prior to joining the Company, Mr. Landau was Managing Director and Head of CRE Banking Americas for Deutsche Bank Securities, Inc.
|
|
|
(2)
|
Mr. Marchetti has served as Executive Vice President, General Manager of Finish Line Macy’s Stores, of the Company since October 2012. Previously he had served as Executive Vice President, Store Operations.
|
|
|
(3)
|
Mr. Kirkendall became an Executive Vice President of the Company and was named President of Running Specialty Group on April 25, 2014. Previously he had served as a member of the Board of Directors since 2001, resigning from that position on April 24, 2014. Prior to joining the Company, Mr. Kirkendall was a Managing Partner/President of Glen Oaks Country Club and Lead Advisor for the Board of Advisors for Golf Resources, Inc.
|
|
|
(4)
|
Member of the Audit Committee of the Board of Directors of the Company.
|
|
|
(5)
|
Member of the Compensation Committee of the Board of Directors of the Company.
|
|
|
(6)
|
Member of the Governance and Nominating Committee of the Board of Directors of the Company.
|
|
|
(7)
|
Member of the Strategy Committee of the Board of Directors of the Company.
|
|
|
(8)
|
Non-Director member of the Strategy Committee of the Board of Directors of the Company.
|
|
|
(9)
|
Mr. Goldsmith is currently a managing Director of the Huron Consulting Group, a provider of business consulting services, and the Daniel Paul Professor of Government and Director of the Innovations in American Government Program at Harvard’s Kennedy School of Government.
|
|
|
(10)
|
Mr. Carmichael currently serves as Chairman of the Board of Trustees of the Columbia Funds Series Trust, Columbia Funds Series Trust II, Columbia Funds Master Investment Trust, Columbia Funds Variable Insurance Trust I and Columbia ETF Trust and Chairman of Tri-Continental Corporation and the Columbia Seligman Premium Technology Growth Fund.
|
|
|
(11)
|
Ms. Langham is the co-founder, President and Chief Executive Officer of Langham Logistics, Inc., a global freight management company specializing in expedited transportation, warehousing and distribution.
|
|
|
(12)
|
Ms. Kunda is the founder and former President and Chief Executive Officer of Lapiz, one of the largest Hispanic advertising agencies across the Americas, and the former President of Leo Burnett Puerto Rico.
|
|
|
(13)
|
Mr. Gurwitz is a former advisor to and Vice President, Corporate Counsel and Director of Human Resources of Emmis Communications, an owner and operator of radio stations and magazines throughout the United States.
|
|
|
(14)
|
Mr. Crystal is the former Chairman and Chief Executive Officer of women’s clothing retailer New York & Company.
|
|
|
(15)
|
Mr. Boone is Managing Director of Agency Business Development for Google.
|
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company’s common stock is traded on the Nasdaq Global Select Market under the ticker symbol FINL.
The following table sets forth, for the periods indicated, the range of high and low sale prices for the Company’s common stock as reported by the Nasdaq Stock Market.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2014
|
|
Fiscal 2013
|
Quarter Ended
|
|
High
|
|
Low
|
|
High
|
|
Low
|
May
|
|
$
|
22.33
|
|
|
$
|
17.75
|
|
|
$
|
26.16
|
|
|
$
|
19.18
|
|
August
|
|
22.85
|
|
|
20.47
|
|
|
23.55
|
|
|
17.87
|
|
November
|
|
27.31
|
|
|
21.37
|
|
|
24.90
|
|
|
19.71
|
|
February
|
|
28.86
|
|
|
22.99
|
|
|
20.89
|
|
|
16.87
|
|
As of
April 4, 2014
, there were approximately 1,997 record holders of common stock. The number of common stock record holders excludes the beneficial owners of shares held in “street” name or held through participants in depositories.
On January 16, 2014, the Company’s Board of Directors increased its quarterly cash dividend by 14% to $0.08 per share of common stock. The Company declared dividends of $14.2 million and $12.5 million during fiscal
2014
and
2013
, respectively. As of
March 1, 2014
and
March 2, 2013
, dividends declared but not paid of $3.9 million and $3.4 million, respectively, were accrued in other liabilities and accrued expenses on the consolidated balance sheets. The Company expects to continue to pay dividends on a quarterly basis and review for increases annually; however, further declarations of dividends remain at the discretion of the Company’s Board of Directors.
On July 21, 2011, the Company’s Board of Directors authorized a share repurchase program (the “2011 Share Repurchase Program”) to repurchase up to 5,000,000 shares of the Company’s common stock outstanding through December 31, 2014. On January 3, 2013, the Company’s Board of Directors amended the 2011 Share Repurchase Program (the “Amended Program”) and authorized the repurchase of an additional 5,000,000 shares of the Company’s common stock, which authorization shall expire on December 31, 2017.
The Company purchased 1,015,838 shares at an average price of $22.27 per share for an aggregate amount of
$22.6 million
in fiscal
2014
. As of
March 1, 2014
, there were 3,904,503 shares remaining available to repurchase under the Amended Program.
As of
March 1, 2014
, the Company held as treasury shares 11,641,219 shares of its common stock at an average price of $18.10 per share for an aggregate amount of $210.7 million. The treasury shares may be issued upon the exercise of employee stock options, issuance of shares for the Employee Stock Purchase Plan, issuance of restricted stock or for other corporate purposes. Further purchases will occur from time to time as market conditions warrant and as the Company deems appropriate when judged against other alternative uses of cash.
Details on the shares repurchased under the Amended Program during the
thirteen
weeks ended
March 1, 2014
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
Total Number of
Shares Purchased
|
|
Average Price
Paid per Share(1)
|
|
Total Number of
Shares Purchased
as Part of Publicly
Announced
Plans or Programs
|
|
Maximum Number (or
Approximate Dollar
Value) of Shares that
May Yet Be Purchased
Under the Program
|
December 1, 2013 – January 4, 2014
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
4,104,464
|
|
January 5, 2014 – February 1, 2014
|
|
199,961
|
|
|
25.67
|
|
|
199,961
|
|
|
3,904,503
|
|
February 2, 2014 – March 1, 2014
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,904,503
|
|
|
|
199,961
|
|
|
$
|
25.67
|
|
|
199,961
|
|
|
|
____________________
|
|
(1)
|
The average price paid per share includes any brokerage commissions.
|
Item 6. Selected Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 1,
|
|
March 2,
|
|
March 3,
|
|
February 26,
|
|
February 27,
|
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
|
(in thousands, except per share and store/shop operating data)
|
Statement of Operations Data(1):
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,670,410
|
|
|
$
|
1,443,365
|
|
|
$
|
1,369,259
|
|
|
$
|
1,229,002
|
|
|
$
|
1,172,415
|
|
Cost of sales (including occupancy costs)(8)
|
|
1,122,967
|
|
|
958,921
|
|
|
889,130
|
|
|
815,073
|
|
|
793,556
|
|
Gross profit
|
|
547,443
|
|
|
484,444
|
|
|
480,129
|
|
|
413,929
|
|
|
378,859
|
|
Selling, general and administrative expenses(8)
|
|
424,571
|
|
|
365,883
|
|
|
343,629
|
|
|
302,718
|
|
|
297,323
|
|
Store closing costs
|
|
713
|
|
|
671
|
|
|
1,191
|
|
|
350
|
|
|
2,707
|
|
Impairment charges
|
|
2,054
|
|
|
5,593
|
|
|
974
|
|
|
1,228
|
|
|
6,771
|
|
Operating income
|
|
120,105
|
|
|
112,297
|
|
|
134,335
|
|
|
109,633
|
|
|
72,058
|
|
Interest income, net
|
|
37
|
|
|
198
|
|
|
447
|
|
|
508
|
|
|
322
|
|
Gain on sale of investment
|
|
2,076
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Income from continuing operations before income taxes
|
|
122,218
|
|
|
112,495
|
|
|
134,782
|
|
|
110,141
|
|
|
72,380
|
|
Income tax expense(2)
|
|
47,166
|
|
|
43,314
|
|
|
49,978
|
|
|
41,277
|
|
|
21,547
|
|
Income from continuing operations
|
|
75,052
|
|
|
69,181
|
|
|
84,804
|
|
|
68,864
|
|
|
50,833
|
|
Loss from discontinued operations, net of income tax benefit
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30
|
)
|
|
(15,161
|
)
|
Net loss attributable to redeemable noncontrolling interest
|
|
1,851
|
|
|
2,292
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net income attributable to The Finish Line, Inc.
|
|
$
|
76,903
|
|
|
$
|
71,473
|
|
|
$
|
84,804
|
|
|
$
|
68,834
|
|
|
$
|
35,672
|
|
Earnings Per Share Data(1):
|
|
|
|
|
|
|
|
|
|
|
Basic earnings from continuing operations
|
|
$
|
1.57
|
|
|
$
|
1.42
|
|
|
$
|
1.62
|
|
|
$
|
1.28
|
|
|
$
|
0.92
|
|
Diluted earnings from continuing operations
|
|
$
|
1.56
|
|
|
$
|
1.40
|
|
|
$
|
1.59
|
|
|
$
|
1.26
|
|
|
$
|
0.92
|
|
Dividends declared per share
|
|
$
|
0.29
|
|
|
$
|
0.25
|
|
|
$
|
0.21
|
|
|
$
|
0.17
|
|
|
$
|
0.13
|
|
Share Data:
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average shares
|
|
48,286
|
|
|
49,824
|
|
|
52,020
|
|
|
52,979
|
|
|
54,221
|
|
Diluted weighted-average shares(3)
|
|
48,701
|
|
|
50,491
|
|
|
52,818
|
|
|
53,775
|
|
|
54,597
|
|
Selected Store Operating Data:
|
|
|
|
|
|
|
|
|
|
|
Number of stores/shops
|
|
|
|
|
|
|
|
|
|
|
Acquired during year
|
|
15
|
|
|
6
|
|
|
18
|
|
|
—
|
|
|
—
|
|
Opened during year
|
|
212
|
|
|
34
|
|
|
5
|
|
|
11
|
|
|
5
|
|
Closed during year
|
|
(24
|
)
|
|
(21
|
)
|
|
(31
|
)
|
|
(13
|
)
|
|
(28
|
)
|
Open at end of year
|
|
878
|
|
|
675
|
|
|
656
|
|
|
664
|
|
|
666
|
|
Total square feet(4)
|
|
3,893,480
|
|
|
3,594,806
|
|
|
3,498,090
|
|
|
3,564,277
|
|
|
3,590,780
|
|
Average square feet per store/shop(4)
|
|
4,434
|
|
|
5,326
|
|
|
5,332
|
|
|
5,368
|
|
|
5,392
|
|
Net sales per square foot for Finish Line comparable stores(5)(6)
|
|
$
|
366
|
|
|
$
|
353
|
|
|
$
|
339
|
|
|
$
|
317
|
|
|
$
|
298
|
|
Increase (decrease) in Finish Line comparable store sales(6)(7)
|
|
4.2
|
%
|
|
5.8
|
%
|
|
9.2
|
%
|
|
6.3
|
%
|
|
(0.5
|
)%
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
373,293
|
|
|
$
|
357,657
|
|
|
$
|
414,065
|
|
|
$
|
383,264
|
|
|
$
|
328,664
|
|
Total assets
|
|
$
|
824,945
|
|
|
$
|
706,422
|
|
|
$
|
711,496
|
|
|
$
|
664,845
|
|
|
$
|
610,268
|
|
Total debt
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Shareholders’ equity
|
|
$
|
582,184
|
|
|
$
|
524,863
|
|
|
$
|
529,537
|
|
|
$
|
490,245
|
|
|
$
|
442,150
|
|
____________________
|
|
(1)
|
Fiscal
2012
includes
53
weeks versus
52
weeks in all other years presented.
|
|
|
(2)
|
Fiscal 2010 amount includes a $6.5 million one-time tax benefit regarding the tax treatment of the terminated merger and litigation expenses related to fiscal 2009.
|
|
|
(3)
|
Consists of weighted-average common and common equivalent shares outstanding for the year.
|
|
|
(4)
|
Computed as of the end of each fiscal year.
|
|
|
(5)
|
Calculation includes all stores that are open as of the end of each fiscal year and that have been open more than one year. Accordingly, stores opened, closed or expanded during the year are not included. Temporarily closed stores are excluded during the months that the store is closed. Calculation excludes digital sales. Calculated excluding sales for the 53
rd
week in fiscal
2012
.
|
|
|
(6)
|
Running Specialty stores and shops within department stores are not included in this calculation.
|
|
|
(7)
|
Calculation includes all stores that are open as of the end of each fiscal year and that have been open more than one year. Accordingly, stores opened, closed or expanded during the year are not included. Temporarily closed stores are excluded during the months that the store is closed. Calculation includes digital sales. Calculated excluding sales for the 53
rd
week in fiscal
2012
.
|
|
|
(8)
|
Fiscal 2014 cost of sales includes $5.8 million in start-up costs related to inventory reserves established for inventory purchased from Macy’s. Fiscal 2014 selling, general and administrative expenses includes $2.2 million in start-up costs associated with shipping and handling for the initial inventory takeover and assortment of Macy’s athletic footwear.
|
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Executive Summary
During fiscal
2014
, there were a few highlights which included record revenues, significant digital sales growth and the success of growth initiatives within Running Specialty and shops within department stores. The Company remained committed to its strategic plan to put capital investments into our people, technology and stores. Also, the Company continued to provide returns to our shareholders through dividends and stock repurchases totaling over $36 million. An overview of the detailed results is discussed below.
|
|
•
|
Net sales
increase
d
15.7%
to
$1,670.4 million
in fiscal
2014
compared to
$1,443.4 million
in fiscal
2013
.
|
|
|
•
|
Finish Line comparable store sales for fiscal
2014
increased
4.2%
.
|
|
|
•
|
Finish Line’s digital comparable sales (which are included in Finish Line comparable store sales) increased 15.1%.
|
|
|
•
|
Net sales per square foot for Finish Line comparable stores increased by $13 to $366.
|
|
|
•
|
Net sales associated with shops within department stores increased
$119.3 million
.
|
|
|
•
|
Running Specialty net sales increased
$22.5 million
to
$50.2 million
.
|
|
|
•
|
Gross profit was
$547.4 million
(
32.8%
of net sales) in fiscal
2014
compared to
$484.4 million
(
33.6%
of net sales) in fiscal
2013
.
|
|
|
•
|
$5.8 million (0.3% of net sales) in start-up costs related to inventory reserves established for inventory purchased from Macy’s.
|
|
|
•
|
0.8% decrease in product margin (including start-up costs), net of shrink, as a percentage of net sales.
|
|
|
•
|
Occupancy costs remained constant as a percentage of net sales.
|
|
|
•
|
SG&A expenses were
$424.6 million
(
25.4%
of net sales) in fiscal
2014
compared to
$365.9 million
(
25.3%
of net sales) in fiscal
2013
.
|
|
|
•
|
0.1%
deleverage
as a percentage of net sales, primarily due to $2.2 million in start-up costs associated with shipping and handling for the initial inventory takeover and assortment of Macy’s athletic footwear.
|
|
|
•
|
Investments in information technology, shops within department stores and Running Specialty along with variable costs to support the increase in digital sales increased SG&A expenses, however, SG&A expenses were consistent as a percentage of net sales.
|
|
|
•
|
Operating income was
$120.1 million
(
7.2%
of net sales) in fiscal
2014
compared to
$112.3 million
(
7.8%
of net sales) in fiscal
2013
.
|
|
|
•
|
$7.8 million
increase
, or
7.0%
, driven by increased sales.
|
|
|
•
|
$2.1 million
of impairment charges related to obsolete store technology assets and fixtures in fiscal
2014
compared to $5.6 million of impairment charges related to the Company’s website and the long-lived assets associated with six underperforming stores in fiscal
2013
.
|
|
|
•
|
$8.0 million of start-up costs for shops within department stores.
|
|
|
•
|
Net income attributable to The Finish Line, Inc. was
$76.9 million
(
4.6%
of net sales) in fiscal
2014
compared to
$71.5 million
(
5.0%
of net sales) in fiscal
2013
.
|
|
|
•
|
$5.4 million
increase
, or
7.6%
.
|
|
|
•
|
Diluted earnings per share attributable to The Finish Line, Inc. shareholders increased
11.4%
to
$1.56
in fiscal
2014
compared to
$1.40
in fiscal
2013
.
|
|
|
•
|
Cash and cash equivalents were
$229.1 million
on
March 1, 2014
with no interest bearing debt.
|
|
|
•
|
Generated cash from operations of
$119.0 million
in fiscal
2014
.
|
|
|
•
|
Cash outlay for capital expenditures was
$81.7 million
, with an additional
$9.2 million
within accounts payable on
March 1, 2014
.
|
|
|
•
|
Paid
$13.7 million
of dividends to shareholders in fiscal
2014
.
|
|
|
•
|
Repurchased 1.0 million shares of common stock totaling
$22.6 million
during fiscal
2014
.
|
|
|
•
|
Opened
22
new and closed
22
Finish Line stores during fiscal
2014
, ending the year with
645
Finish Line stores.
|
|
|
•
|
Opened branded shops in
183
new department stores and closed a branded shop in
1
department store during fiscal
2014
, ending the year with branded shops in
185
department stores.
|
|
|
•
|
Acquired
15
Running Specialty stores, opened
7
new stores and closed
1
store during fiscal
2014
, ending the year with
48
Running Specialty stores.
|
Critical Accounting Policies
Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, the Company evaluates these estimates, including those related to the valuation of inventories, the potential impairment of property and equipment and income taxes. The Company bases the estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Management believes the following critical accounting policies affect the more significant judgments and estimates used in the preparation of its consolidated financial statements.
Cost of Sales.
Cost of sales includes the cost associated with acquiring merchandise from vendors, occupancy costs, license fees, provision for inventory shortages and credits and allowances from our merchandise vendors. Cash consideration received from merchandise vendors after the related merchandise has been sold is recorded as an offset to cost of sales in the period negotiations are finalized. For cash consideration received on merchandise still in inventory, the allowance is recorded as a reduction to the cost of on-hand inventory and recorded as a reduction of our cost of sales at the time of sale.
Because the Company does not include the costs associated with operating its distribution center and freight within cost of sales, the Company’s gross profit may not be comparable to those of other retailers that may include all costs related to their distribution centers in cost of sales and in the calculation of gross profit.
Valuation of Inventories.
Merchandise inventories are valued at the lower of cost or market using a weighted-average cost method, which approximates the first-in, first-out method. The Company’s valuation of merchandise inventory includes markdown adjustments for merchandise that will be sold below cost and the impact of shrinkage. Markdowns are based upon historical information and assumptions about future demand and market conditions. Shrinkage is based on historical information and assumptions as to current shrink trends. Vendor rebates are applied as a reduction to the cost of merchandise inventories. It is possible that changes to the markdowns and shrinkage estimates could be required in future periods due to changes in market conditions.
Impairment of Property and Equipment Review.
The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the estimated future undiscounted cash flows expected to be generated by the asset. If an asset is considered to be impaired, the impairment recognized is measured by comparing projected discounted cash flows to the asset’s carrying value. The estimation of fair value is measured by discounting expected future cash flows at the discount rate the Company utilizes to evaluate potential investments. Actual results may differ from these estimates and as a result the estimation of fair values may be adjusted in the future.
Operating Leases.
The Company leases retail stores under operating leases. Many lease agreements contain rent holidays, rent escalation clauses and/or contingent rent provisions. The Company recognizes rent expense for minimum lease payments on a straight-line basis over the expected lease term, including cancelable option periods where failure to exercise such options would result in an economic penalty. The Company uses a time period for its straight-line rent expense calculation that equals or exceeds the time period used for depreciation. In addition, the commencement date of the lease term is the earlier of the date when the Company becomes legally obligated for the rent payments or the date when the Company takes possession of the leased space for build out. Contingent rents are determined as a percentage of gross sales in excess of specified levels. The Company records a contingent rent liability in other liabilities and accrued expenses on the consolidated balance sheets and the corresponding rent expense when specified levels have been achieved or when management determines that achieving the specified levels during the fiscal year is probable.
Income Taxes.
The Company accounts for income taxes under the asset and liability method. Under this method, the amount of taxes currently payable or refundable are accrued and deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets are also recognized for realizable loss and tax credit carryforwards. The deferred tax assets may be reduced by a valuation allowance, which is established when it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. In addition, management is required to evaluate all available evidence including estimating future taxable income by taxing jurisdictions, the future reversal of temporary differences, tax planning strategies and recent results of operations when making its judgment to determine whether or not to record a valuation allowance for a portion, or all, of its deferred tax assets. Deferred tax assets and liabilities are measured using enacted income tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in the Company’s consolidated statements of income in the period that includes the enactment date.
The Company calculates an annual effective income tax rate based on annual income, permanent differences between book and tax income and statutory income tax rates. The Company adjusts the annual effective income tax rate as additional information on outcomes or events becomes available. The Company’s effective income tax rate is affected by items including changes in tax law, the tax jurisdiction of new stores or business ventures, the level of earnings or losses, the results of tax audits and the level of investment income.
The Company’s income tax returns, like those of most companies, are periodically audited by tax authorities. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income among various tax jurisdictions. At any one time, multiple tax years are subject to audit by the various tax authorities. The Company accounts for uncertainty in income taxes using a two-step approach for evaluating income tax positions. The first step requires the Company to conclude that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination by a tax authority. The second step applies if the Company has concluded that the tax position is more likely than not to be sustained upon examination and requires the Company to measure the largest amount of benefit, determined on a cumulative probability basis, which is more likely than not to be realized upon ultimate settlement. The Company adjusts its accrual for uncertain tax positions and income tax provision in the period in which matters are effectively settled with tax authorities at amounts different from its established accrual, the statute of limitations expires for the relevant taxing authority to examine the tax position or when more information becomes available. The Company includes its accrual for uncertain tax positions, including accrued penalties and interest, in other long-term liabilities on the consolidated balance sheets unless the liability is expected to be paid within one year. Changes to the accrual for uncertain tax positions, including accrued penalties and interest, are included in income tax expense on the consolidated statements of income.
Recent Accounting Pronouncements.
Recently issued accounting pronouncements did not, or are not believed by management to, have a material effect on the Company’s present or future consolidated financial statements.
Results of Operations
General.
The following discussion and analysis should be read in conjunction with the information set forth under “Selected Financial Data” and the Consolidated Financial Statements and Notes thereto included elsewhere herein.
The Company uses a “Retail” calendar. The Company’s fiscal year ends on the Saturday closest to the last day of February and included
52
weeks in fiscal
2014
and
2013
and
53
weeks in fiscal
2012
.
The Company is a premium retailer of athletic shoes, apparel and accessories for men, women and kids, throughout the United States, through four operating segments: brick and mortar stores, digital (which includes internet, mobile and tablet), shops within departments stores and Running Specialty. The brick and mortar stores and digital operating segments are collectively referred to as “Finish Line” throughout this document.
Brick and mortar comparable store sales are sales from stores open longer than one year, beginning in the thirteenth month of a store’s operation. Expanded stores are excluded from the brick and mortar comparable store sales calculation until the thirteenth month following the re-opening of the store and temporarily closed stores are excluded during the months that the store is closed. As a result of the 53rd week in fiscal 2012, the brick and mortar comparable store sales were calculated on a shifted basis by comparing brick and mortar comparable store sales for the 52 weeks ended
March 2, 2013
to the 52 weeks ended
March 3, 2012
.
Digital comparable sales are the change in sales year over year for the reporting period derived from finishline.com. As a result of the 53rd week in fiscal 2012, the digital comparable sales were calculated on a shifted basis by comparing digital sales for the 52 weeks ended
March 2, 2013
to the 52 weeks ended
March 3, 2012
.
Finish Line comparable store sales is the aggregation of brick and mortar comparable store sales and digital comparable sales.
The following tables set forth store and square feet information of the Company for each of the following years:
|
|
|
|
|
|
|
|
|
|
Year Ended
|
Number of stores/shops
|
|
March 1, 2014
|
|
March 2, 2013
|
Finish Line:
|
|
|
|
|
Beginning of year
|
|
645
|
|
|
637
|
|
Opened
|
|
22
|
|
|
29
|
|
Closed
|
|
(22
|
)
|
|
(21
|
)
|
End of year
|
|
645
|
|
|
645
|
|
Branded shops within department stores:
|
|
|
|
|
Beginning of year
|
|
3
|
|
|
—
|
|
Opened
|
|
183
|
|
|
3
|
|
Closed
|
|
(1
|
)
|
|
—
|
|
End of year
|
|
185
|
|
|
3
|
|
Running Specialty:
|
|
|
|
|
Beginning of year
|
|
27
|
|
|
19
|
|
Acquired
|
|
15
|
|
|
6
|
|
Opened
|
|
7
|
|
|
2
|
|
Closed
|
|
(1
|
)
|
|
—
|
|
End of year
|
|
48
|
|
|
27
|
|
Total:
|
|
|
|
|
Beginning of year
|
|
675
|
|
|
656
|
|
Acquired
|
|
15
|
|
|
6
|
|
Opened
|
|
212
|
|
|
34
|
|
Closed
|
|
(24
|
)
|
|
(21
|
)
|
End of year
|
|
878
|
|
|
675
|
|
|
|
|
|
|
|
|
|
Square feet information
|
|
March 1, 2014
|
|
March 2, 2013
|
Finish Line:
|
|
|
|
|
Square feet
|
|
3,507,865
|
|
|
3,511,128
|
|
Average store size
|
|
5,439
|
|
|
5,444
|
|
Branded shops within department stores:
|
|
|
|
|
Square feet
|
|
229,685
|
|
|
3,483
|
|
Average shop size
|
|
1,242
|
|
|
1,161
|
|
Running Specialty:
|
|
|
|
|
Square feet
|
|
155,930
|
|
|
80,195
|
|
Average store size
|
|
3,249
|
|
|
2,970
|
|
Total:
|
|
|
|
|
Square feet
|
|
3,893,480
|
|
|
3,594,806
|
|
The following table sets forth net sales of the Company by major category for each of the following years (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
Category
|
|
March 1, 2014
|
|
March 2, 2013
|
|
March 3, 2012
|
Footwear
|
|
$
|
1,466,039
|
|
|
88
|
%
|
|
$
|
1,237,685
|
|
|
86
|
%
|
|
$
|
1,177,114
|
|
|
86
|
%
|
Softgoods
|
|
204,371
|
|
|
12
|
%
|
|
205,680
|
|
|
14
|
%
|
|
192,145
|
|
|
14
|
%
|
Total net sales
|
|
$
|
1,670,410
|
|
|
100
|
%
|
|
$
|
1,443,365
|
|
|
100
|
%
|
|
$
|
1,369,259
|
|
|
100
|
%
|
The following table and subsequent discussion set forth operating data of the Company as a percentage of net sales for the years indicated below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 1, 2014
|
|
March 2, 2013
|
|
March 3, 2012
|
Income Statement Data:
|
|
|
|
|
|
|
Net sales
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Cost of sales (including occupancy costs)
|
|
67.2
|
|
|
66.4
|
|
|
64.9
|
|
Gross profit
|
|
32.8
|
|
|
33.6
|
|
|
35.1
|
|
Selling, general and administrative expenses
|
|
25.4
|
|
|
25.3
|
|
|
25.1
|
|
Store closing costs
|
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
Impairment charges
|
|
0.1
|
|
|
0.4
|
|
|
0.1
|
|
Operating income
|
|
7.2
|
|
|
7.8
|
|
|
9.8
|
|
Interest income, net
|
|
—
|
|
|
—
|
|
|
—
|
|
Gain on sale of investment
|
|
0.1
|
|
|
—
|
|
|
—
|
|
Income before income taxes
|
|
7.3
|
|
|
7.8
|
|
|
9.8
|
|
Income tax expense
|
|
2.8
|
|
|
3.0
|
|
|
3.6
|
|
Net income
|
|
4.5
|
|
|
4.8
|
|
|
6.2
|
|
Net loss attributable to redeemable noncontrolling interest
|
|
0.1
|
|
|
0.2
|
|
|
—
|
|
Net income attributable to The Finish Line, Inc.
|
|
4.6
|
%
|
|
5.0
|
%
|
|
6.2
|
%
|
Fifty-Two
Weeks Ended
March 1, 2014
Compared to the
Fifty-Two
Weeks Ended
March 2, 2013
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 1, 2014
|
|
March 2, 2013
|
|
|
(dollars in thousands)
|
Brick and mortar store sales
|
|
$
|
1,291,863
|
|
|
$
|
1,234,077
|
|
Digital sales
|
|
208,984
|
|
|
181,551
|
|
Shops within department store sales
|
|
119,384
|
|
|
102
|
|
Running Specialty sales
|
|
50,179
|
|
|
27,635
|
|
Total net sales
|
|
$
|
1,670,410
|
|
|
$
|
1,443,365
|
|
|
|
|
|
|
Brick and mortar comparable store sales increase
|
|
2.5
|
%
|
|
3.4
|
%
|
Digital comparable sales increase
|
|
15.1
|
%
|
|
25.1
|
%
|
Finish Line comparable store sales increase
|
|
4.2
|
%
|
|
5.8
|
%
|
Net sales
increase
d
15.7%
for fiscal
2014
compared to fiscal
2013
. The
increase
was attributable to a Finish Line comparable store sales
increase
of
4.2%
, an increase in net sales associated with the shops within department stores of
$119.3 million
and an
increase
in Running Specialty net sales of
$22.5 million
. The Finish Line comparable store sales
increase
of
4.2%
is due to an increase in average dollars per transaction and digital traffic, partially offset by a decrease in conversion and store traffic.
Cost of Sales (Including Occupancy Costs) and Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 1, 2014
|
|
March 2, 2013
|
|
|
(dollars in thousands)
|
Cost of sales (including occupancy costs)
|
|
$
|
1,122,967
|
|
|
$
|
958,921
|
|
Gross profit
|
|
$
|
547,443
|
|
|
$
|
484,444
|
|
Gross profit as a percentage of net sales
|
|
32.8
|
%
|
|
33.6
|
%
|
The
0.8%
decrease
in gross profit, as a percentage of net sales, was primarily due to a 0.8% decrease in product margin, net of shrink, as a percentage of net sales. The 0.8% decrease in product margin, net of shrink, as a percentage of net sales, was primarily due to $5.8 million, or 0.3% of net sales, of start-up costs related to inventory reserves established for inventory purchased from Macy’s, as well as higher markdowns as the Company adjusted product assortment to meet customer demands.
Selling, General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 1, 2014
|
|
March 2, 2013
|
|
|
(dollars in thousands)
|
Selling, general and administrative expenses
|
|
$
|
424,571
|
|
|
$
|
365,883
|
|
Selling, general and administrative expenses as a percentage of net sales
|
|
25.4
|
%
|
|
25.3
|
%
|
The $
58.7 million
increase
in selling, general and administrative expenses was primarily due to the following: (1) $2.2 million, or 0.1% of net sales, in start-up costs associated with shipping and handling for the initial inventory takeover and assortment of Macy’s athletic footwear; (2) capital investments to support the Company’s technology upgrades, digital platform and omnichannel strategy and to support shops within department stores and Running Specialty, which has increased depreciation by $5.1 million, or 16.5%; (3) variable costs in fulfillment, freight and payroll in conjunction with the
15.7%
increase in consolidated net sales and (4) the increased cost associated with building a team for the shops within department stores.
Store Closing Costs
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 1, 2014
|
|
March 2, 2013
|
|
|
(dollars in thousands)
|
Store closing costs
|
|
$
|
713
|
|
|
$
|
671
|
|
Store closing costs as a percentage of net sales
|
|
0.1
|
%
|
|
0.1
|
%
|
Number of stores/shops closed
|
|
24
|
|
|
21
|
|
Store closing costs represent the non-cash write-off of any fixtures and equipment upon a store or shop closing.
Impairment Charges
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 1, 2014
|
|
March 2, 2013
|
|
|
(dollars in thousands)
|
Impairment charges
|
|
$
|
2,054
|
|
|
$
|
5,593
|
|
Impairment charges as a percentage of net sales
|
|
0.1
|
%
|
|
0.4
|
%
|
Number of stores impaired
|
|
—
|
|
|
6
|
|
The fiscal
2014
impairment charge of
$2.1 million
was primarily a result of the write-off of obsolete store technology assets and fixtures. The fiscal
2013
impairment charge of $
5.6 million
was primarily due to a $3.7 million charge associated
with the Company’s updated website that was launched but subsequently abandoned, as well as the write-off of long-lived assets of
6
underperforming stores.
Interest Income, Net
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 1, 2014
|
|
March 2, 2013
|
|
|
(dollars in thousands)
|
Interest income, net
|
|
$
|
37
|
|
|
$
|
198
|
|
Interest income, net as a percentage of net sales
|
|
—
|
%
|
|
—
|
%
|
The
decrease
of $
0.2 million
was due to lower invested balances and interest rates in fiscal
2014
compared to fiscal
2013
.
Gain on Sale of Investment
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 1, 2014
|
|
March 2, 2013
|
|
|
(dollars in thousands)
|
Gain on sale of investment
|
|
$
|
2,076
|
|
|
$
|
—
|
|
Gain on sale of investment as a percentage of net sales
|
|
0.1
|
%
|
|
—
|
%
|
During fiscal
2014
, the Company sold an investment with a carrying value of $1.0 million for $3.1 million, which resulted in a $
2.1 million
gain.
Income Tax Expense
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 1, 2014
|
|
March 2, 2013
|
|
|
(dollars in thousands)
|
Income tax expense
|
|
$
|
47,166
|
|
|
$
|
43,314
|
|
Income tax expense as a percentage of net sales
|
|
2.8
|
%
|
|
3.0
|
%
|
Effective income tax rate
|
|
38.6
|
%
|
|
38.5
|
%
|
The
increase
in the effective tax rate is a result of a slight increase in nondeductible expenses incurred during fiscal
2014
compared to fiscal
2013
.
Net Loss Attributable To Redeemable Noncontrolling Interest
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 1, 2014
|
|
March 2, 2013
|
|
|
(dollars in thousands)
|
Net loss attributable to redeemable noncontrolling interest
|
|
$
|
1,851
|
|
|
$
|
2,292
|
|
Net loss attributable to redeemable noncontrolling interest as a percentage of net sales
|
|
0.1
|
%
|
|
0.2
|
%
|
The net loss attributable to redeemable noncontrolling interest represents the noncontrolling owner’s portion of the net loss generated by Running Specialty since March 29, 2012, which was the date of the investment by GCPI SR LLC.
Net Income Attributable To The Finish Line, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 1, 2014
|
|
March 2, 2013
|
|
|
(dollars in thousands, except per
share data)
|
Net income attributable to The Finish Line, Inc.
|
|
$
|
76,903
|
|
|
$
|
71,473
|
|
Net income attributable to The Finish Line, Inc. as a percentage of net sales
|
|
4.6
|
%
|
|
5.0
|
%
|
Diluted earnings per share attributable to The Finish Line, Inc. shareholders
|
|
$
|
1.56
|
|
|
$
|
1.40
|
|
The
$5.4 million
increase
in net income attributable to the Finish Line, Inc. was primarily due to the
increase
in net sales,
decrease
in impairment charges and the gain on sale of investment during fiscal 2014. These increases were partially offset by $8.0 million of start-up costs related to shops within department stores, along with a decrease in product margin as a percentage of net sales and the investments to support the Company’s omnichannel strategy and the growth of shops within department stores and Running Specialty.
Fifty-Two
Weeks Ended
March 2, 2013
Compared to the
Fifty-Three
Weeks Ended
March 3, 2012
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 2, 2013
|
|
March 3, 2012
|
|
|
(dollars in thousands)
|
Brick and mortar store sales
|
|
$
|
1,234,077
|
|
|
$
|
1,210,368
|
|
Digital sales
|
|
181,551
|
|
|
148,206
|
|
Shops within department store sales
|
|
102
|
|
|
—
|
|
Running Specialty sales
|
|
27,635
|
|
|
10,685
|
|
Total net sales
|
|
$
|
1,443,365
|
|
|
$
|
1,369,259
|
|
|
|
|
|
|
Brick and mortar comparable store sales increase
|
|
3.4
|
%
|
|
5.7
|
%
|
Digital comparable sales increase
|
|
25.1
|
%
|
|
49.5
|
%
|
Finish Line comparable store sales increase
|
|
5.8
|
%
|
|
9.2
|
%
|
Net sales
increase
d
5.4%
for fiscal
2013
compared to fiscal
2012
. The
increase
was primarily attributable to a Finish Line comparable store sales increase of
5.8%
during fiscal
2013
resulting primarily from a 4.4% increase in store average dollar per transaction, a 0.9% increase in store traffic and a 25.1% increase in digital comparable sales. Comparable store footwear sales for the
fifty-two
weeks ended
March 2, 2013
increased 6.1% while comparable store softgoods sales increased 4.5%.
Cost of Sales (Including Occupancy Costs) and Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 2, 2013
|
|
March 3, 2012
|
|
|
(dollars in thousands)
|
Cost of sales (including occupancy costs)
|
|
$
|
958,921
|
|
|
$
|
889,130
|
|
Gross profit
|
|
$
|
484,444
|
|
|
$
|
480,129
|
|
Gross profit as a percentage of net sales
|
|
33.6
|
%
|
|
35.1
|
%
|
The
1.5%
decrease
in gross profit, as a percentage of net sales, was a result of a 0.8% decrease in product margin, net of shrink, as a percentage of net sales, and a 0.7% increase in occupancy costs as a percentage of net sales. The 0.8% decrease in product margin, net of shrink, as a percentage of net sales, was primarily due to selling a lower proportion of full price product related to markdowns as we continually adjusted our product assortments to customer demands. Also, digital sales, which typically have a lower overall product margin than stores, increased as a percentage of total net sales as compared to the prior year. The 0.7% increase in occupancy costs, as a percentage of net sales, reflects more store openings than closings, as well as, longer lease term agreements entered into for some of our better performing stores during
2013
.
Selling, General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 2, 2013
|
|
March 3, 2012
|
|
|
(dollars in thousands)
|
Selling, general and administrative expenses
|
|
$
|
365,883
|
|
|
$
|
343,629
|
|
Selling, general and administrative expenses as a percentage of net sales
|
|
25.3
|
%
|
|
25.1
|
%
|
The $
22.3 million
increase
in selling, general and administrative expenses was primarily due to the following: (1) variable costs in fulfillment, freight and payroll in conjunction with the 25.1% increase in comparable digital sales as well as the increase in store sales; (2) an increase in marketing expense to drive traffic to our website and our stores; (3) capital investments to support the Company’s technology upgrades, digital platform and omnichannel strategy which has increased depreciation and amortization by $4.2 million, or 15.4%; (4) additional expenses associated with the Running Specialty business growth and (5) start-up costs associated with shops within department stores.
Store Closing Costs
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 2, 2013
|
|
March 3, 2012
|
|
|
(dollars in thousands)
|
Store closing costs
|
|
$
|
671
|
|
|
$
|
1,191
|
|
Store closing costs as a percentage of net sales
|
|
0.1
|
%
|
|
0.1
|
%
|
Number of stores closed
|
|
21
|
|
|
31
|
|
Store closing costs represent the non-cash write-off of any fixtures and equipment upon a store closing. The $
0.5 million
decrease
in store closing costs is a function of
more
stores closed during fiscal
2012
compared to fiscal
2013
that had remaining book value.
Impairment Charges
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 2, 2013
|
|
March 3, 2012
|
|
|
(dollars in thousands)
|
Impairment charges
|
|
$
|
5,593
|
|
|
$
|
974
|
|
Impairment charges as a percentage of net sales
|
|
0.4
|
%
|
|
0.1
|
%
|
Number of stores impaired
|
|
6
|
|
|
4
|
|
The fiscal
2013
impairment charge of $
5.6 million
was primarily a result of a $3.7 million charge associated with the Company’s updated website that launched during the third quarter of fiscal
2013
. Subsequently, it became apparent that there was a degradation of the customer experience, evidenced by a decline in several key performance indicators. As a result, the Company made the strategic decision to transition back to the Company’s legacy website given the importance of the selling season. In February 2013, the Company made the decision to permanently abandon the updated website. The fiscal
2013
impairment charge also included $1.9 million for the write-off of long-lived assets of
6
underperforming stores. The fiscal
2012
impairment charge of $1.0 million was a result of the write-off of long-lived assets of
4
underperforming stores.
Interest Income, Net
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 2, 2013
|
|
March 3, 2012
|
|
|
(dollars in thousands)
|
Interest income, net
|
|
$
|
198
|
|
|
$
|
447
|
|
Interest income, net as a percentage of net sales
|
|
—
|
%
|
|
—
|
%
|
The
decrease
of $
0.2 million
was due to lower invested balances for fiscal
2013
compared to fiscal
2012
.
Income Tax Expense
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 2, 2013
|
|
March 3, 2012
|
|
|
(dollars in thousands)
|
Income tax expense
|
|
$
|
43,314
|
|
|
$
|
49,978
|
|
Income tax expense as a percentage of net sales
|
|
3.0
|
%
|
|
3.6
|
%
|
Effective income tax rate
|
|
38.5
|
%
|
|
37.1
|
%
|
The
increase
in the effective tax rate in fiscal
2013
exists because the Company may only record a tax benefit on its percentage share of the Running Specialty loss while 100% of the Running Specialty loss is included in income before income taxes. The increase also exists because of the release of a reserve for uncertain tax positions of approximately $1.0 million in fiscal
2012
related to the resolution of a state income tax audit that was only partially offset in fiscal
2013
by the release of a reserve for uncertain tax positions of $0.3 million related to the resolution of a U.S. federal income tax audit.
Net Loss Attributable to Redeemable Noncontrolling Interest
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 2, 2013
|
|
March 3, 2012
|
|
|
(dollars in thousands)
|
Net loss attributable to redeemable noncontrolling interest
|
|
$
|
2,292
|
|
|
$
|
—
|
|
Net loss attributable to redeemable noncontrolling interest as a percentage of net sales
|
|
0.2
|
%
|
|
—
|
%
|
The net loss attributable to redeemable noncontrolling interest represents the noncontrolling owner’s portion of the net loss generated by Running Specialty since March 29, 2012, which was the date of the investment by GCPI SR LLC.
Net Income Attributable to The Finish Line, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 2, 2013
|
|
March 3, 2012
|
|
|
(dollars in thousands, except per
share data)
|
Net income attributable to The Finish Line, Inc.
|
|
$
|
71,473
|
|
|
$
|
84,804
|
|
Net income attributable to The Finish Line, Inc. as a percentage of net sales
|
|
5.0
|
%
|
|
6.2
|
%
|
Diluted earnings per share attributable to The Finish Line, Inc. shareholders
|
|
$
|
1.40
|
|
|
$
|
1.59
|
|
The
1.2%
decrease
in net income attributable to The Finish Line, Inc., as a percentage of net sales, was primarily due to the decrease in product margin, increase in occupancy costs and increase in impairment charges, as a percentage of net sales.
Liquidity and Capital Resources.
The Company’s primary source of working capital is cash flows from operations. The following table sets forth material balance sheet and liquidity measures of the Company (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
March 1, 2014
|
|
March 2, 2013
|
Cash and cash equivalents
|
|
$
|
229,079
|
|
|
$
|
226,982
|
|
Merchandise inventories, net
|
|
$
|
304,209
|
|
|
$
|
243,770
|
|
Interest-bearing debt
|
|
$
|
—
|
|
|
$
|
—
|
|
Working capital
|
|
$
|
373,293
|
|
|
$
|
357,657
|
|
Operating Activities
Net cash provided by operating activities was
$119.0 million
,
$81.5 million
and
$94.7 million
for fiscal
2014
,
2013
and
2012
, respectively. Net cash provided by operating activities
increase
d by
$37.5 million
in fiscal
2014
compared to fiscal
2013
. This
increase
is primarily the result of an increase in net income and a net decrease in the cash outflow in working capital balances for fiscal
2014
compared to fiscal
2013
.
At
March 1, 2014
, the Company had cash and cash equivalents of
$229.1 million
, which represents a
$2.1 million
increase
from
March 2, 2013
. Cash and cash equivalents consist primarily of cash on hand and highly liquid instruments purchased with a maturity of three months or less at the date of purchase. At
March 1, 2014
, substantially all of the Company’s cash was invested in deposit accounts at banks.
Consolidated inventories
increase
d
24.8%
at
March 1, 2014
compared to
March 2, 2013
. Finish Line inventories increased 0.2% at
March 1, 2014
compared to
March 2, 2013
. The
increase
in consolidated inventories over the prior year is primarily related to the increase in inventory to support the Company’s merchandise assortment within shops within department stores and the increase in inventory at Running Specialty to support the increase in stores.
Investing Activities
Net cash used in investing activities was
$91.2 million
,
$86.0 million
and
$38.1 million
for fiscal
2014
,
2013
and
2012
, respectively. The
increase
in cash used in investing activities in fiscal
2014
compared to fiscal
2013
was primarily a result of a
$9.2 million
increase in cash paid for acquisitions completed by Running Specialty, which was partially offset by
$3.1 million
in proceeds from the sale of an investment.
Capital expenditures were
$81.7 million
,
$81.6 million
and
$29.1 million
for fiscal
2014
,
2013
and
2012
, respectively. Expenditures in fiscal
2014
were primarily for the construction of
22
new Finish Line stores and
7
new Running Specialty stores, excluding acquisitions, the remodeling and repositioning of existing stores, including additional brand shops such as Finish Line’s Nike Track Club and Brand Jordan, as well as other key brand partnerships for “store-within-store” models, and building out shops within department stores. Further, the Company had capital investments in IT infrastructure to support new supply chain management, warehouse management and merchandising systems and technology to support growth in Finish Line’s digital business, the majority of which have yet to be placed in service as of year-end. In addition to
$81.7 million
of cash paid in fiscal
2014
,
$9.2 million
of capital expenditures for property and equipment was accrued in accounts payable at
March 1, 2014
.
The Company intends to invest approximately $90-$95 million in capital expenditures for the upcoming fiscal year. Of this amount, approximately $9 million is intended for the construction of approximately 15 new Finish Line stores and approximately $15 million is intended for the remodeling or repositioning of existing Finish Line stores with additional brand shops such as Finish Line’s Nike Track Club and Brand Jordan, as well as other key brand partnerships for “store-within-store” models. In addition, approximately $15 million is expected to be spent on building out Branded shops within department stores. The remaining $51-$56 million to be invested is related primarily to projected capital expenditures of approximately $46 million intended for technology investments to support the multi-year core systems upgrade and growth in our digital business and approximately $5 million to support Running Specialty new store growth and other corporate maintenance, which excludes acquisition capital. The Company anticipates satisfying all of these capital expenditures through the use of cash-on-hand and operating cash flows.
Financing Activities
Net cash used in financing activities was
$25.7 million
,
$76.0 million
and
$48.4 million
for fiscal
2014
,
2013
and
2012
, respectively. The
$50.3 million
decrease
in cash used in financing activities in fiscal
2014
compared to fiscal
2013
was primarily due to a reduction of
$54.6 million
of stock repurchases, a
$3.3 million
increase
in proceeds from the issuance of common stock and a
$4.0 million
decrease
in the funding of a related-party note receivable, partially offset by a
$1.5 million
increase
in dividends paid and proceeds from the sale of redeemable noncontrolling interest of
$10.0 million
related to Running Specialty in fiscal
2013
.
Credit Facility
On November 30, 2012, the Company entered into an unsecured $100 million Amended and Restated Revolving Credit Facility Credit Agreement (the “Amended Credit Agreement”) with certain Lenders, which expires on November 30, 2017. The Amended Credit Agreement provides that, under certain circumstances, the Company may increase the maximum amount of the credit facility in an aggregate principal amount not to exceed $200 million. The Amended Credit Agreement will be used by
the Company, among other things, to issue letters of credit, support working capital needs, fund capital expenditures and other general corporate purposes.
Approximately $1.8 million in stand-by letters of credit were outstanding as of
March 1, 2014
under the Amended Credit Agreement. No advances were outstanding under the Amended Credit Agreement as of
March 1, 2014
. Accordingly, the total revolving credit availability under the Amended Credit Agreement was $98.2 million as of
March 1, 2014
.
The Company’s ability to borrow monies in the future under the Amended Credit Agreement is subject to certain conditions, including compliance with certain covenants and making certain representations and warranties. The Amended Credit Agreement contains restrictive covenants that limit, among other things, mergers and acquisitions. In addition, the Company must maintain a maximum leverage ratio (as defined in the Amended Credit Agreement) and minimum consolidated tangible net worth (as defined in the Amended Credit Agreement). The Company was in compliance with all such covenants as of
March 1, 2014
.
The Amended Credit Agreement pricing grid is adjusted quarterly and is based on the Company’s leverage ratio (as defined in the Amended Credit Agreement). The minimum pricing is LIBOR plus 0.90% or Base Rate (as defined in the Amended Credit Agreement) and the maximum pricing is LIBOR plus 1.75% or Base Rate plus 0.75%. The Company is also subject to an unused commitment fee based on the Company’s leverage ratio with minimum pricing of 0.10% and maximum pricing of 0.25%. In addition, the Company is subject to a letter of credit fee based on the Company’s leverage ratio with minimum pricing of 0.40% and maximum pricing of 1.25%.
Share Repurchase Program
On July 21, 2011, the Company’s Board of Directors authorized a share repurchase program (the “2011 Share Repurchase Program”) to repurchase up to 5,000,000 shares of the Company’s common stock outstanding through December 31, 2014. On January 3, 2013, the Company’s Board of Directors amended the 2011 Share Repurchase Program (the “Amended Program”) and authorized the repurchase of an additional 5,000,000 shares of the Company’s common stock, which authorization shall expire on December 31, 2017.
The Company purchased 1,015,838 shares at an average price of $22.27 per share for an aggregate amount of
$22.6 million
in fiscal
2014
. As of
March 1, 2014
, there were 3,904,503 shares remaining available to repurchase under the Amended Program.
As of
March 1, 2014
, the Company held as treasury shares 11,641,219 shares of its common stock at an average price of $18.10 per share for an aggregate purchase amount of $210.7 million. The treasury shares may be issued upon the exercise of employee stock options, issuance of shares for the Employee Stock Purchase Plan and issuance of restricted stock, or for other corporate purposes. Further purchases will occur from time to time as market conditions warrant and as the Company deems appropriate when judged against other alternative uses of cash.
Dividends
On January 16, 2014, the Company increased its quarterly cash dividend to $0.08 per share of the Company’s common stock. The Company declared dividends of $14.2 million and $12.5 million during fiscal
2014
and
2013
, respectively. As of
March 1, 2014
and
March 2, 2013
, dividends declared but not paid were $3.9 million and $3.4 million, respectively. Further declarations of dividends remain at the discretion of the Company.
Share Conversion
On July 20, 2012, all of the Company’s shares of Class B common stock were converted on a one-for-one basis into an equal number of shares of Class A common stock in accordance with the terms of the Company’s Restated Articles of Incorporation, and the Company eliminated its dual class stock structure. The Company did not receive any proceeds from the conversion of the Class B shares, and the Company will not receive any proceeds from the sale of any Class A shares issued as a result of the conversion. Per the Company’s Restated Articles of Incorporation, as of the conversion, all Class B shares are no longer authorized.
Strategic Priority Funding
Management believes that cash on hand of
$229.1 million
as of
March 1, 2014
and anticipated future operating cash flows will be sufficient to deliver on the Company’s three strategic priorities to drive sales and earnings growth:
|
|
•
|
Continue to grow Finish Line through improved store productivity and continued elevated digital growth;
|
|
|
•
|
Continue to expand as a multi-divisional retailer, maximizing the growth opportunities in shops within department stores and Running Specialty while exploring other opportunities as well; and
|
|
|
•
|
Continue to provide direct returns to shareholders through dividends and share repurchases.
|
Contractual Obligations
The following table summarizes the Company’s long-term contractual obligations as of
March 1, 2014
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Payments Due by Fiscal Year
|
|
|
Less than
1 Year
|
|
1-3
Years
|
|
3-5
Years
|
|
After 5
Years
|
|
Other
|
Contractual Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease obligations(1)
|
|
$
|
688,189
|
|
|
$
|
87,352
|
|
|
$
|
163,361
|
|
|
$
|
153,898
|
|
|
$
|
283,578
|
|
|
$
|
—
|
|
Other liabilities(2)(3)(4)
|
|
17,404
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,404
|
|
Total contractual obligations
|
|
$
|
705,593
|
|
|
$
|
87,352
|
|
|
$
|
163,361
|
|
|
$
|
153,898
|
|
|
$
|
283,578
|
|
|
$
|
17,404
|
|
_____________
|
|
(1)
|
Includes the guaranteed minimum license fee associated with shops within department stores. The Company has entered into an arrangement to sell product within its shops within department stores which includes a guaranteed minimum license fee in fiscal years 2017 through 2023. The license fee is compensation for use of the selling space and for administrative and operational services and use of the department store’s name.
|
|
|
(2)
|
Other liabilities includes future estimated payments associated with unrecognized tax benefits of $9.6 million. The Company expects to make cash outlays in the future related to our unrecognized tax benefits. The liability is included in the “Other” category as the timing and amount of these payments is not known until the matters are resolved with relevant tax authorities. For further information related to unrecognized tax benefits, see Note 6, “Income Taxes,” to the consolidated financial statements included in Item 8, Financial Statements and Supplementary Data.
|
|
|
(3)
|
Other liabilities includes future payments related to our non-qualified deferred compensation plan of $5.9 million. The liability is included in the “Other” category as the timing of these future payments is not known until an associate leaves the Company or otherwise requests an in-service distribution. For further information related to our non-qualified deferred compensation plan, see Note 7, “Retirement Plan,” to the consolidated financial statements included in Item 8, Financial Statements and Supplementary Data.
|
|
|
(4)
|
Other liabilities includes liabilities of $1.9 million that are measured at fair value on a recurring basis related to contingent consideration for two acquisitions. The liabilities are included in the “Other” category and disclosed in Note 2, “Acquisitions and Goodwill,” to the consolidated financial statements included in Item 8, Financial Statements and Supplementary Data.
|
The Company’s contractual obligations primarily consist of operating leases and open purchase orders for merchandise inventory. In addition, in the ordinary course of business, the Company enters into arrangements with vendors to purchase merchandise up to 12 months in advance of expected delivery. These open purchase orders do not contain any significant termination payments or other penalties if cancelled. Total open purchase orders outstanding at
March 1, 2014
were $523.5 million, and have not been included in the table above.
Off Balance Sheet Arrangements
The Company has no off balance sheet arrangements as that term is defined in Item 303(a)(4) of Regulation S-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risks
The Company is exposed to changes in interest rates primarily from its investments in marketable securities from time to time. The Company did not have any marketable securities as of
March 1, 2014
. The Company does not use interest rate derivative instruments to manage exposure to interest rate changes.
Item 8. Financial Statements and Supplementary Data
Management’s Report on Internal Control Over Financial Reporting
The management of The Finish Line, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934). The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.
Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of
March 1, 2014
. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control—Integrated Framework
(1992 framework). Based on management’s assessment it believes that, as of
March 1, 2014
, the Company’s internal control over financial reporting is effective based on those criteria.
The Company’s independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on the Company’s internal control over financial reporting. Ernst & Young LLP’s report appears on the following page and expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of
March 1, 2014
.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of The Finish Line, Inc.
We have audited The Finish Line, Inc.’s internal control over financial reporting as of
March 1, 2014
based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). The Finish Line, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, The Finish Line, Inc. maintained, in all material respects, effective internal control over financial reporting as of
March 1, 2014
based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of The Finish Line, Inc. as of
March 1, 2014
and
March 2, 2013
, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for each of the three years in the period ended
March 1, 2014
of The Finish Line, Inc., and our report dated
April 29, 2014
, expressed an unqualified opinion thereon.
Indianapolis, Indiana
April 29, 2014
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of The Finish Line, Inc.
We have audited the accompanying consolidated balance sheets of The Finish Line, Inc. as of
March 1, 2014
and
March 2, 2013
, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for each of the three years in the period ended
March 1, 2014
. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Finish Line, Inc. at
March 1, 2014
and
March 2, 2013
, and the consolidated results of its operations and its cash flows for each of the three years in the period ended
March 1, 2014
, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), The Finish Line, Inc.’s. internal control over financial reporting as of
March 1, 2014
, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated
April 29, 2014
, expressed an unqualified opinion thereon.
Indianapolis, Indiana
April 29, 2014
THE FINISH LINE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
March 1,
2014
|
|
March 2,
2013
|
ASSETS
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
229,079
|
|
|
$
|
226,982
|
|
Accounts receivable, net
|
|
16,062
|
|
|
14,768
|
|
Merchandise inventories, net
|
|
304,209
|
|
|
243,770
|
|
Other
|
|
17,613
|
|
|
6,174
|
|
Total current assets
|
|
566,963
|
|
|
491,694
|
|
PROPERTY AND EQUIPMENT:
|
|
|
|
|
Land
|
|
1,557
|
|
|
1,557
|
|
Building
|
|
42,840
|
|
|
42,460
|
|
Leasehold improvements
|
|
239,555
|
|
|
227,080
|
|
Furniture, fixtures and equipment
|
|
170,252
|
|
|
143,510
|
|
Construction in progress
|
|
61,154
|
|
|
36,339
|
|
|
|
515,358
|
|
|
450,946
|
|
Less accumulated depreciation
|
|
292,176
|
|
|
270,345
|
|
Total property and equipment, net
|
|
223,182
|
|
|
180,601
|
|
Deferred income taxes
|
|
—
|
|
|
12,018
|
|
Goodwill
|
|
25,608
|
|
|
13,888
|
|
Other assets, net
|
|
9,192
|
|
|
8,221
|
|
Total assets
|
|
$
|
824,945
|
|
|
$
|
706,422
|
|
See accompanying notes.
THE FINISH LINE, INC.
CONSOLIDATED BALANCE SHEETS - (CONTINUED)
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
March 1,
2014
|
|
March 2,
2013
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
Accounts payable
|
|
$
|
120,982
|
|
|
$
|
75,641
|
|
Employee compensation
|
|
24,269
|
|
|
15,579
|
|
Accrued property and sales tax
|
|
11,162
|
|
|
9,245
|
|
Income taxes payable
|
|
6,932
|
|
|
5,211
|
|
Deferred income taxes
|
|
3,998
|
|
|
7,239
|
|
Other liabilities and accrued expenses
|
|
26,327
|
|
|
21,122
|
|
Total current liabilities
|
|
193,670
|
|
|
134,037
|
|
Commitments and contingencies
|
|
|
|
|
Deferred credits from landlords
|
|
27,658
|
|
|
27,215
|
|
Deferred income taxes
|
|
1,366
|
|
|
—
|
|
Other long-term liabilities
|
|
18,293
|
|
|
16,638
|
|
Redeemable noncontrolling interest
|
|
1,774
|
|
|
3,669
|
|
SHAREHOLDERS’ EQUITY:
|
|
|
|
|
Preferred stock, $.01 par value; 1,000 shares authorized; none issued
|
|
—
|
|
|
—
|
|
Common stock, $.01 par value; 110,000 shares authorized
|
|
|
|
|
Shares issued—(2014—60,145; 2013—59,587)
|
|
|
|
|
Shares outstanding—(2014—48,117; 2013—48,193)
|
|
601
|
|
|
596
|
|
Additional paid-in capital
|
|
224,619
|
|
|
217,045
|
|
Retained earnings
|
|
567,631
|
|
|
504,883
|
|
Treasury stock—(2014—11,641; 2013—11,394)
|
|
(210,667
|
)
|
|
(197,661
|
)
|
Total shareholders’ equity
|
|
582,184
|
|
|
524,863
|
|
Total liabilities and shareholders’ equity
|
|
$
|
824,945
|
|
|
$
|
706,422
|
|
See accompanying notes.
THE FINISH LINE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 1,
2014
|
|
March 2,
2013
|
|
March 3,
2012
|
Net sales
|
|
$
|
1,670,410
|
|
|
$
|
1,443,365
|
|
|
$
|
1,369,259
|
|
Cost of sales (including occupancy costs)
|
|
1,122,967
|
|
|
958,921
|
|
|
889,130
|
|
Gross profit
|
|
547,443
|
|
|
484,444
|
|
|
480,129
|
|
Selling, general and administrative expenses
|
|
424,571
|
|
|
365,883
|
|
|
343,629
|
|
Store closing costs
|
|
713
|
|
|
671
|
|
|
1,191
|
|
Impairment charges
|
|
2,054
|
|
|
5,593
|
|
|
974
|
|
Operating income
|
|
120,105
|
|
|
112,297
|
|
|
134,335
|
|
Interest income, net
|
|
37
|
|
|
198
|
|
|
447
|
|
Gain on sale of investment
|
|
2,076
|
|
|
—
|
|
|
—
|
|
Income before income taxes
|
|
122,218
|
|
|
112,495
|
|
|
134,782
|
|
Income tax expense
|
|
47,166
|
|
|
43,314
|
|
|
49,978
|
|
Net income
|
|
75,052
|
|
|
69,181
|
|
|
84,804
|
|
Net loss attributable to redeemable noncontrolling interest
|
|
1,851
|
|
|
2,292
|
|
|
—
|
|
Net income attributable to The Finish Line, Inc.
|
|
$
|
76,903
|
|
|
$
|
71,473
|
|
|
$
|
84,804
|
|
Basic earnings per share attributable to The Finish Line, Inc. shareholders
|
|
$
|
1.57
|
|
|
$
|
1.42
|
|
|
$
|
1.62
|
|
Diluted earnings per share attributable to The Finish Line, Inc. shareholders
|
|
$
|
1.56
|
|
|
$
|
1.40
|
|
|
$
|
1.59
|
|
Dividends declared per share
|
|
$
|
0.29
|
|
|
$
|
0.25
|
|
|
$
|
0.21
|
|
See accompanying notes.
THE FINISH LINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
March 1,
2014
|
|
March 2,
2013
|
|
March 3,
2012
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net income
|
|
$
|
75,052
|
|
|
$
|
69,181
|
|
|
$
|
84,804
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
Impairment charges
|
|
2,054
|
|
|
5,593
|
|
|
974
|
|
Depreciation and amortization
|
|
34,964
|
|
|
31,182
|
|
|
27,027
|
|
Deferred income taxes
|
|
10,143
|
|
|
5,041
|
|
|
10,805
|
|
Loss on disposals of property and equipment
|
|
1,448
|
|
|
1,250
|
|
|
1,528
|
|
Gain on sale of investment
|
|
(2,076
|
)
|
|
—
|
|
|
—
|
|
Share-based compensation
|
|
7,068
|
|
|
6,612
|
|
|
5,187
|
|
Excess tax benefits from share-based compensation
|
|
(2,897
|
)
|
|
(2,963
|
)
|
|
(5,951
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
Accounts receivable, net
|
|
(1,189
|
)
|
|
(5,710
|
)
|
|
1,511
|
|
Merchandise inventories, net
|
|
(56,707
|
)
|
|
(22,403
|
)
|
|
(23,880
|
)
|
Other assets
|
|
(13,204
|
)
|
|
9,342
|
|
|
(8,645
|
)
|
Accounts payable
|
|
43,315
|
|
|
(2,471
|
)
|
|
(7,512
|
)
|
Employee compensation
|
|
8,690
|
|
|
(6,843
|
)
|
|
3,887
|
|
Income taxes payable
|
|
6,248
|
|
|
(6,850
|
)
|
|
8,971
|
|
Other liabilities and accrued expenses
|
|
5,632
|
|
|
914
|
|
|
2,950
|
|
Deferred credits from landlords
|
|
443
|
|
|
(382
|
)
|
|
(6,916
|
)
|
Net cash provided by operating activities
|
|
118,984
|
|
|
81,493
|
|
|
94,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
Capital expenditures for property and equipment
|
|
(81,668
|
)
|
|
(81,586
|
)
|
|
(29,131
|
)
|
Acquisitions, net of cash acquired
|
|
(12,687
|
)
|
|
(3,526
|
)
|
|
(8,495
|
)
|
Payments for intangible assets
|
|
—
|
|
|
—
|
|
|
(550
|
)
|
Proceeds from disposals of property and equipment
|
|
62
|
|
|
77
|
|
|
40
|
|
Cash paid for investment
|
|
—
|
|
|
(1,000
|
)
|
|
—
|
|
Proceeds from sale of investment
|
|
3,076
|
|
|
—
|
|
|
—
|
|
Net cash used in investing activities
|
|
(91,217
|
)
|
|
(86,035
|
)
|
|
(38,136
|
)
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Dividends paid to shareholders
|
|
(13,674
|
)
|
|
(12,147
|
)
|
|
(10,512
|
)
|
Proceeds from issuance of common stock
|
|
7,725
|
|
|
4,422
|
|
|
16,496
|
|
Excess tax benefits from share-based compensation
|
|
2,897
|
|
|
2,963
|
|
|
5,951
|
|
Purchase of treasury stock
|
|
(22,618
|
)
|
|
(77,208
|
)
|
|
(60,368
|
)
|
Funding of related-party note receivable
|
|
—
|
|
|
(4,000
|
)
|
|
—
|
|
Proceeds from sale of redeemable noncontrolling interest
|
|
—
|
|
|
10,000
|
|
|
—
|
|
Net cash used in financing activities
|
|
(25,670
|
)
|
|
(75,970
|
)
|
|
(48,433
|
)
|
Net increase (decrease) in cash and cash equivalents
|
|
2,097
|
|
|
(80,512
|
)
|
|
8,171
|
|
Cash and cash equivalents at beginning of year
|
|
226,982
|
|
|
307,494
|
|
|
299,323
|
|
Cash and cash equivalents at end of year
|
|
$
|
229,079
|
|
|
$
|
226,982
|
|
|
$
|
307,494
|
|
Supplemental disclosure of noncash operating and investing activities:
|
|
|
|
|
|
|
Capital expenditures incurred but not yet paid
|
|
$
|
9,200
|
|
|
$
|
9,715
|
|
|
$
|
—
|
|
See accompanying notes.
THE FINISH LINE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Amount
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Treasury
Stock
|
|
Totals
|
|
|
Class A
|
|
Class B
|
|
Treasury
|
|
Class A
|
|
Class B
|
|
Balance at February 26, 2011
|
|
51,037
|
|
|
1,351
|
|
|
6,964
|
|
|
$
|
580
|
|
|
$
|
13
|
|
|
$
|
197,036
|
|
|
$
|
372,047
|
|
|
$
|
(79,431
|
)
|
|
$
|
490,245
|
|
Net income attributable to The Finish Line, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,804
|
|
|
|
|
84,804
|
|
Cash dividends declared ($0.21 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,967
|
)
|
|
|
|
(10,967
|
)
|
Non-qualified Class A common stock options exercised and related tax benefits
|
|
1,490
|
|
|
|
|
(1,490
|
)
|
|
|
|
|
|
10,428
|
|
|
|
|
11,237
|
|
|
21,665
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
5,187
|
|
|
|
|
|
|
5,187
|
|
Restricted shares vested, net of repurchase for taxes
|
|
288
|
|
|
58
|
|
|
(288
|
)
|
|
|
|
|
|
(1,508
|
)
|
|
|
|
17
|
|
|
(1,491
|
)
|
Shares issued under employee stock purchase plan
|
|
27
|
|
|
|
|
(27
|
)
|
|
|
|
|
|
128
|
|
|
|
|
334
|
|
|
462
|
|
Class B common stock conversion to Class A common stock
|
|
838
|
|
|
(838
|
)
|
|
|
|
8
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
—
|
|
Treasury stock purchased
|
|
(2,885
|
)
|
|
|
|
2,885
|
|
|
|
|
|
|
|
|
|
|
(60,368
|
)
|
|
(60,368
|
)
|
Balance at March 3, 2012
|
|
50,795
|
|
|
571
|
|
|
8,044
|
|
|
588
|
|
|
5
|
|
|
211,271
|
|
|
445,884
|
|
|
(128,211
|
)
|
|
529,537
|
|
Net income attributable to The Finish Line, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,473
|
|
|
|
|
71,473
|
|
Cash dividends declared ($0.25 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,474
|
)
|
|
|
|
(12,474
|
)
|
Non-qualified Class A common stock options exercised and related tax benefits
|
|
544
|
|
|
|
|
(544
|
)
|
|
|
|
|
|
(869
|
)
|
|
|
|
8,456
|
|
|
7,587
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
6,612
|
|
|
|
|
|
|
6,612
|
|
Restricted shares vested, net of repurchase for taxes
|
|
42
|
|
|
87
|
|
|
48
|
|
|
|
|
2
|
|
|
(36
|
)
|
|
|
|
(1,212
|
)
|
|
(1,246
|
)
|
Shares issued under employee stock purchase plan
|
|
33
|
|
|
|
|
(33
|
)
|
|
|
|
|
|
67
|
|
|
|
|
514
|
|
|
581
|
|
Class B common stock conversion to Class A common stock
|
|
658
|
|
|
(658
|
)
|
|
|
|
8
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
1
|
|
Treasury stock purchased
|
|
(3,879
|
)
|
|
|
|
3,879
|
|
|
|
|
|
|
|
|
|
|
(77,208
|
)
|
|
(77,208
|
)
|
Balance at March 2, 2013
|
|
48,193
|
|
|
—
|
|
|
11,394
|
|
|
596
|
|
|
—
|
|
|
217,045
|
|
|
504,883
|
|
|
(197,661
|
)
|
|
524,863
|
|
Net income attributable to The Finish Line, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,903
|
|
|
|
|
76,903
|
|
Cash dividends declared ($0.29 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,155
|
)
|
|
|
|
(14,155
|
)
|
Non-qualified common stock options exercised and related tax benefits
|
|
751
|
|
|
|
|
(751
|
)
|
|
|
|
|
|
582
|
|
|
|
|
10,031
|
|
|
10,613
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
7,068
|
|
|
|
|
|
|
7,068
|
|
Restricted shares vested, net of repurchase for taxes
|
|
158
|
|
|
|
|
|
13
|
|
|
5
|
|
|
|
|
|
(268
|
)
|
|
|
|
(833
|
)
|
|
(1,096
|
)
|
Shares issued under employee stock purchase plan
|
|
31
|
|
|
|
|
(31
|
)
|
|
|
|
|
|
192
|
|
|
|
|
414
|
|
|
606
|
|
Treasury stock purchased
|
|
(1,016
|
)
|
|
|
|
1,016
|
|
|
|
|
|
|
|
|
|
|
(22,618
|
)
|
|
(22,618
|
)
|
Balance at March 1, 2014
|
|
48,117
|
|
|
—
|
|
|
11,641
|
|
|
$
|
601
|
|
|
$
|
—
|
|
|
$
|
224,619
|
|
|
$
|
567,631
|
|
|
$
|
(210,667
|
)
|
|
$
|
582,184
|
|
See accompanying notes.
THE FINISH LINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
Basis of Presentation.
The consolidated financial statements include the accounts of The Finish Line, Inc. and its subsidiaries (collectively, the “Company”). All intercompany transactions and balances have been eliminated. Throughout these notes to the consolidated financial statements, fiscal years ended
March 1, 2014
,
March 2, 2013
and
March 3, 2012
are referred to as
2014
,
2013
and
2012
, respectively.
The Company uses a “Retail” calendar. The Company’s fiscal year ends on the Saturday closest to the last day of February and included
52
weeks in
2014
and
2013
and
53
weeks in
2012
.
Nature of Operations.
The Company is one of the largest specialty retailers in the United States, and operates
two
retail divisions under the Finish Line brand name (“Finish Line”) and the Running Specialty Group (“Running Specialty”).
In
2014
, the Company purchased approximately
88%
of its merchandise from its
five
largest suppliers. The largest supplier, Nike, accounted for approximately
70%
,
69%
and
64%
of merchandise purchases in
2014
,
2013
and
2012
, respectively.
Use of Estimates.
Preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Segment Information.
The Company is a premium retailer of athletic shoes, apparel and accessories for men, women and kids, throughout the United States, through
four
operating segments: brick and mortar stores, digital (which includes internet, mobile and tablet), shops within department stores and Running Specialty. Given the similar economic characteristics of brick and mortar stores, digital and shops within department stores, which include a similar nature of products sold, type of customer and method of distribution, and Running Specialty being immaterial, the Company’s operating segments are aggregated into
one
reportable segment. The following table sets forth net sales of the Company by major category for each of the following years (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Category
|
|
2014
|
|
2013
|
|
2012
|
Footwear
|
|
$
|
1,466,039
|
|
|
88
|
%
|
|
$
|
1,237,685
|
|
|
86
|
%
|
|
$
|
1,177,114
|
|
|
86
|
%
|
Softgoods
|
|
204,371
|
|
|
12
|
%
|
|
205,680
|
|
|
14
|
%
|
|
192,145
|
|
|
14
|
%
|
Total net sales
|
|
$
|
1,670,410
|
|
|
100
|
%
|
|
$
|
1,443,365
|
|
|
100
|
%
|
|
$
|
1,369,259
|
|
|
100
|
%
|
Cash and Cash Equivalents.
Cash and cash equivalents consist primarily of cash on hand and highly liquid instruments purchased with a maturity of three months or less at the date of purchase. At
March 1, 2014
, substantially all of the Company’s cash was invested in deposit accounts at banks. The majority of payments due from banks for credit card transactions process within
24
to
48
hours and are accordingly classified as cash and cash equivalents.
Merchandise Inventories.
Merchandise inventories are valued at the lower of cost or market using a weighted-average cost method, which approximates the first-in, first-out method. The Company’s valuation of merchandise inventory includes markdown adjustments for merchandise that will be sold below cost and the impact of shrinkage. Markdowns are based upon historical information and assumptions about future demand and market conditions. Shrinkage is based on historical information and assumptions as to current shrink trends. Vendor rebates are applied as a reduction to the cost of merchandise inventories.
Property and Equipment.
Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful lives of the assets:
30
years for buildings and
three
to
10
years for furniture, fixtures and equipment. Improvements to leased premises are amortized on a straight-line basis over the shorter of the estimated useful life of the asset, generally
10
years, or the remaining lease term. Significant additions and improvements that extend the useful life of an asset are capitalized. Maintenance and repairs are charged to current operations as incurred. Depreciation expense for
2014
,
2013
and
2012
was
$36.4 million
,
$31.3 million
and
$27.1 million
, respectively.
Impairment of Property and Equipment.
In accordance with Accounting Standards Codification “ASC” 360, the Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company considers historical performance and future estimated
results in its evaluation of potential impairment and then compares the carrying amount of the asset to the estimated future undiscounted cash flows expected to be generated by the asset. If an asset is considered to be impaired, the impairment recognized is measured by comparing projected discounted cash flows to the asset’s carrying value. The estimation of fair value is measured by discounting expected future cash flows at the discount rate the Company utilizes to evaluate potential investments.
Goodwill and Other Intangible Assets.
The Company accounts for goodwill and other intangible assets in accordance with ASC 350,
Goodwill and Other Intangible Assets
(“ASC 350”). ASC 350 requires that goodwill and intangible assets with indefinite lives not be amortized, but reviewed for impairment if impairment indicators arise and, at a minimum, annually. Intangible assets that are deemed to have finite lives are amortized over their estimated useful lives.
The goodwill impairment test is a two-step test. In the first step, the Company compares the fair value of each reporting unit with goodwill to its carrying value. The Company determines the fair value of its reporting units with goodwill using a combination of a discounted cash flow and a market value approach. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that reporting unit, goodwill is not impaired and the Company is not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the Company must perform the second step of the goodwill impairment test in order to determine the implied fair value of the reporting unit’s goodwill and compare it to the carrying value of the reporting unit’s goodwill. The activities in the second step include valuing the tangible and intangible assets and liabilities. If the implied fair value of goodwill is less than the carrying value, an impairment loss is recognized for the difference.
Intangible assets that have been determined to have indefinite lives relate to a domain name and are also not subject to amortization and are reviewed at least annually for potential impairment, as described above. The fair value of the Company’s indefinite lived intangible asset is estimated and compared to its carrying value. The Company recognizes an impairment charge when the estimated fair value of the intangible asset is less than the carrying value.
There were
no
impairment charges recognized by the Company related to goodwill or other intangible assets in 2014, 2013 or 2012.
Deferred Credits From Landlords.
Deferred credits from landlords consist of step rent and allowances from landlords related to the Company’s retail stores. Step rent represents the difference between actual operating lease payments due and straight-line rent expense, which is recorded by the Company over the term of the lease, including the pre-opening build-out period. This amount is generally recorded as a deferred credit in the early years of the lease, when cash payments are generally lower than the straight-line rent expense, and reduced in the later years of the lease, when payments begin to exceed the straight-line expense. Landlord allowances are generally comprised of amounts promised to the Company by landlords in the form of cash or rent abatements. These allowances are part of the negotiated terms of the lease. In situations where cash is to be received, the Company records a receivable for the full amount of the allowance when certain performance criteria articulated in the lease are met and a liability is concurrently established. This deferred credit from landlords is amortized into income (through lower rent expense) over the term, including the pre-opening build-out period, of the applicable lease and the receivable is reduced as amounts are received from the landlord.
Revenue Recognition.
Revenues are recognized at the time the customer receives the merchandise, which for digital revenues reflects an estimate of shipments that have not been received by the customer based on shipping terms and estimated delivery times. Sales include merchandise, net of returns and excluding all taxes.
The Company sells gift cards with no expiration dates to customers and does not charge administrative fees on unused gift cards. The Company recognizes revenue from gift cards when they are redeemed by the customer. In addition, the Company recognizes revenue on unredeemed gift cards when the likelihood of the gift card being redeemed is remote and there is no legal obligation to remit the value of unredeemed gift cards to the relevant jurisdictions. The Company determined the gift card breakage rate based on historical redemption patterns. During the 4
th
quarter of
2014
,
2013
and
2012
the Company recorded
$0.7 million
,
$0.4 million
and
$0.3 million
, respectively, of revenue related to gift card breakage. Gift card breakage is included in net sales in the Company’s consolidated statements of income, however it is not included in the comparable store sales amounts.
Cost of Sales.
Cost of sales includes the cost associated with acquiring merchandise from vendors, occupancy costs, license fees, provision for inventory shortages and credits and allowances from merchandise vendors. Cash consideration received from merchandise vendors after the related merchandise has been sold is recorded as an offset to cost of sales in the period negotiations are finalized. For cash consideration received on merchandise still in inventory, the allowance is recorded as a reduction to the cost of on-hand inventory and recorded as a reduction of cost of sales at the time of sale.
Because the Company does not include the costs associated with operating its distribution center and freight within cost of sales, the Company’s gross profit may not be comparable to those of other retailers that may include all costs related to their distribution centers in cost of sales and in the calculation of gross profit.
Selling, General and Administrative Expenses.
Selling, general and administrative expenses include store payroll and related payroll benefits, store operating expenses, advertising, cooperative advertising allowances, shipping expense associated with shipping product to customers, costs associated with operating our distribution center and freight, including moving merchandise from our distribution center to stores, share-based compensation and other corporate related expenses.
Advertising.
The Company expenses the cost of advertising as incurred, net of reimbursements for cooperative advertising. The reimbursements for cooperative advertising are agreed upon with vendors and are recorded in the same period as the associated expenses are incurred. Advertising expense was as follows for each of the following years (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
Advertising expense
|
|
$
|
41,818
|
|
|
$
|
39,948
|
|
|
$
|
35,827
|
|
Cooperative advertising credits
|
|
(9,846
|
)
|
|
(9,295
|
)
|
|
(7,839
|
)
|
Net advertising expense
|
|
$
|
31,972
|
|
|
$
|
30,653
|
|
|
$
|
27,988
|
|
Store Pre-opening Costs.
Store pre-opening costs and other non-capitalized expenditures, including payroll, training costs and straight-line rent expense, are expensed as incurred.
Store Closing Costs.
Store closing costs represent the non-cash write-off of any fixtures and equipment upon a store closing. In the event a store is closed before its lease has expired, any estimated post-closing lease obligations, less sublease rental income, is provided for when the leased space is no longer in use. The Company closed
24
,
21
and
31
stores in
2014
,
2013
and
2012
, respectively.
Income Taxes.
The Company accounts for income taxes under the asset and liability method. Under this method, the amount of taxes currently payable or refundable are accrued and deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets are also recognized for realizable loss and tax credit carryforwards. The deferred tax assets may be reduced by a valuation allowance, which is established when it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. In addition, management is required to evaluate all available evidence including estimating future taxable income by taxing jurisdictions, the future reversal of temporary differences, tax planning strategies and recent results of operations when making its judgment to determine whether or not to record a valuation allowance for a portion, or all, of its deferred tax assets. Deferred tax assets and liabilities are measured using enacted income tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in the Company’s consolidated statements of income in the period that includes the enactment date.
The Company calculates an annual effective income tax rate based on annual income, permanent differences between book and tax income and statutory income tax rates. The Company adjusts the annual effective income tax rate as additional information on outcomes or events becomes available. The Company’s effective income tax rate is affected by items including changes in tax law, the tax jurisdiction of new stores or business ventures, the level of earnings or losses, the results of tax audits and the level of investment income.
The Company’s income tax returns, like those of most companies, are periodically audited by tax authorities. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income among various tax jurisdictions. At any one time, multiple tax years are subject to audit by the various tax authorities. The Company accounts for uncertainty in income taxes using a two-step approach for evaluating income tax positions. The first step requires the Company to conclude that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination by a tax authority. The second step applies if the Company has concluded that the tax position is more likely than not to be sustained upon examination and requires the Company to measure the largest amount of benefit, determined on a cumulative probability basis, which is more likely than not to be realized upon ultimate settlement. The Company adjusts its accrual for uncertain tax positions and income tax provision in the period in which matters are effectively settled with tax authorities at amounts different from its established accrual, the statute of limitations expires for the relevant taxing authority to examine the tax position or when more information becomes available. The Company includes its accrual for uncertain tax positions, including accrued penalties and interest, in other long-term liabilities on the consolidated balance sheets unless the liability is expected to be paid within one year. Changes to the accrual for uncertain tax positions, including accrued penalties and interest, are included in income tax expense in the consolidated statements of income.
Earnings Per Share.
Basic earnings per share is calculated by dividing net income associated with common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share assumes the issuance of additional shares of common stock by the Company upon exercise of all outstanding stock options and contingently issuable securities if the effect is dilutive, in accordance with the treasury stock method or two class method (whichever is more dilutive) as discussed in ASC 260-10,
Earnings Per Share
.
ASC 260-10 requires the inclusion of restricted stock as participating securities, since they have the right to share in dividends, if declared, equally with common shareholders. During periods of net income, participating securities are allocated a proportional share of net income determined by dividing total weighted average participating securities by the sum of total weighted average common shares and participating securities (“the two-class method”). During periods of net loss, no effect is given to participating securities since they do not share in the losses of the Company. Participating securities have the effect of diluting both basic and diluted earnings per share during periods of net income. All per share amounts, unless otherwise noted, are presented on a diluted basis.
Financial Instruments.
Financial instruments consist of cash and cash equivalents, accounts receivable and accounts payable. The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of these instruments.
As of
March 1, 2014
and
March 2, 2013
, the Company had not invested in, nor did it have, any derivative financial instruments.
Share-Based Compensation.
The Company accounts for share-based compensation by the measuring and recognizing of compensation expense for all share-based awards made to employees and directors based on estimated fair values on the grant date. The Company is required to estimate the fair value of share-based awards on the date of grant and recognize as expense the value of the portion of the award that is ultimately expected to vest over the requisite service period.
Share-based compensation expense recognized in the consolidated statements of income is based on awards ultimately expected to vest, and accordingly has been reduced for estimated forfeitures. Forfeitures are required to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company applies an estimated forfeiture rate based on historical data to determine the amount of compensation expense.
Compensation expense for stock options is recognized, net of forfeitures, over the requisite service period on a straight-line basis, using a single option approach (each option is valued as one grant, irrespective of the number of vesting tranches). Restricted stock expense is recognized, net of forfeitures, on a straight-line basis over the requisite service period.
Fair Value Measurements.
Fair value measurements are determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants exclusive of any transaction costs. The Company utilizes a fair value hierarchy based upon the observability of inputs used in valuation techniques as follows:
|
|
|
|
Level 1:
|
|
Observable inputs such as quoted prices in active markets;
|
|
|
|
Level 2:
|
|
Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
|
|
|
|
Level 3:
|
|
Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
Self-Insurance Reserves.
The Company is self-insured for certain losses related to health, workers’ compensation and general liability insurance, although we maintain stop-loss coverage with third-party insurers to limit our liability exposure. Liabilities associated with these losses are estimated in part by considering historical claims experience, industry factors, severity factors and other actuarial assumptions.
Recent Accounting Pronouncements.
Recently issued accounting pronouncements did not, or are not believed by management to, have a material effect on the Company’s present or future consolidated financial statements.
2. Acquisitions and Goodwill
On March 29, 2012, GCPI SR LLC (“GCPI”) made a
$10.0 million
strategic investment in Running Specialty. The Company remained majority owner. GCPI has the right to “put” and the Company has the right to “call” after March 4, 2017, under certain circumstances, GCPI’s interest in Running Specialty at an agreed upon price approximating fair value. Also, as part of the transaction, GCPI issued to the Company a
$4.0 million
related-party promissory note (the “Promissory Note”), which is collateralized with GCPI’s interest in Running Specialty, due
March 31, 2021
or earlier depending on certain stipulated events in the control of GCPI. The Promissory Note calls for interest payments based in part on a fixed rate and in part on participation in the value of other investments held by GCPI. The balance of the Promissory Note and related accrued interest was
$4.1 million
and
$4.0 million
at
March 1, 2014
and
March 2, 2013
, respectively, and has been netted against the redeemable noncontrolling interest on the consolidated balance sheets.
The redeemable noncontrolling interest is classified as mezzanine equity and measured at the greater of estimated fair value at the end of each reporting period or the historical cost basis of the redeemable noncontrolling interest, net of the Promissory Note and related accrued interest and adjusted for cumulative earnings or loss allocations. The resulting increases or decreases in the estimated redemption amount are affected by corresponding charges against retained earnings, or in the absence of retained earnings, additional paid-in capital. As of
March 1, 2014
and
March 2, 2013
the redeemable noncontrolling interest was measured at historical cost basis. The loss allocations for
2014
and
2013
were
$1.9 million
and
$2.3 million
, respectively.
During
2014
, the Company completed four individually immaterial acquisitions for total consideration of
$13.0 million
, net of cash acquired, which were funded through the Company’s existing cash. In addition to cash consideration, the transactions included aggregate contingent consideration with an estimated fair value of
$0.5 million
, which is included within other long-term liabilities. The Company determined the estimated fair value based on discounted cash flow analyses and estimates made by management. The entities acquired operated
fifteen
specialty running stores in Ohio, Kentucky, Indiana, Colorado and Virginia. In connection with these acquisitions, the Company recorded goodwill of
$11.6 million
during
2014
. Goodwill is deductible for U.S. federal income tax purposes.
The Company allocated the aggregated preliminary purchase price based upon the tangible and intangible assets acquired, net of liabilities. The allocation of the preliminary purchase price for
2014
acquisitions is detailed below (in thousands):
|
|
|
|
|
|
Allocation of
Purchase Price
|
Goodwill
|
$
|
11,608
|
|
Tangible assets, net of liabilities
|
1,832
|
|
Contingent consideration
|
(450
|
)
|
Total purchase price
|
$
|
12,990
|
|
During
2013
, the Company completed two individually immaterial acquisitions for total consideration of
$4.2 million
, net of cash acquired, which were funded through the Company’s existing cash. The Company determined the estimated fair value based on discounted cash flow analyses and estimates made by management. The entities acquired operated six specialty running shops in Texas and Virginia. In connection with these acquisitions, the Company recorded goodwill of
$5.4 million
during
2013
.
The Company allocated the aggregated purchase price based upon the tangible and intangible assets acquired, net of liabilities. The allocation of the purchase price for
2013
acquisitions is detailed below (in thousands):
|
|
|
|
|
|
Allocation of
Purchase Price
|
Goodwill
|
$
|
5,385
|
|
Tangible assets, net of liabilities
|
299
|
|
Contingent consideration
|
(1,453
|
)
|
Total purchase price
|
$
|
4,231
|
|
The following table provides a reconciliation of the Company’s goodwill for each of the following years (in thousands):
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
Beginning balance
|
$
|
13,888
|
|
|
$
|
8,503
|
|
Acquisitions
|
11,608
|
|
|
5,385
|
|
Other
|
112
|
|
|
—
|
|
Ending balance
|
$
|
25,608
|
|
|
$
|
13,888
|
|
3. Fair Value Measurements
The following table provides a summary of the recognized assets and liabilities that are measured at fair value on a recurring basis (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 1, 2014
|
|
March 2, 2013
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-qualified deferred compensation plan
|
|
$
|
5,869
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,940
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration liability
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,903
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,453
|
|
Included in Level 1 assets are mutual fund investments under a non-qualified deferred compensation plan. The Company estimates the fair value of these investments on a recurring basis using readily available market prices.
The Company has two liabilities that are measured at fair value on a recurring basis related to contingent consideration for two acquisitions for
$1.9 million
. The liabilities are adjusted to fair value each reporting period. The categorization of the framework used to price the liabilities is considered Level 3, due to the subjective nature of the unobservable inputs used to determine the fair values.
There were no transfers into or out of Level 1, Level 2 or Level 3 assets or liabilities for any of the periods presented.
Level 3 Valuation Techniques
Financial assets and liabilities are considered Level 3 when the fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The following table provides a reconciliation of the Company’s Level 3 contingent consideration liabilities for each of the following years (in thousands):
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
Beginning balance
|
$
|
1,453
|
|
|
$
|
—
|
|
Contingent consideration from acquisition
|
450
|
|
|
1,453
|
|
Ending balance
|
$
|
1,903
|
|
|
$
|
1,453
|
|
The Company has certain assets that are measured at fair value on a non-recurring basis and are adjusted to fair value under certain circumstances that include those described in Note 12, Impairment Charges. The categorization used to price the assets is considered a Level 3 measurement due to the subjective nature of the unobservable inputs used to determine the fair value.
Additionally, in connection with the acquisitions and purchase price allocations that are described in Note 2, Acquisitions and Goodwill, the Company recognized its assets and liabilities at fair value. All amounts are recognized as Level 3 measurements due to the subjective nature of the unobservable inputs used to determine the fair value.
4. Debt Agreement
On
November 30, 2012
, the Company entered into an unsecured
$100 million
Amended and Restated Revolving Credit Facility Credit Agreement (the “Amended Credit Agreement”) with certain Lenders, which expires on
November 30, 2017
. The Amended Credit Agreement provides that, under certain circumstances, the Company may increase the maximum amount of the credit facility in an aggregate principal amount not to exceed
$200 million
. The Amended Credit Agreement will be used by the Company, among other things, to issue letters of credit, support working capital needs, fund capital expenditures and other general corporate purposes.
Approximately
$1.8 million
in stand-by letters of credit were outstanding as of
March 1, 2014
under the Amended Credit Agreement. No advances were outstanding under the Amended Credit Agreement as of
March 1, 2014
. Accordingly, the total revolving credit availability under the Amended Credit Agreement was
$98.2 million
as of
March 1, 2014
.
The Company’s ability to borrow monies in the future under the Amended Credit Agreement is subject to certain conditions, including compliance with certain covenants and making certain representations and warranties. The Amended Credit Agreement contains restrictive covenants that limit, among other things, mergers and acquisitions. In addition, the Company must maintain a maximum leverage ratio (as defined in the Amended Credit Agreement) and minimum consolidated tangible net worth (as defined in the Amended Credit Agreement). The Company was in compliance with all such covenants as of
March 1, 2014
.
The Amended Credit Agreement pricing grid is adjusted quarterly and is based on the Company’s leverage ratio (as defined in the Amended Credit Agreement). The minimum pricing is LIBOR plus
0.90%
or Base Rate (as defined in the Amended Credit Agreement) and the maximum pricing is LIBOR plus
1.75%
or Base Rate plus
0.75%
. The Company is subject to an unused commitment fee based on the Company’s leverage ratio with minimum pricing of
0.10%
and maximum pricing of
0.25%
. In addition, the Company is subject to a letter of credit fee based on the Company’s leverage ratio with minimum pricing of
0.40%
and maximum pricing of
1.25%
.
5. Leases
The Company leases retail stores under non-cancelable operating leases, which generally have lease terms ranging from
five
to
ten
years. Most of these lease arrangements do not provide for renewal periods. Many leases provide for contingent rents or license fees, which are determined as a percentage of gross sales in excess of specified levels. The Company records a contingent rent liability in other liabilities and accrued expenses on the consolidated balance sheets and the corresponding rent expense when specified levels have been achieved or when management determines that achieving the specified levels during the fiscal year is probable. In addition to rent payments, these leases generally require additional payments covering real estate taxes, insurance, maintenance and other costs. These additional payments are excluded from the table below. The components of rent expense incurred under these leases are as follows for each of the following years (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
Base rent, net of landlord deferred credits
|
$
|
89,114
|
|
|
$
|
81,872
|
|
|
$
|
72,329
|
|
Step rent
|
1,456
|
|
|
1,340
|
|
|
(1,883
|
)
|
Contingent rent
|
25,241
|
|
|
13,628
|
|
|
14,718
|
|
Rent expense
|
$
|
115,811
|
|
|
$
|
96,840
|
|
|
$
|
85,164
|
|
A schedule of future base rent payments by fiscal year with initial or remaining non-cancelable terms of one year or more is as follows (in thousands):
|
|
|
|
|
2015
|
$
|
87,352
|
|
2016
|
75,204
|
|
2017
|
88,157
|
|
2018
|
79,249
|
|
2019
|
74,649
|
|
Thereafter
|
283,578
|
|
Total
|
$
|
688,189
|
|
This schedule of future base rent payments includes lease commitments for
two
new stores and
nine
remodeled stores that were not open as of
March 1, 2014
. The lease commitments also include the guaranteed minimum license fee associated with shops within department stores.
6. Income Taxes
The following table sets forth the components of income tax expense for each of the following years (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
Currently payable:
|
|
|
|
|
|
Federal
|
$
|
32,610
|
|
|
$
|
33,703
|
|
|
$
|
36,211
|
|
State
|
4,413
|
|
|
4,570
|
|
|
2,962
|
|
|
37,023
|
|
|
38,273
|
|
|
39,173
|
|
Deferred:
|
|
|
|
|
|
Federal
|
9,266
|
|
|
4,359
|
|
|
9,357
|
|
State
|
877
|
|
|
682
|
|
|
1,448
|
|
|
10,143
|
|
|
5,041
|
|
|
10,805
|
|
Total income tax expense
|
$
|
47,166
|
|
|
$
|
43,314
|
|
|
$
|
49,978
|
|
Deferred income taxes reflect the net tax effects of temporary differences between the amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
March 1, 2014
|
|
March 2, 2013
|
Deferred tax assets:
|
|
|
|
Deferred credits from landlords
|
$
|
10,323
|
|
|
$
|
10,591
|
|
Share-based compensation
|
4,361
|
|
|
4,681
|
|
Compensation accrual
|
5,456
|
|
|
3,297
|
|
Deferred compensation
|
2,281
|
|
|
1,920
|
|
Other
|
5,721
|
|
|
4,501
|
|
Total deferred tax assets
|
28,142
|
|
|
24,990
|
|
Deferred tax liabilities:
|
|
|
|
Property and equipment
|
(24,625
|
)
|
|
(10,137
|
)
|
Inventories
|
(7,500
|
)
|
|
(9,729
|
)
|
Other
|
(1,381
|
)
|
|
(345
|
)
|
Total deferred tax liabilities
|
(33,506
|
)
|
|
(20,211
|
)
|
Net deferred tax (liability) asset
|
$
|
(5,364
|
)
|
|
$
|
4,779
|
|
The effective income tax rate varies from the statutory federal income tax rate for
2014
,
2013
and
2012
due to the following:
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
Tax at statutory federal income tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State income taxes, net of federal benefit
|
2.9
|
|
|
2.9
|
|
|
3.0
|
|
Tax contingencies
|
—
|
|
|
(0.2
|
)
|
|
(0.9
|
)
|
Tax effect related to Running Specialty partnership interest
|
0.5
|
|
|
0.7
|
|
|
—
|
|
Other
|
0.2
|
|
|
0.1
|
|
|
—
|
|
|
38.6
|
%
|
|
38.5
|
%
|
|
37.1
|
%
|
As of
March 1, 2014
, the Company had approximately
$1.0 million
of net operating loss carryforwards for state tax purposes of which
$0.5 million
of net operating loss carryforwards related to excess share-based compensation deductions and when realized, will be credited to shareholders’ equity. If not used, these carryforwards will expire between
2028
and
2029
.
Payments of income taxes for
2014
,
2013
and
2012
equaled
$31.0 million
,
$45.0 million
and
$28.7 million
, respectively.
The Company is subject to U.S. federal income tax as well as income tax by multiple state jurisdictions. The Company has substantially concluded all U.S. federal income tax matters through fiscal 2009 and all state and local income tax matters through fiscal 2005. The Company may resolve some or all of the issues related to tax matters and make payments to settle agreed upon liabilities.
Uncertain Tax Positions
As of
March 1, 2014
and
March 2, 2013
, the Company had
$9.6 million
and
$8.1 million
of unrecognized tax benefits respectively,
$2.7 million
and
$3.0 million
respectively, of which, if recognized, would affect the effective income tax rate. Of the total unrecognized tax benefits as of
March 1, 2014
, it is reasonably possible that the total unrecognized tax benefits could decrease by up to
$0.2 million
during the next twelve months due to audit settlements, expiration of statute of limitations or other resolution of uncertainties. Due to the uncertain and complex application of tax regulations, it is possible that the ultimate resolution of audits may result in liabilities that could be different from this estimate. In such case, the Company will record additional tax expense or tax benefit in the tax provision or reclassify amounts on the consolidated balance sheets in the period in which such matter is effectively settled with the tax authority.
The Company recognizes interest and penalty expense, as well as reversal of expense, related to unrecognized tax benefits as components of income tax expense. In
2014
,
2013
and
2012
,
$0.2 million
,
$(0.5) million
and
$(0.6) million
, respectively, of interest and penalties were included in income tax expense on the consolidated statements of income. The Company has accrued
$2.0 million
and
$1.8 million
for the payment of interest and penalties as of
March 1, 2014
and
March 2, 2013
, respectively.
The following table summarizes the activity related to the Company’s unrecognized tax benefits for U.S. federal and state tax jurisdictions and excludes accrued interest and penalties (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
Unrecognized tax benefits at beginning of year
|
$
|
6,268
|
|
|
$
|
6,548
|
|
|
$
|
7,530
|
|
Increases in tax positions for prior years
|
1,695
|
|
|
275
|
|
|
193
|
|
Decreases in tax positions for prior years
|
(195
|
)
|
|
(29
|
)
|
|
(1,057
|
)
|
Increases in unrecognized tax benefits as a result of current year activity
|
2,385
|
|
|
13
|
|
|
50
|
|
Decreases to unrecognized tax benefits relating to settlements with taxing authorities
|
(209
|
)
|
|
—
|
|
|
(5
|
)
|
Decreases to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations
|
(2,306
|
)
|
|
(539
|
)
|
|
(163
|
)
|
Unrecognized tax benefits at end of year
|
$
|
7,638
|
|
|
$
|
6,268
|
|
|
$
|
6,548
|
|
7. Retirement Plan
The Company sponsors a defined contribution profit sharing plan, which covers substantially all employees who have completed
one
year of service and meet other eligibility criteria. Contributions to this plan are discretionary and are allocated to employees as a percentage of each covered employee’s wages. The plan also has a 401(k) feature whereby the Company matches employee contributions to the plan. The Company matches
100 percent
of employee contributions to the plan on the first
three
percent of an employee’s wages and then
50 percent
of employee contributions to the plan over
three
percent up to
five
percent of their wages (maximum of
four
percent). Employee contributions and Company matching contributions vest immediately. The Company’s total expense for the plan in
2014
,
2013
and
2012
was
$1.7 million
,
$1.2 million
and
$1.3 million
, respectively.
The Company has a non-qualified deferred compensation plan for highly compensated employees whose contributions are limited under the qualified defined contribution profit sharing plan. Amounts contributed and deferred under the deferred compensation plan are credited or charged with the performance of investment options offered under the plan and elected by the participants. In the event of bankruptcy, the assets of this plan are available to satisfy the claims of general creditors. The liability for compensation deferred under the Company’s plan was
$5.9 million
and
$4.9 million
at
March 1, 2014
and
March 2, 2013
, respectively, and is included in other long-term liabilities on the consolidated balance sheets. The Company’s total expense recorded for this plan was
$0
in
2014
,
2013
and
2012
.
8. Stock Plans
General
In July 2009, the Company’s shareholders approved and adopted The Finish Line, Inc. 2009 Incentive Plan (the “2009 Incentive Plan”), previously approved by the Company’s Board of Directors. The Company’s Board of Directors has reserved
6,500,000
shares of common stock for issuance upon exercise of options or other awards under the 2009 Incentive Plan. The number of shares reserved for issuance of all awards other than options and stock appreciation rights, is limited to
2,500,000
under the 2009 Incentive Plan. Upon approval of the 2009 Incentive Plan, the 2002 Stock Incentive Plan of The Finish Line, Inc. (the “2002 Incentive Plan”) is limited in future grants to awards from shares returned to the 2002 Incentive Plan by forfeiture after July 23, 2009. The Company provides newly issued shares and treasury stock to satisfy stock option exercises and for the issuance of restricted stock.
Total share-based compensation expense in
2014
,
2013
and
2012
was
$7.1 million
,
$6.6 million
and
$5.2 million
, respectively.
Stock Option Activity
Stock options have been granted to directors, officers and other key employees. Generally, options outstanding under the plans are exercisable at a price equal to the fair market value on the date of grant, vest over
four
years and expire
ten
years after the date of grant. The estimated weighted-average fair value of the individual options granted during
2014
,
2013
and
2012
was
$8.24
,
$9.56
and
$8.98
, respectively on the date of the grant. The fair values for all years were determined using a Black-Scholes option-pricing model with the following weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
Dividend yield
|
1.38
|
%
|
|
1.05
|
%
|
|
1.12
|
%
|
Volatility
|
53.4
|
%
|
|
58.3
|
%
|
|
57.8
|
%
|
Risk-free interest rate
|
0.84
|
%
|
|
0.95
|
%
|
|
1.98
|
%
|
Expected life
|
5.0 years
|
|
|
4.9 years
|
|
|
4.8 years
|
|
The dividend yield assumption is based on the Company’s history and expectation of dividend payouts. The expected volatility assumption is based on the Company’s analysis of historical volatility. The risk-free interest rate assumption is based upon the average daily closing rates during the period for U.S. treasury notes that have a life, which approximates the expected life of the option. The expected life of employee stock options represents the weighted-average period the stock options are expected to remain outstanding based on historical exercise experience.
A reconciliation of the Company’s stock option activity and related information for
2014
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted
Average
Exercise Price
Per Share
|
|
Weighted
Average
Remaining
Contractual Life
(Years)
|
|
Aggregate
Intrinsic
Value
|
Outstanding at March 2, 2013
|
2,196,177
|
|
|
$
|
14.54
|
|
|
|
|
|
Granted
|
700,811
|
|
|
19.73
|
|
|
|
|
|
Exercised
|
(750,637
|
)
|
|
11.10
|
|
|
|
|
$
|
8,380,000
|
|
Forfeited
|
(229,755
|
)
|
|
19.72
|
|
|
|
|
|
Outstanding at March 1, 2014
|
1,916,596
|
|
|
$
|
17.14
|
|
|
7.2
|
|
$
|
18,866,000
|
|
Exercisable at March 1, 2014
|
590,017
|
|
|
$
|
12.08
|
|
|
5.0
|
|
$
|
8,816,000
|
|
As of
March 1, 2014
, there was
$6.4 million
of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested options. That cost is expected to be recognized over a weighted average period of
1.7 years
.
Intrinsic value for stock options is the difference between the current market value of the Company’s stock and the option strike price. The total intrinsic value of options exercised during
2014
,
2013
and
2012
was
$8.4 million
,
$6.4 million
and
$14.7 million
, respectively.
The following table summarizes information concerning outstanding and exercisable options at
March 1, 2014
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of Exercise Prices
|
Number
Outstanding
|
|
Weighted-Average
Remaining
Contractual Life
|
|
Weighted-Average
Exercise Price
|
|
Number
Exercisable
|
|
Weighted-Average
Exercise Price
|
$1-$10
|
233,202
|
|
|
4.6
|
|
$
|
5.75
|
|
|
233,202
|
|
|
$
|
5.75
|
|
$10-$15
|
288,048
|
|
|
4.9
|
|
13.11
|
|
|
167,631
|
|
|
13.09
|
|
$15-$20
|
848,186
|
|
|
8.0
|
|
19.08
|
|
|
134,843
|
|
|
18.15
|
|
$20-$30
|
547,160
|
|
|
8.2
|
|
21.14
|
|
|
54,341
|
|
|
21.05
|
|
|
1,916,596
|
|
|
7.2
|
|
$
|
17.14
|
|
|
590,017
|
|
|
$
|
12.08
|
|
The Company recorded compensation expense related to stock options of
$3.5 million
,
$2.7 million
and
$2.1 million
in
2014
,
2013
and
2012
, respectively.
Restricted Stock Activity
The Company has granted shares of the Company’s stock to non-employee directors, officers and other key employees that are subject to restrictions. The restricted stock granted to employees under the 2002 and 2009 Incentive Plans either vest upon the achievement of specified levels of net income growth over a
three
-year period or were granted such that they cliff-vest after a
three
-year period. For performance-based awards, should the net income criteria not be met over the
three
-year period, the shares will be forfeited. All restricted stock awards issued to non-employee directors cliff-vest after a
one
-year period from the grant date. The Company recorded compensation expense related to restricted stock of
$3.5 million
,
$3.8 million
and
$3.0 million
in
2014
,
2013
and
2012
, respectively.
A reconciliation of the Company’s restricted stock activity and related information for
2014
is as follows:
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted Average
Grant Date
Fair Value
|
Unvested at March 2, 2013
|
757,160
|
|
|
$
|
18.95
|
|
Granted
|
324,927
|
|
|
20.32
|
|
Vested
|
(191,500
|
)
|
|
14.42
|
|
Forfeited
|
(97,858
|
)
|
|
15.42
|
|
Unvested at March 1, 2014
|
792,729
|
|
|
$
|
20.47
|
|
As of
March 1, 2014
, there was
$7.0 million
of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested restricted stock. That cost is expected to be recognized over a weighted average period of
2.2 years
. The total fair value of awards for which restrictions lapsed (vested) during
2014
was
$2.8 million
.
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan (“ESPP”). Under the ESPP, participating employees are able to contribute up to
10 percent
of their annual compensation to acquire shares of common stock at
85%
of the market price on a specified date each offering period. As of
March 1, 2014
,
2,400,000
shares of common stock were authorized for purchase under the ESPP, of which
31,000
,
33,000
and
27,000
shares were purchased during
2014
,
2013
and
2012
, respectively. The Company recognizes compensation expense based on the
15%
discount at purchase. The Company recorded compensation expense related to the ESPP of
$0.1 million
in
2014
,
2013
and
2012
.
9. Start-Up Costs
The Company entered into a department license agreement and an on-line shop license agreement (the “Agreements”) with Macy’s, Inc. (“Macy’s”) whereby the Company is the exclusive provider of men’s, women’s and kids’ athletic shoes (“Athletic Shoes”) within Macy’s stores and macys.com. The Company will merchandise and fulfill inventory at all of Macy’s locations, and perform in-store build out of Finish Line shops and staffing at up to approximately
400
of Macy’s locations. The Company has incurred start-up costs to accommodate a conversion of Macy’s Athletic Shoes inventory to Finish Line assortments. The Company took full control of Macy’s Athletic Shoes inventory at Macy’s department store locations as of April 14, 2013 and macys.com as of May 14, 2013. As a part of the conversion, the Company agreed to purchase certain of Macy’s Athletic Shoes at Macy’s original cost.
The charges from start-up costs related to the Agreements with Macy’s includes the following: freight and handling of inventory from Macy’s to the Company; leased warehouse space at a third party for sorting and inventory reserves established for inventory purchased from Macy’s to record at the lower of cost or market.
During
2014
, the Company incurred
$5.8 million
in start-up costs through cost of sales and
$2.2 million
within selling, general and administrative expenses within the consolidated statements of income for a combined
$8.0 million
. No start-up costs were incurred during fiscal
2013
.
10. Earnings Per Share
Basic earnings per share attributable to The Finish Line, Inc. is calculated by dividing net income attributable to The Finish Line, Inc. associated with common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share attributable to The Finish Line, Inc. assumes the issuance of additional shares of common stock by the Company upon exercise of all outstanding stock options and contingently issuable securities if the effect is dilutive, in accordance with the treasury stock method or two class method (whichever is more dilutive) discussed in ASC 260-10,
Earnings Per Share
.
ASC 260-10 requires the inclusion of restricted stock as participating securities, since they have the right to share in dividends, if declared, equally with common shareholders. During periods of net income, participating securities are allocated a proportional share of net income attributable to The Finish Line, Inc. determined by dividing total weighted average participating securities by the sum of total weighted average common shares and participating securities (“the two-class method”). During periods of net loss, no effect is given to participating securities since they do not share in the losses of the Company. Participating securities have the effect of diluting both basic and diluted earnings per share during periods of net income.
The following is a reconciliation of the numerators and denominators used in computing earnings per share for each of the following years (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
Net income attributable to The Finish Line, Inc.
|
|
$
|
76,903
|
|
|
$
|
71,473
|
|
|
$
|
84,804
|
|
Net income attributable to The Finish Line, Inc. attributable to participating securities
|
|
919
|
|
|
653
|
|
|
691
|
|
Net income attributable to The Finish Line, Inc. available to common shareholders
|
|
$
|
75,984
|
|
|
$
|
70,820
|
|
|
$
|
84,113
|
|
Basic earnings per share attributable to The Finish Line, Inc. shareholders:
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding
|
|
48,286
|
|
|
49,824
|
|
|
52,020
|
|
Basic earnings per share attributable to The Finish Line, Inc. shareholders
|
|
$
|
1.57
|
|
|
$
|
1.42
|
|
|
$
|
1.62
|
|
Diluted earnings per share attributable to The Finish Line, Inc. shareholders:
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding
|
|
48,286
|
|
|
49,824
|
|
|
52,020
|
|
Dilutive effect of potential common shares(a)
|
|
415
|
|
|
667
|
|
|
798
|
|
Diluted weighted-average number of common shares outstanding
|
|
48,701
|
|
|
50,491
|
|
|
52,818
|
|
Diluted earnings per share attributable to The Finish Line, Inc. shareholders
|
|
$
|
1.56
|
|
|
$
|
1.40
|
|
|
$
|
1.59
|
|
_____________
|
|
(a)
|
The computation of diluted earnings per share attributable to The Finish Line, Inc. shareholders excludes options to purchase approximately
1.1 million
,
0.9 million
and
0.4 million
shares of common stock in
2014
,
2013
and
2012
, respectively, because the impact of such options would have been antidilutive.
|
11. Common Stock
On July 21, 2011, the Company’s Board of Directors authorized a share repurchase program (the “2011 Share Repurchase Program”) to repurchase up to
5,000,000
shares of the Company’s common stock outstanding through
December 31, 2014
. On January 3, 2013, the Company’s Board of Directors amended the 2011 Share Repurchase Program (the “Amended Program”) and authorized the repurchase of an additional
5,000,000
shares of the Company’s common stock, which authorization shall expire on
December 31, 2017
.
The Company purchased
1,015,838
shares at an average price of
$22.27
per share for an aggregate amount of
$22.6 million
in
2014
. As of
March 1, 2014
, there were
3,904,503
shares remaining available to repurchase under the Amended Program.
The Company’s treasury shares may be issued upon the exercise of employee stock options, issuance of shares for the Employee Stock Purchase Plan, issuance of restricted stock or for other corporate purposes. Further purchases will occur from time to time as market conditions warrant and as the Company deems appropriate when judged against other alternative uses of cash.
On January 16, 2014, the Company increased its quarterly cash dividend to
$0.08
per share from
$0.07
per share of the Company’s common stock. The Company declared dividends of
$14.2 million
,
$12.5 million
and
$11.0 million
during
2014
,
2013
and
2012
, respectively. As of
March 1, 2014
and
March 2, 2013
, dividends declared but not paid were
$3.9 million
and
$3.4 million
, respectively. Further declarations of dividends remain at the discretion of the Company’s Board of Directors.
On July 20, 2012, all of the Company’s shares of Class B common stock were converted on a one-for-one basis into an equal number of shares of Class A common stock in accordance with the terms of the Company’s Restated Articles of Incorporation, and the Company eliminated its dual class stock structure. The Company did not receive any proceeds from the conversion of the Class B shares, and the Company will not receive any proceeds from the sale of any Class A shares issued as a result of the conversion. Per the Company’s Restated Articles of Incorporation, as of the conversion, all Class B shares are no longer authorized.
12. Impairment Charges
The
2014
impairment charges of
$2.1 million
were primarily the result of the write-off of obsolete store technology assets and fixtures. The asset impairment charges for the obsolete store technology assets and fixtures were calculated as the difference between the carrying amount of the impaired assets and their estimated future discounted cash flows.
The
2013
impairment charges of
$5.6 million
were primarily the result of a
$3.7 million
charge associated with the Company’s updated website that was launched during the third quarter of fiscal 2013. Subsequently, it became apparent that there was a degradation of the customer experience, evidenced by a decline in several key performance indicators. As a result, the Company made the strategic decision to transition back to the Company’s legacy website given the importance of the selling season. In February 2013, the Company made the decision to permanently abandon the updated website. The 2013 impairment charge also included a
$1.9 million
charge for the write-off of long-lived assets of
6
underperforming stores.
The
2012
impairment charges of
$1.0 million
were the result of a write-off of long-lived assets of
4
underperforming stores.
13. Commitments and Contingencies
Demandware, Inc. (“Plaintiff”) filed an action against the Company in the United States District Court for the Southern District of New York on or about August 12, 2013, alleging breach of contract as it relates to the parties’ engagement to replace Finish Line’s web commerce platform. The viability of the claim is uncertain and a counterclaim against the Plaintiff has been filed. Plaintiff’s lawsuit seeks
$6.6 million
in alleged damages, as well as costs and attorney fees and other specified relief to be determined by the court. The possible range of loss for such contingency varies from
zero
to the extent of any judgment which may be rendered by the court. The Company intends to vigorously defend itself in this matter. The Company does not believe this matter is likely to have a material adverse effect on the Company’s financial position, results of operations or cash flows.
The Company is subject from time to time to certain legal proceedings and claims in the ordinary course of conducting its business. The Company establishes a liability related to its legal proceedings and claims when it has determined that it is probable that the Company has incurred a liability and the related amount can be reasonably estimated. If the Company determines that an obligation is reasonably possible, the Company will, if material, disclose the nature of the loss contingency and the estimated range of possible loss, or include a statement that no estimate of loss can be made. The Company believes there are no pending legal proceedings in which the Company is currently involved which will have a material adverse effect on the Company’s financial position, results of operations or cash flows.
14. Quarterly Financial Information (Unaudited)
The Company’s merchandise is marketed during all seasons, with the highest volume of merchandise sold during the second and fourth fiscal quarters as a result of back-to-school and holiday shopping. The third fiscal quarter has traditionally had the lowest volume of merchandise sold and the lowest results of operations.
The following tables set forth quarterly operating data of the Company, including such data as a percentage of net sales, for
2014
and
2013
. This quarterly information is unaudited but, in management’s opinion, reflects all adjustments, consisting only of normal recurring adjustments, other than those noted, necessary for a fair presentation of the information for the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
June 1, 2013
|
|
August 31, 2013
|
|
November 30, 2013
|
|
March 1, 2014
|
|
|
(Dollars in thousands, except per share data)
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
351,053
|
|
|
100.0
|
%
|
|
$
|
436,030
|
|
|
100.0
|
%
|
|
$
|
364,455
|
|
|
100.0
|
%
|
|
$
|
518,872
|
|
|
100.0
|
%
|
Cost of sales (including occupancy costs)
|
|
244,058
|
|
|
69.5
|
|
|
289,693
|
|
|
66.4
|
|
|
256,607
|
|
|
70.4
|
|
|
332,609
|
|
|
64.1
|
|
Gross profit
|
|
106,995
|
|
|
30.5
|
|
|
146,337
|
|
|
33.6
|
|
|
107,848
|
|
|
29.6
|
|
|
186,263
|
|
|
35.9
|
|
Selling, general and administrative expenses
|
|
99,356
|
|
|
28.3
|
|
|
103,455
|
|
|
23.8
|
|
|
104,092
|
|
|
28.6
|
|
|
117,668
|
|
|
22.7
|
|
Store closing costs
|
|
186
|
|
|
0.1
|
|
|
17
|
|
|
—
|
|
|
166
|
|
|
—
|
|
|
344
|
|
|
0.1
|
|
Impairment charges
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
841
|
|
|
0.2
|
|
|
1,213
|
|
|
0.2
|
|
Operating income
|
|
7,453
|
|
|
2.1
|
|
|
42,865
|
|
|
9.8
|
|
|
2,749
|
|
|
0.8
|
|
|
67,038
|
|
|
12.9
|
|
Interest income, net
|
|
14
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
10
|
|
|
—
|
|
Gain on sale of investment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,076
|
|
|
0.4
|
|
Income before income taxes
|
|
7,467
|
|
|
2.1
|
|
|
42,875
|
|
|
9.8
|
|
|
2,752
|
|
|
0.8
|
|
|
69,124
|
|
|
13.3
|
|
Income tax expense
|
|
2,953
|
|
|
0.8
|
|
|
16,682
|
|
|
3.8
|
|
|
1,161
|
|
|
0.4
|
|
|
26,370
|
|
|
5.1
|
|
Net income
|
|
4,514
|
|
|
1.3
|
|
|
26,193
|
|
|
6.0
|
|
|
1,591
|
|
|
0.4
|
|
|
42,754
|
|
|
8.2
|
|
Net loss attributable to redeemable noncontrolling interest
|
|
561
|
|
|
0.1
|
|
|
314
|
|
|
0.1
|
|
|
727
|
|
|
0.2
|
|
|
249
|
|
|
0.1
|
|
Net income attributable to The Finish Line, Inc.
|
|
$
|
5,075
|
|
|
1.4
|
%
|
|
$
|
26,507
|
|
|
6.1
|
%
|
|
$
|
2,318
|
|
|
0.6
|
%
|
|
$
|
43,003
|
|
|
8.3
|
%
|
Basic earnings per share attributable to The Finish Line, Inc.(a)
|
|
$
|
0.10
|
|
|
|
|
$
|
0.54
|
|
|
|
|
$
|
0.05
|
|
|
|
|
$
|
0.88
|
|
|
|
Diluted earnings per share attributable to The Finish Line, Inc.(a)
|
|
$
|
0.10
|
|
|
|
|
$
|
0.54
|
|
|
|
|
$
|
0.05
|
|
|
|
|
$
|
0.87
|
|
|
|
Dividends declared per share
|
|
$
|
0.07
|
|
|
|
|
$
|
0.07
|
|
|
|
|
$
|
0.07
|
|
|
|
|
$
|
0.08
|
|
|
|
|
|
(a)
|
Earnings per share is computed independently for each of the quarters presented. Therefore, the sum of the quarterly amounts may not equal the total for the fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
June 2, 2012
|
|
September 1, 2012
|
|
December 1, 2012
|
|
March 2, 2013
|
|
|
(Dollars in thousands, except per share data)
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
319,049
|
|
|
100.0
|
%
|
|
$
|
385,011
|
|
|
100.0
|
%
|
|
$
|
296,623
|
|
|
100.0
|
%
|
|
$
|
442,682
|
|
|
100.0
|
%
|
Cost of sales (including occupancy costs)
|
|
214,390
|
|
|
67.2
|
|
|
250,461
|
|
|
65.0
|
|
|
206,833
|
|
|
69.7
|
|
|
287,237
|
|
|
64.9
|
|
Gross profit
|
|
104,659
|
|
|
32.8
|
|
|
134,550
|
|
|
35.0
|
|
|
89,790
|
|
|
30.3
|
|
|
155,445
|
|
|
35.1
|
|
Selling, general and administrative expenses
|
|
84,818
|
|
|
26.6
|
|
|
94,711
|
|
|
24.6
|
|
|
91,447
|
|
|
30.8
|
|
|
94,907
|
|
|
21.4
|
|
Store closing costs
|
|
95
|
|
|
—
|
|
|
325
|
|
|
0.1
|
|
|
1
|
|
|
—
|
|
|
250
|
|
|
0.1
|
|
Impairment charges
|
|
28
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,565
|
|
|
1.2
|
|
Operating income (loss)
|
|
19,718
|
|
|
6.2
|
|
|
39,514
|
|
|
10.3
|
|
|
(1,658
|
)
|
|
(0.5
|
)
|
|
54,723
|
|
|
12.4
|
|
Interest income, net
|
|
71
|
|
|
—
|
|
|
58
|
|
|
—
|
|
|
38
|
|
|
—
|
|
|
31
|
|
|
—
|
|
Income (loss) before income taxes
|
|
19,789
|
|
|
6.2
|
|
|
39,572
|
|
|
10.3
|
|
|
(1,620
|
)
|
|
(0.5
|
)
|
|
54,754
|
|
|
12.4
|
|
Income tax expense (benefit)
|
|
7,708
|
|
|
2.4
|
|
|
15,136
|
|
|
3.9
|
|
|
(811
|
)
|
|
(0.3
|
)
|
|
21,281
|
|
|
4.8
|
|
Net income (loss)
|
|
12,081
|
|
|
3.8
|
|
|
24,436
|
|
|
6.4
|
|
|
(809
|
)
|
|
(0.2
|
)
|
|
33,473
|
|
|
7.6
|
|
Net loss attributable to redeemable noncontrolling interest
|
|
197
|
|
|
0.1
|
|
|
537
|
|
|
0.1
|
|
|
702
|
|
|
0.2
|
|
|
856
|
|
|
0.2
|
|
Net income (loss) attributable to The Finish Line, Inc.
|
|
$
|
12,278
|
|
|
3.9
|
%
|
|
$
|
24,973
|
|
|
6.5
|
%
|
|
$
|
(107
|
)
|
|
—
|
%
|
|
$
|
34,329
|
|
|
7.8
|
%
|
Basic earnings (loss) per share attributable to The Finish Line, Inc.(a)
|
|
$
|
0.24
|
|
|
|
|
$
|
0.49
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
0.70
|
|
|
|
Diluted earnings (loss) per share attributable to The Finish Line, Inc.(a)
|
|
$
|
0.24
|
|
|
|
|
$
|
0.49
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
0.69
|
|
|
|
Dividends declared per share
|
|
$
|
0.06
|
|
|
|
|
$
|
0.06
|
|
|
|
|
$
|
0.06
|
|
|
|
|
$
|
0.07
|
|
|
|
|
|
(a)
|
Earnings (loss) per share is computed independently for each of the quarters presented. Therefore, the sum of the quarterly amounts may not equal the total for the fiscal year.
|
15. Subsequent Events
On April 25, 2014, the Company entered into an agreement with GCPI SR LLC (“GCP”) to increase Finish Line’s ownership in the Denver-based Running Specialty Group (“RSG”). GCP will retain an ownership position in RSG, maintain two positions on the RSG Board of Directors and will continue to provide leadership in ongoing business development opportunities. This transaction had no material impact on the Company’s financial statements.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures.
With the participation of our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures were effective in ensuring that (i) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
(b) Management’s Report on Internal Control Over Financial Reporting.
The report of management of the Company regarding internal control over financial reporting appears under the caption “Management’s Report On Internal Control Over Financial Reporting” in Item 8 preceding the Company’s financial statements of this Annual Report on Form 10-K and is incorporated by reference herein.
(c) Changes in Internal Control over Financial Reporting.
There were no changes in the Company’s internal control over financial reporting during the fourth quarter of fiscal
2014
that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
(d) Attestation Report of Independent Registered Public Accounting Firm.
The attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting appears under the caption “Report of Independent Registered Public Accounting Firm” in Item 8 preceding the Company’s financial statements of this Annual Report on Form 10-K and is incorporated by reference herein.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Except for information disclosed in Part I under the heading “Directors and Executive Officers of the Registrant,” the information required by this Item is incorporated by reference to the information contained under the captions “Management—Executive Officers and Directors,” “Management—Section 16(a) Beneficial Ownership Reporting Compliance” and “Board of Directors, Committees and Meetings—Meetings and Committees of the Board of Directors—The Audit Committee” in the Company’s Proxy Statement for its Annual Shareholders Meeting (the “
2014
Proxy Statement”) to be filed with the Securities and Exchange Commission within 120 days of
March 1, 2014
, the Company’s most recent fiscal year-end. The Company has a Code of Ethics policy that applies to all officers, employees and directors of the Company. It and other corporate governance documents are available on the Company’s website at www.finishline.com.
Item 11. Executive Compensation
The information required by this Item is incorporated herein by reference to the information contained under the caption “Executive Compensation” in the
2014
Proxy Statement to be filed within 120 days of
March 1, 2014
, the Company’s most recent fiscal year-end.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated herein by reference to the information contained under the caption “Security Ownership of Certain Beneficial Owners and Management” in the
2014
Proxy Statement to be filed within 120 days of
March 1, 2014
, the Company’s most recent fiscal year-end.
Equity Compensation Plan Information
The following table provides information with respect to compensation plans under which equity securities of the Company are currently authorized for issuance to employees or non-employees (such as directors, consultants, advisors, vendors, customers, suppliers or lenders), as of
March 1, 2014
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
Plan Category
|
|
Number of shares to be
issued upon exercise of
outstanding options,
warrants and rights
|
|
Weighted average
exercise price of
outstanding options,
warrants and rights
|
|
Number of shares
remaining available for
future issuance under
equity compensation
plans (excluding shares
reflected in column (a))
|
|
|
Equity compensation plans approved by shareholders(1)
|
|
1,916,596
|
|
|
$
|
17.14
|
|
|
5,783,308
|
|
|
(2
|
)
|
Equity compensation plans not approved by shareholders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
_______________
|
|
(1)
|
These shares are subject to awards made or to be made under the Company’s 2002 Stock Incentive Plan, 2009 Incentive Plan, Non-Employee Director Stock Option Plan and Employee Stock Purchase Plan.
|
|
|
(2)
|
Includes the following shares which remain available for future issuance under the referenced plans as of
March 1, 2014
: (i) 291,520 shares under the 2002 Stock Incentive Plan; (ii) 3,513,760 shares under the 2009 Incentive Plan and (iii) 1,978,028 shares under the Employee Stock Purchase Plan. From and after July 23, 2009, the only shares issuable under the 2002 Stock Incentive Plan (other than shares issuable upon the exercise of outstanding options, as disclosed in column (a)) include 291,520 shares eligible for issuance in respect of shares returned to the plan by forfeiture after July 23, 2009.
|
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated herein by reference to the information contained under the captions “Executive Compensation—Related Party Transactions” and “Board of Directors, Committees and Meetings—Independence of Directors” in the
2014
Proxy Statement to be filed within 120 days of
March 1, 2014
, the Company’s most recent fiscal year-end.
Item 14. Principal Accounting Fees and Services
The information required by this Item is incorporated herein by reference to the information contained under the captions “Audit Committee Report—Independent Auditor Fee Information” and “Audit Committee Report—Pre-Approval Policies and Proceedings” in the
2014
Proxy Statement to be filed within 120 days of
March 1, 2014
, the Company’s most recent fiscal year-end.
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) The following financial statements of The Finish Line, Inc. and the reports of the independent registered public accounting firm are filed in Item 8 as part of this Annual Report on Form 10-K:
(b) Financial Statement Schedules
All schedules for which provision is made in the applicable regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.
(c) Exhibits
|
|
|
Exhibit
Number
|
Description
|
|
|
2.1
|
Asset Purchase Agreement, dated June 21, 2009 by and among The Finish Line Man Alive, Inc., The Finish Line, Inc., Man Alive Acquisitions, LLC, and the other entities listed therein.(1)
|
|
|
3.1
|
Restated Articles of Incorporation of The Finish Line, Inc., amended and restated as of July 23, 2009.(2)
|
|
|
3.2
|
Bylaws of The Finish Line, Inc., amended as of July 23, 2009.(3)
|
|
|
4.1
|
2002 Stock Incentive Plan of The Finish Line, Inc. (as amended and restated July 21, 2005).(4)*
|
|
|
4.2
|
Amendment No. 1 to the 2002 Stock Incentive Plan of The Finish Line, Inc. (as amended and restated July 21, 2005).(5)*
|
|
|
4.3
|
Amendment No. 2 to the 2002 Stock Incentive Plan of The Finish Line, Inc. (as amended and restated July 21, 2005).(6)*
|
|
|
4.4
|
Amendment No. 3 to the 2002 Stock Incentive Plan of The Finish Line, Inc. (as amended and restated July 21, 2005).(7)*
|
|
|
4.5
|
The Finish Line, Inc. 2009 Incentive Plan.(10)*
|
|
|
10.1
|
Form of Award Agreement for Employees and Employee Directors pursuant to the 2002 Stock Incentive Plan.(19)*
|
|
|
|
Exhibit
Number
|
Description
|
|
|
10.2
|
Form of Award Agreement for Nonemployee Directors pursuant to the 2002 Stock Incentive Plan.(20)*
|
|
|
10.3
|
Form of Non-Qualified Option Award Letter for Employees and Employee Directors pursuant to the 2002 Stock Incentive Plan.(21)*
|
|
|
10.4
|
Form of Non-Qualified Option Award Letter for Nonemployee Directors pursuant to the 2002 Stock Incentive Plan.(22)*
|
|
|
10.5
|
Form of Incentive Stock Award Letter pursuant to the 2002 Stock Incentive Plan.(23)*
|
|
|
10.6
|
Form of Indemnity Agreement between The Finish Line Inc. and each of its Directors or Executive Officers.(13)
|
|
|
10.7
|
The Finish Line, Inc. Non-Employee Director Stock Option Plan, as amended and restated.(14)*
|
|
|
10.8
|
The Finish Line, Inc. Employee Stock Purchase Plan.(15)*
|
|
|
10.9
|
The Finish Line, Inc. Non-Qualified Deferred Compensation Plan.(28)*
|
|
|
10.10
|
Amendment No. 1 to The Finish Line, Inc. Non-Qualified Deferred Compensation Plan.(29)*
|
|
|
10.11
|
Amended and Restated Employment Agreement of Glenn S. Lyon, dated as of December 31, 2008.*
|
|
|
10.12
|
Employment Agreement of Edward W. Wilhelm, dated as of March 30, 2009.*
|
|
|
10.13
|
Amendment No. 1 to the Amended and Restated Employment Agreement of Edward W. Wilhelm.*
|
|
|
10.14
|
Form of The Finish Line, Inc. 2009 Incentive Plan Non-Qualified Stock Option Award Agreement.(8)*
|
|
|
10.15
|
Form of The Finish Line, Inc. 2009 Incentive Plan Restricted Stock Award Agreement.(9)*
|
|
|
10.16
|
Amended and Restated Revolving Credit Facility Credit Agreement, dated as of November 30, 2012, by and among The Finish Line, Inc., The Finish Line USA, Inc., The Finish Line Distribution, Inc., Finish Line Transportation Co., Inc., and Spike’s Holding, LLC as Borrowers, The Finish Line MA, Inc., as Guarantor, certain Lenders named therein, Bank of America, N.A., as Syndication Agent, and PNC Bank, National Association, as Administrative Agent, Lead Arranger, and Sole Book Runner.(24)
|
|
|
10.17
|
Amended and Restated Continuing Agreement of Guaranty And Suretyship—Subsidiaries, dated as of November 30, 2012, by The Finish Line MA, Inc.(25)
|
|
|
10.18
|
Amendment No. 1 to the Amended and Restated Employment Agreement for Mr. Glenn Lyon.*
|
|
|
10.19
|
Amendment No. 2 to the Amended and Restated Employment Agreement for Mr. Glenn Lyon.*
|
|
|
10.20
|
Form of The Finish Line, Inc. 2009 Incentive Plan Restricted Stock Award Agreement for Time Based Vesting.(11)*
|
|
|
10.21
|
Form of The Finish Line, Inc. 2009 Incentive Plan Restricted Stock Award Agreement for Performance Based Vesting.(12)*
|
|
|
10.22
|
Amendment No. 1 to The Finish Line, Inc. 2009 Incentive Plan.(16)*
|
|
|
|
Exhibit
Number
|
Description
|
|
|
10.23
|
Amended and Restated Employment Agreement of Samuel M. Sato, dated as of December 31, 2008.(26)*
|
|
|
10.24
|
Amendment No. 1 to the Amended and Restated Employment Agreement of Samuel M. Sato.(18)*
|
|
|
10.25
|
Retirement Agreement, effective June 30, 2013, by and between The Finish Line, Inc. and Steven J. Schneider.(17)*
|
|
|
10.26
|
Employment Agreement of Mark S. Landau, dated as of January 1, 2012.*
|
|
|
14
|
Code of Ethics of The Finish Line, Inc., amended as of February 11, 2013.(27)
|
|
|
21
|
Subsidiaries of The Finish Line, Inc.
|
|
|
23
|
Consent of Independent Registered Public Accounting Firm.
|
|
|
31.1
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as amended.
|
|
|
31.2
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as amended.
|
|
|
32
|
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
101
|
The following materials from the Company’s Form 10-K for the year ended March 1, 2014, formatted in an XBRL Interactive Data File: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Cash Flows; (iv) Consolidated Statements of Changes in Shareholders’ Equity; and (v) Notes to Consolidated Financial Statements, with detailed tagging of notes and financial statement schedules.
|
_______________
|
|
(1)
|
Previously filed as Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 22, 2009 and incorporated herein by reference.
|
|
|
(2)
|
Previously filed as Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2009 and incorporated herein by reference.
|
|
|
(3)
|
Previously filed as Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 24, 2009 and incorporated herein by reference.
|
|
|
(4)
|
Previously filed as Exhibit 4.1 of the Registrant’s Annual Report on Form 10-K for the year ended March 2, 2013 and incorporated herein by reference.
|
|
|
(5)
|
Previously filed as Exhibit 4.2 of the Registrant’s Annual Report on Form 10-K for the year ended March 2, 2013 and incorporated herein by reference.
|
|
|
(6)
|
Previously filed as Exhibit 4.3 of the Registrant’s Annual Report on Form 10-K for the year ended March 2, 2013 and incorporated herein by reference.
|
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|
(7)
|
Previously filed as Exhibit 4.4 of the Registrant’s Annual Report on Form 10-K for the year ended March 2, 2013 and incorporated herein by reference.
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(8)
|
Previously filed as Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2009 and incorporated herein by reference.
|
|
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(9)
|
Previously filed as Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2009 and incorporated herein by reference.
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(10)
|
Previously filed as Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2009 and incorporated herein by reference.
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|
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(11)
|
Previously filed as Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 11, 2011 and incorporated herein by reference.
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(12)
|
Previously filed as Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 11, 2011 and incorporated herein by reference.
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(13)
|
Previously filed as Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K for the year ended February 27, 2010 and incorporated herein by reference.
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(14)
|
Previously filed as Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K for the year ended February 27, 2010 and incorporated herein by reference.
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(15)
|
Previously filed as Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K for the year ended February 27, 2010 and incorporated herein by reference.
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|
(16)
|
Previously filed as Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K for the year ended February 27, 2010 and incorporated herein by reference.
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(17)
|
Previously filed as Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 1, 2013 and incorporated herein by reference.
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|
(18)
|
Previously filed as Exhibit 10.30 of the Registrant’s Annual Report on Form 10-K for the year ended March 2, 2013 and incorporated herein by reference.
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|
(19)
|
Previously filed as Exhibit 10.3 to the Registrant’s Annual Report on Form 10-K for the year ended February 26, 2011 and incorporated herein by reference.
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|
(20)
|
Previously filed as Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K for the year ended February 26, 2011 and incorporated herein by reference.
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|
(21)
|
Previously filed as Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K for the year ended February 26, 2011 and incorporated herein by reference.
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|
(22)
|
Previously filed as Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K for the year ended February 26, 2011 and incorporated herein by reference.
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|
(23)
|
Previously filed as Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K for the year ended February 26, 2011 and incorporated herein by reference.
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(24)
|
Previously filed as Exhibit 99.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 6, 2012 and incorporated herein by reference.
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(25)
|
Previously filed as Exhibit 99.2 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 6, 2012 and incorporated herein by reference.
|
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(26)
|
Previously filed as Exhibit 10.29 of the Registrant’s Annual Report on Form 10-K for the year ended March 2, 2013 and incorporated herein by reference.
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(27)
|
Previously filed as Exhibit 99.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 13, 2013 and incorporated herein by reference.
|
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|
(28)
|
Previously filed as Exhibit 10.9 of the Registrant’s Annual Report on Form 10-K for the year ended March 2, 2013 and incorporated herein by reference.
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(29)
|
Previously filed as Exhibit 10.10 of the Registrant’s Annual Report on Form 10-K for the year ended March 2, 2013 and incorporated herein by reference.
|
_______________
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|
|
*
|
Management contract or compensatory plan, contract or arrangement.
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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THE FINISH LINE, INC.
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|
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Date:
|
April 29, 2014
|
By:
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/
S
/ E
DWARD
W. W
ILHELM
|
|
|
|
Edward W. Wilhelm,
Executive Vice President,
Chief Financial Officer
|
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature to the Annual Report on Form 10-K appears below here by constitutes and appoints Glenn S. Lyon and Edward W. Wilhelm as such person’s true and lawful attorney-in-fact and agent with full power of substitution for such person and in such person’s name, place and stead, in any and all capacities, to sign and to file with the Securities and Exchange Commission, any and all amendments to this Annual Report on Form 10-K, with exhibits thereto and other documents in connection therewith, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said in attorney-in-fact and agent, or any substitute therefor, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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Date:
|
April 29, 2014
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/s/ G
LENN
S. L
YON
|
|
|
|
Glenn S. Lyon,
Chairman and Chief Executive Officer
(Principal Executive Officer)
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|
Date:
|
April 29, 2014
|
|
/s/ E
DWARD
W. W
ILHELM
|
|
|
|
Edward W. Wilhelm,
Executive Vice President, Chief Financial Officer
(Principal Financial Officer)
|
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|
Date:
|
April 29, 2014
|
|
/s/ S
TEPHEN
G
OLDSMITH
|
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|
Stephen Goldsmith, Director
|
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|
|
Date:
|
April 29, 2014
|
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/s/ W
ILLIAM
P. C
ARMICHAEL
|
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|
William P. Carmichael, Director
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|
Date:
|
April 29, 2014
|
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/s/ C
ATHERINE
A. L
ANGHAM
|
|
|
|
Catherine A. Langham, Director
|
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|
|
Date:
|
April 29, 2014
|
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/s/ D
OLORES
A. K
UNDA
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|
Dolores A. Kunda, Director
|
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|
|
Date:
|
April 29, 2014
|
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/s/ N
ORMAN
H. G
URWITZ
|
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|
Norman H. Gurwitz, Director
|
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|
Date:
|
April 29, 2014
|
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/s/ R
ICHARD
P. C
RYSTAL
|
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|
Richard P. Crystal, Director
|
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|
Date:
|
April 29, 2014
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/s/ T
ORRENCE
B
OONE
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Torrence Boone, Director
|
Exhibit Index
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|
|
|
|
Exhibit
Number
|
Description
|
|
|
10.11
|
Amended and Restated Employment Agreement of Glenn S. Lyon, dated as of December 31, 2008.
|
|
|
10.12
|
Employment Agreement of Edward W. Wilhelm, dated as of March 30, 2009.
|
|
|
10.13
|
Amendment No. 1 to the Amended and Restated Employment Agreement of Edward W. Wilhelm.
|
|
|
10.18
|
Amendment No. 1 to the Amended and Restated Employment Agreement for Mr. Glenn Lyon.
|
|
|
10.19
|
Amendment No. 2 to the Amended and Restated Employment Agreement for Mr. Glenn Lyon.
|
|
|
10.26
|
Employment Agreement of Mark S. Landau, dated as of January 1, 2012.
|
|
|
21
|
Subsidiaries of The Finish Line, Inc.
|
|
|
23
|
Consent of Independent Registered Public Accounting Firm.
|
|
|
31.1
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as amended.
|
|
|
31.2
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as amended.
|
|
|
32
|
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
101
|
The following materials from the Company’s Form 10-K for the year ended March 1, 2014, formatted in an XBRL Interactive Data File: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Cash Flows; (iv) Consolidated Statements of Changes in Shareholders’ Equity; and (v) Notes to Consolidated Financial Statements, with detailed tagging of notes and financial statement schedules.
|
Exhibit 10.11
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “
Agreement
”) is made and entered into as of December 31, 2008 (the “
Effective
Date
”) by and between The Finish Line, Inc. (the “
Company
”) and Glenn S. Lyon (“
Executive
”).
WHEREAS, Executive is currently employed by the Company and is a party to that certain Employment Agreement (the “
Original Agreement
”) between the Company and Executive dated October 30, 2006 (the “
Effective Date
”); and
WHEREAS, the Company and Executive desire to amend and restate the Original Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and Executive agree as follows:
1.
Employment; Term
. The Company hereby agrees to employ Executive, and Executive hereby accepts such employment with the Company, in each case, on the terms and subject to the conditions hereinafter set forth. Subject to the provisions of Section 7 of this Agreement, Executive shall be employed by the Company for a four-year period commencing on the Effective Date and ending on the fourth anniversary of the Effective Date (as such period may be extended pursuant to the terms hereof, the “
Employment
Term
”) on the terms and subject to the conditions set forth in this Agreement; provided, however, that commencing with the fourth anniversary of the Effective Date and on each anniversary thereafter (each an “
Extension
Date
”), the Employment Term shall be automatically extended for an additional one-year period, unless the Company or Executive provides the other party hereto with written notice at least 180 days before the next Extension Date that the Employment Term shall not be so extended (“
Non-Renewal
Notice
”).
2.
Position
.
(a)
While employed by the Company hereunder, Executive shall serve as the Company’s Chief Executive Officer. In such position, Executive shall have such duties and authority as shall be determined from time to time by the board of directors of the Company (the “
Board
”).
(b)
While employed by the Company hereunder, Executive will devote his full business time and best efforts to the performance of Executive’s duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise which would conflict or interfere with the rendition of such services to the Company either directly or indirectly, without the prior written consent of the Board.
(c)
Executive’s principal place of employment shall be at the Company’s corporate headquarters in Indianapolis, Indiana.
3.
Base Salary
. As compensation for services rendered to the Company, the Company shall initially pay Executive a base salary at the annual rate of $620,000. Executive shall be entitled to such increases in Executive’s base salary, if any, as may be determined from time to time in the sole discretion of the Board. Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as the “
Base
Salary
.”
4.
Bonus
. In addition to the Base Salary, Executive shall be eligible to participate in such annual and long-term incentive bonus compensation programs or arrangements established from time to time for executives of the Company.
5.
Employee Benefits
. While employed by the Company hereunder, Executive shall be entitled to participate in the Company’s employee benefit plans as in effect from time to time, on the same basis as those benefits are generally made available to other peer executives of the Company.
6.
Business Expenses
. While employed by the Company hereunder, reasonable business expenses (including travel expenses) incurred by Executive in the performance of Executive’s duties hereunder shall be reimbursed by the Company in accordance with Company policies.
7.
Termination
. Executive’s employment hereunder may be terminated by either party at any time and for any or no reason; provided that Executive will be required to give the Company advance written notice of any resignation of Executive’s
employment (as set forth in this Section 7). Notwithstanding any other provision of this Agreement, the provisions of this Section 7 shall exclusively govern Executive’s rights upon termination of employment with the Company and its affiliates.
(a)
By the Company For Cause or By Executive Resignation without Good Reason.
(i)
Executive’s employment hereunder may be terminated by the Company for Cause (as defined below) at any time upon delivery of advance written notice to Executive and, if in the reasonable determination of the Company the acts or omissions of Executive providing the basis for termination for Cause as set forth in Section 7(a)(ii) are curable, after Executive’s failure to cure during a period of 35 days following the date of the delivery of such written notice. Any determination of a Cause by the Company pursuant to the items contained in Sections 7(a)(ii)(A), (B) and (D) may only be made by a majority of the Board. Executive’s employment hereunder shall terminate automatically upon Executive’s resignation without Good Reason (as defined in Section 7(c)); provided, that Executive will be required to give the Company at least 30 days advance written notice of a resignation without Good Reason.
(ii)
For purposes of this Agreement,
“Cause”
shall mean (A) the willful and continued failure by Executive to perform his material duties with respect to the Company or its affiliates for a period of more than 30 days; (B) the willful or intentional engaging by Executive in conduct within the scope of his employment that causes material and demonstrable injury, monetarily or otherwise, to the Company including, without limitation, embezzlement or theft; (C) Executive’s conviction for, or a plea of
nolo contendere
to, the commission of a felony involving moral turpitude; or (D) a material breach of Executive’s covenants set forth in Section 8 and 9 of this Agreement that causes a material and demonstrable injury, monetarily or otherwise, to the Company.
(iii)
If Executive’s employment is terminated by the Company for Cause, or if Executive resigns without Good Reason (except under the circumstances described in Section 7(e) or as provided in Section 7(d)(iii)), Executive shall be entitled to receive:
(A)
the Base Salary through the date of termination (including payment for any accrued but unused vacation time);
(B)
any earned but unpaid portion of Executive’s annual performance bonus (if any) for the fiscal year preceding the fiscal year in which such termination occurs;
(C)
reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the date of Executive’s termination; and
(D)
such employee benefits, if any, as to which Executive may be entitled under the employee benefit plans of the Company according to their terms (the amounts described in clauses (A) through (D) hereof, reduced by any amounts owed by Executive to the Company, being referred to as the
“Accrued Rights”).
Following such termination of Executive’s employment by the Company for Cause or resignation without Good Reason by Executive, except as set forth in this Section 7(a)(iii) or in Section 7(e) or Section 7(d), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(b)
Disability or Death
.
(i) Executive’s employment hereunder shall terminate upon Executive’s death and maybe terminated by the Company if Executive becomes (in the good faith judgment of the Board) physically or mentally incapacitated and is therefore unable for a period of three (3) consecutive months or for an aggregate of six (6) months in any twelve (12) consecutive month period to perform Executive’s duties (such incapacity is hereinafter referred to as “
Disability
”).
(ii) Upon termination of Executive’s employment hereunder for either Disability or death, Executive or Executive’s estate (as the case may be) shall be entitled to receive the Accrued Rights.
Following Executive’s termination of employment due to death or Disability, except as set forth in this Section 7(b)(ii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(c)
By the Company Without Cause, Resignation of Executive with Good Reason or Non-Renewal of Agreement
.
(i) Executive’s employment hereunder may be terminated by the Company at any time without Cause. Executive’s employment hereunder may be terminated by Executive for Good Reason (as defined below).
(ii) For purposes of this Agreement,
“Good Reason”
shall mean if, other than for Cause, any of the following has occurred: (A) any reduction in the Base Salary or Executive’s annual bonus opportunity (except for across the board reductions for all similarly situated executives of the Company); (B) a transfer of Executive’s primary workplace by more than thirty-five (35) miles from its location as of the Effective Date; (C) a material breach by the Company of this Agreement; or (D) if such termination of employment occurs within 30 days prior to or 2 years following a Change in Control (as defined in Section 7(d)), any of (1)
a substantial reduction in Executive’s authority, duties or responsibilities, or (2) the assignment of any duties or responsibilities inconsistent with Executive’s position with the Company;
provided, however,
that, in each case, Good Reason shall cease to exist for an event to the extent that (x) Executive shall have consented, in advance, to such event, (y) 90 days shall elapsed following the initial existence of such event without the Company receiving notice of Good Reason for such event, or (z) Executive has provided the Company with a notice specifying the event within 90 days of the initial existence of such event and the Company has failed to remedy the event within 30 days after receipt of such notice from Executive.
(iii) Except as set forth in Section 7(d), if Executive’s employment is terminated by the Company without Cause (other than by reason of death or Disability) or if Executive resigns for Good Reason, in either case, other than within the period that begins 30 days prior to a Change in Control and ends 2 years following a Change in Control, Executive shall be entitled to receive:
(A) the Accrued Rights; and
(B) subject to (I) Executive’s continued compliance with the provisions of Sections 8 and 9 hereof and (II) Executive’s execution and non-revocation of a general release in favor of the Company and its affiliates in a form reasonably acceptable to the Company:
(1)
a lump sum cash payment equal to 2 times the Base Salary, payable, subject to Section 7(g), within 30 days following the date of such termination of employment (the “
Termination Date
”); and
(2)
continued provision of group health benefits to Executive and his dependents for two years following the Termination Date in accordance with the terms thereof and with the same cost as if Executive remained employed during such period; and
(3)
if Executive was eligible to receive one or more cash bonuses for the calendar year during which Executive’s employment is terminated (the “
Termination Year
”), an amount equal to the greater of (y) a pro-rated portion (based on the number of days in the Termination Year during which Executive was employed) of the annual bonus and any other bonus Executive would have received for Termination Year had he remained employed through the entire year (based on the Company’s actual results for the Termination Year) or (z) the average annual bonus actually paid to Executive over the three full fiscal years prior to the Termination Date, payable, subject to Section 7(g), when bonuses are generally paid to the Company’s executives for the Termination Year but no later than two and one half months after the end of the year in which the bonus was earned.
(iv) Except as set forth in Section 7(d), if the Company provides Executive with a written Non-Renewal Notice and in connection therewith, notifies Executive that his employment shall terminate without Cause at the end of the Employment Term, Section 7(c)(iii) shall not apply and Executive shall be entitled to receive, if Executive does not resign, die or suffer a Disability prior to the end of the Employment term or if Executive is not terminated for Cause prior to the end of the Employment Term:
(A)
the Accrued Rights; and
(B)
subject to (I) Executive’s continued compliance with the provisions of Sections 8 and 9 hereof and (11) Executive’s execution and non-revocation of a general release of employment related claims in favor of the Company and its affiliates in a form reasonably acceptable to the Company:
(1)
a lump sum cash payment equal to the Base Salary, payable, subject to Section 7(g), within 30 days following the Termination Date;
(2)
continued provision of group health benefits to Executive and his dependents for one year following the Termination Date in accordance with the terms thereof and with the same cost as if Executive remained employed during such period; and
(3)
if Executive was eligible to receive one or more cash bonuses for the calendar year during which Executive’s employment is terminated (the “Termination Year”), an amount equal to a pro-rated portion (based on the number of days in the Termination Year during which Executive was employed) of the annual bonus and any other bonus Executive would have received for Termination Year had he remained employed through the entire year (based on the Company’s actual results for the Termination Year), payable, subject to Section 7(g), when bonuses are generally paid to the Company’s executives for the Termination Year but no later than two and one half months after the end of the year in which the bonus was earned.
Following Executive’s termination of employment by the Company without Cause (other than by reason of Executive’s death or Disability) or by Executive’s resignation for Good Reason, except as set forth in this Section 7(c)(iii), Section 7(c)(iv) or in Section 7(d), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(d)
Change in Control
.
(i) For purposes of this Agreement, “
Change
in
Control
” shall mean the consummation of one or more of the following:
(A) the sale, exchange, lease or other disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any “person” or “group” (as such terms are used in the Securities Exchange Act of 1934, as amended);
(B) any person or group, other than Alan Cohen, David Klapper or Larry Sablosky (each a “
Founder
”) is or becomes the beneficial owner, directly or indirectly, of more than 35% of the total voting power of the voting stock of the Company (or any entity which controls the Company or which is a successor to all or substantially all of the assets of the Company), including by way of merger, consolidation, tender or exchange offer or otherwise;
(C) a merger, consolidation or similar reorganization of the Company with or into another entity, if the shareholders of the common stock of the Company immediately prior to such transaction do not own a majority of the voting power of the voting stock of the surviving company or its parent immediately after the transaction in substantially the same proportions as immediately prior to such transaction; or
(D) during any 12-month period, individuals who at the beginning of such period constituted the Board (together with any new directors whose election by the Board (whether through the filling of a vacancy or otherwise) or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company then still in office, who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease or any reason to constitute a majority of the board of directors then in office.
(ii) In the event of a Change in Control (determined without regard to subclause (A) of the definition set forth in Section 7(d)(i)), notwithstanding any provision in any equity compensation plan maintained by the Company or any award agreement between the Company and Executive, all stock options and awards of restricted stock granted to Executive, which are outstanding and have not otherwise vested shall be deemed vested immediately prior to the consummation of the Change in Control (determined without regard to
subclause (A) of the definition set forth in Section 7(d)(i)). For purposes of this Section 7(d)(ii), the terms “stock option” and “restricted stock” should be read to include all other similar equity instruments.
(iii) If Executive’s employment is terminated by the Company without Cause (other than by reason of death or Disability) or if Executive resigns for Good Reason, in either case, during the period that begins 30 days prior to a Change in Control (as defined below) and ends 2 years following a Change in Control, Executive shall be entitled to receive:
(A) the Accrued Rights; and
(B) subject to (I) Executive’s continued compliance with the provisions of Sections 8 and 9 hereof and (II) Executive’s execution and non-revocation of a general release of employment related claims in favor of the Company and its affiliates in a form reasonably acceptable to the Company:
(1) a lump sum cash payment equal to 2.5 times the sum of (i) the Base Salary, plus (ii) Executive’s target annual bonus for Termination Year, plus (iii) the value of any other bonus the executive could have earned during the year of termination pursuant to the Company’s then existing bonus programs, payable, subject to Section 7(g), within 30 days following the Termination Date; and
(2) continued provision of group health benefits to Executive and his dependents for two years following the Termination Date in accordance with the terms thereof and with the same cost as if Executive remained employed during such period.
Following Executive’s termination of employment by the Company without Cause (other than by reason of Executive’s death or Disability) or by Executive’s resignation for Good Reason, except as set forth in this Section 7(d)(iii), Section 7(c)(iii), or Section 7(c)(iv), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(e)
By Executive without Good Reason Following a Change in Control
. If Executive resigns without Good Reason during the 30-day period that begins on the first anniversary of a Change in Control, Executive shall be entitled to receive:
(i) the Accrued Rights; and
(ii) subject to (I) Executive’s continued compliance with the provisions of Sections 8
and 9 hereof and (II) Executive’s execution and non-revocation of a general release in favor of the Company and its affiliates in a form reasonably acceptable to the Company, a lump sum cash payment equal to the Base Salary, payable, subject to Section 7(g), within 30 days following the Termination Date.
(f)
Parachute Taxes
.
(i) If any payments, rights or benefits (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement of Executive with the Company or any person affiliated with the Company) (“
Covered
Payments
”) received or to be received by Executive will be subject to the tax (the “
Excise
Tax”)
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “
Code
”) (or any similar tax that may hereafter be imposed), then, except as set forth in Section 7(f)(ii), the Company shall pay to Executive an amount in addition to the Covered Payments (“
Gross-Up Payment
”) as calculated below. The Gross-Up Payment shall be in an amount such that, after deduction of any Excise Tax on the Covered Payments and any federal, state and local income and employment tax and Excise Tax on the Gross-Up Payment, but before deduction for any federal, state or local income and employment tax on the Covered Payments, the net amount retained by Executive shall be equal to the Covered Payments.
(ii) Notwithstanding anything in this Agreement to the contrary, if the Covered Payments do not exceed 110% of Safe Harbor Amount (as defined below), then the portion of the Covered Payments that would be treated as “parachute payments” under Section 280G of the Code (“
Covered
Parachute
Payments
”) shall be reduced so that the Covered Parachute Payments, in the aggregate, are reduced to the Safe Harbor Amount. For purposes of this Agreement, the term “
Safe Harbor Amount
” means the largest portion of the Covered
Payments that would result in no portion of the Covered Payments being subject to the Excise Tax. In the event that it is determined that the amount of any Covered Payments will be reduced in accordance with this Section 7(f), Executive shall have the right to designate which of the Covered Payments shall be reduced and to what extent, provided, that Executive may not so elect to the extent that, in the determination of counsel to the Company, such election would cause Executive to be subject to the Excise Tax.
(iii) The determination of (A) whether an event described in Section 280G(b)(2)(A)(i) of the Code has occurred, (B) the amount of any Gross-Up Payment, (C) the value of any Covered Parachute Payments and the Safe Harbor Amount, (D) whether any reduction in the Covered Payments is required under Section 7(f)(ii), and (E) the amount of any such reduction, shall be made initially by an independent accounting firm selected by the Board as constituted prior to any Change in Control (the “
Accountants
”). For purposes of making the calculations required by this Section 7(f), the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of the Code, and other applicable legal authority. The Company and Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 7(f). The Company shall bear and be solely responsible for all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 7(f).
(iv) Executive shall promptly notify the Company in writing of any claim by any taxing authority that, if successful, would require the payment by the Company of a Gross-Up Payment; provided, however, that failure by Executive to give such notice promptly shall not result in a waiver or forfeiture of any of Executive’s rights under this Section 7(f), except to the extent of actual damage suffered by the Company as a result of such failure. If the Company notifies Executive in writing within 15 days after receiving such notice that it desires to contest such claim (and demonstrates to the reasonable satisfaction of Executive its ability to pay any resulting Gross-Up Payment), Executive shall:
(A) give the Company any information reasonably requested by the Company relating to such claim;
(B) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by the Company that is reasonably acceptable to Executive;
(C) cooperate with the Company in good faith in order effectively to contest such claim; and
(D) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company’s actions do not unreasonably interfere with or prejudice Executive’s disputes with the taxing authority as to other issues; and provided, further, that the Company shall bear and pay on an after-tax and as-incurred basis, all attorneys fees, costs and expenses (including additional interest, penalties and additions to tax) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax and as-incurred basis, for all resulting taxes (including, without limitation, income and excise taxes), interest, penalties and additions to tax.
(v) Notwithstanding anything herein to the contrary, any payment required under this Section 7(f) shall be made by the end of Executive’s taxable year next following the Company’s taxable year in which Executive remits the payment. In addition, any right to reimbursement of expenses incurred due to a tax audit or litigation addressing the existence or amount of a tax liability, whether Federal, state, local, or foreign, shall be made by the end of Executive’s taxable year following Executive’s taxable year in which the taxes that are the subject of the audit or litigation are remitted to the taxing authority, or where as a result of such audit or litigation no taxes are remitted, the end of Executive’s taxable year following Executive’s taxable year in which the audit is completed or there is a final and nonappealable settlement or other resolution of the litigation. This Section 7(f)(v) shall be interpreted consistent with Treas. Reg. §409A-3(i)(l)(v).
(g)
Effect of Section 409A of the Code
. Notwithstanding anything to the contrary in this Agreement, if the Company determines (i) that on the date Executive’s employment with the Company terminates or at such other time that the Company determines to be relevant, Executive is a “specified employee” (as such term is defined under Section 409A) of the Company and (ii) that any payments to be provided to Executive pursuant to this
Agreement are or may become subject to the additional tax under Section 409A(a)(l)(B) of the Code or any other taxes or penalties imposed under Section 409A of the Code (“
Section 409A Taxes
”) if provided at the time otherwise required under this Agreement then (A) such payments shall be delayed until the date that is six months after date of Executive’s “separation from service” (as such term is defined under Section 409A of the Code) with the Company, or such shorter period that, as determined by the Company, is sufficient to avoid the imposition of Section 409A Taxes (the “
Payment Delay Period
”) and (B) such payments shall be increased by an amount equal to interest on such payments for the Payment Delay Period at a rate equal to the prime rate in effect as of the date the payment was first due plus one point (for this purpose, the prime rate will be based on the rate published from time to time in The Wall Street Journal).
(h)
Notice of Termination
. Any termination of employment by the Company for Cause shall be communicated by written Notice of Termination to Executive in accordance with Section 11(h) hereof. In addition, any termination of employment by Executive for Good Reason shall be communicated by written Notice of Termination to the Company in accordance with Section 11(h) hereof. For purposes of this Agreement, a “
Notice of Termination
” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated.
(i)
Board/Committee Resignation
. Upon termination of Executive’s employment for any reason, Executive agrees that Executive shall automatically be deemed to have resigned as of the date of such termination, from the Board (and any committees thereof) and the board of directors or similar governing body (and any committees thereof) of any of the Company’s affiliates, and any position in which Executive is acting on behalf of or as a representative of the Company (such as a trustee or administrative committee member with respect to a tax-qualified retirement plan).
8.
Non-Competition; Non-Solicitation
.
(a) Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and its affiliates and accordingly agrees as follows:
(i) During the Restricted Period (as defined below), Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (“
Person
”), directly or indirectly:
(A) engage, in a competitive capacity, in any business that competes with the Company’s business in the athletic specialty and/or sporting goods retail industry (a “
Competitive
Business
”) in the United States;
(B) in a competitive capacity, enter the employ of, or render any services to, or enter into any contractual agreement or relationship with any Person (or any division or controlled or controlling affiliate of any Person) that engages in a Competitive Business;
(C) acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant or transfer any business to, or in any other way facilitate any other Person’s ability to engage in a Competitive Business; or
(D) interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Company or any of its affiliates and its customers, suppliers, partners, investors or vendors.
(ii) Notwithstanding anything to the contrary in this Agreement, Executive may, directly or indirectly own, solely as an investment, securities of any Person engaged in a Competitive Business that are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling Person of, or a member of a group that controls, such Person and (ii) does not, directly or indirectly, own 5% or more of any class of securities of such Person.
(iii) During the Restricted Period, Executive shall not, whether on Executive’s own behalf or on behalf of or in conjunction with any Person, directly or indirectly:
(E) solicit or encourage any employee of the Company or its affiliates to leave the employment of the Company or its affiliates; or
(F) hire any such employee who was employed by the Company or its affiliates as of the date of Executive’s termination of employment with the Company or who left the employment of the Company or its affiliates coincident with, or within one year prior to or after, the termination of Executive’s employment with the Company.
(b) It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section 8
to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that ally restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.
(c) For purposes of this Agreement, “
Restricted Period
” shall mean the period commencing on the Effective Date and ending (i) 12 months following the Termination Date if Executive’s employment with the Company terminates under the circumstances described in Section 7(c) or Section 7(e), (ii) 24 months following the Termination Date if Executive’s employment with the Company terminates under the circumstances described in Section 7(d)(iii), or (iii) upon the date Executive ceases to be employed by the Company for any other reason.
9.
Confidentiality; Intellectual Property
.
(a)
Confidentiality.
(i)
Executive will not at any time (whether during or after Executive’s employment with the Company) (x) retain or use for the benefit, purposes or account of Executive or any other Person (other than the Company); or (y) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations), any non-public, proprietary or confidential information including without limitation trade secrets, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, store site selection, new store openings, government and regulatory activities and approvals - concerning the past, current or future business, activities and operations of the Company, its subsidiaries or affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis (“
Confidential
Information
”) without the prior written authorization of the Board.
(ii)
“
Confidential
Information
” shall not include any information that is (a) generally known to the industry or the public other than as a result of Executive’s breach of this covenant; (b) made legitimately available to Executive without a confidentiality restriction by a third party without breach of any confidentiality obligation of that third party; or (c) required by law to be disclosed; provided, that Executive shall give prompt written notice to the Company of such requirement, disclose no more information than is so required, and cooperate with any attempts by the Company to obtain a protective order or similar treatment.
(iii)
Except as required by law, Executive shall not disclose to anyone, other than Executive’s immediate family and legal or financial advisors, the existence or contents of this Agreement; provided, that Executive may disclose to any prospective future employer the provisions of Sections 8 and 9 of this Agreement provided they agree to maintain the confidentiality of such terms.
(iv)
Upon termination of Executive’s employment with the Company for any reason, Executive shall (x) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name
or other source indicator) owned or used by the Company, its subsidiaries or affiliates; (y) immediately destroy, delete, or return to the Company, at the Company’s option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executive’s possession or control (including any of the foregoing stored or located in Executive’s office, home, laptop or other computer, whether or not Company property) that contain Confidential Information or otherwise relate to the business of the Company, its affiliates and subsidiaries, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information; and (z) notify and fully cooperate with the Company regarding the delivery or destruction of any other Confidential Information of which Executive is or becomes aware.
(b)
The provisions of this Section 9 shall survive the termination of Executive’s employment for any reason.
10.
Specific Performance
. Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Section 8 or Section 9 would be inadequate and the Company would suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy that may then be available.
11.
Miscellaneous.
(a)
Governing Law: Jurisdiction
. This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana, without regard to conflicts of laws principles thereof. Any and all disputes between the parties which may arise pursuant to this Agreement will be heard and determined before an appropriate federal court in the Southern District of Indiana, or, if not maintainable therein, then in an appropriate Indiana state court in Marion County, Indiana. The parties acknowledge that such courts have jurisdiction to interpret and enforce the provisions of this Agreement, and the parties consent to, and waive any and all objections that they may have as to, personal jurisdiction and/or venue in such courts.
(b)
Entire Agreement/Amendments
. This Agreement contains the entire understanding of the parties with respect to the employment of Executive by the Company. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto.
(c)
No Waiver
. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.
(d)
Severability
. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.
(e)
Assignment
. This Agreement, and all of Executive’s rights and duties hereunder, shall not be assignable or delegable by Executive. Any purported assignment or delegation by Executive in violation of ht foregoing shall be null and void
ab initio
and of no force or effect. This Agreement may be assigned by the Company to a Person that is an affiliate or a successor in interest to any portion of ht business operation of the Company. Upon such assignment, the rights and obligations of the company hereunder shall become the rights and obligations of such affiliate or successor Person.
(f)
Set Off; No Mitigation
. The Company’s obligation to pay Executive the amounts provided and to make the arrangements provided hereunder shall be subject to set-off, counterclaim or recoupment of amounts owed by Executive to the Company or its affiliates; provided, however, that in no event shall Executive be obligated to seek other employment or taken any other action by way of mitigation of the amounts payable to Executive under Section 7 of this Agreement.
(g)
Successors; Binding Agreement
. This Agreement shall inure to the benefit of and be binding upon personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
(h)
Notice
. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three days after it has been mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below in this Agreement, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
If to the Company:
The Finish Line, Inc.
3308 N. Mitthoeffer Road
Indianapolis, Indiana 46235
Attention: Chairperson of the Compensation and Stock Option Committee
If to Executive:
To the most recent address of Executive set forth in the personnel records of the Company.
(i)
Prior Agreements
. This Agreement supersedes all prior agreements and understandings (including verbal agreements) between Executive and the Company and/or its affiliates regarding the terms and conditions of Executive’s employment with the Company and/or its affiliates including, without limitation, the Original Agreement
(j)
Cooperation
. Executive shall provide Executive’s reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding), which relates to events occurring during Executive’s employment hereunder. This provision shall survive any termination of this Agreement.
(k)
Withholding Taxe
s. The Company may withhold from any amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
(l)
Counterparts
. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amended and Restated Employment Agreement as of the day and year first above written.
THE FINISH LINE, INC.
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By:
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/s/ BILL KIRKENDALL
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/s/ GLENN S. LYON
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Name:
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Bill Kirkendall
|
Glenn S. Lyon
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Title:
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Chair, Compensation and Stock Option Committee
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Exhibit 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “
Agreement
”) is made and entered into as of March 30, 2009 (the “
Effective
Date
”) by and between The Finish Line, Inc. (the “
Company
”) and Edward Wilhelm (“
Executive
”).
WHEREAS, the Company has offered to employ Executive as the Company’s Chief Financial Officer and Executive has accepted such employment; and
WHEREAS, the Company and Executive desire to enter into an Employment Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and Executive agree as follows:
1.
Employment; Term
. The Company hereby agrees to employ Executive, and Executive hereby accepts such employment with the Company, in each case, on the terms and subject to the conditions hereinafter set forth. Subject to the provisions of Section 7 of this Agreement, Executive shall be employed by the Company for a period commencing on the Effective Date and ending on December 30, 2009 (as such period may be extended pursuant to the terms hereof, the “
Employment
Term
”) on the terms and subject to the conditions set forth in this Agreement; provided, however, that commencing with December 30, 2009 and on each anniversary thereafter (each an “
Extension
Date
”), the Employment Term shall be automatically extended for an additional one-year period, unless the Company or Executive provides the other party hereto with written notice at least 180 days before the next Extension Date that the Employment Term shall not be so extended (“
Non-Renewal
Notice
”).
2.
Position
.
(a)
While employed by the Company hereunder, Executive shall serve as the Company’s Executive Vice President and Chief Financial Officer. In such position, Executive shall have such duties and authority as shall be determined from time to time by the board of directors of the Company (the “
Board
”).
(b)
While employed by the Company hereunder, Executive will devote his full business time and best efforts to the performance of Executive’s duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise which would conflict or interfere with the rendition of such services to the Company either directly or indirectly, without the prior written consent of the Board.
(c)
Executive’s principal place of employment shall be at the Company’s corporate headquarters in Indianapolis, Indiana.
3.
Base Salary
. As compensation for services rendered to the Company, the Company shall initially pay Executive a base salary at the annual rate of $300,000. Executive shall be entitled to such increases in Executive’s base salary, if any, as may be determined from time to time in the sole discretion of the Board. Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as the “
Base
Salary
.”
4.
Bonus
. In addition to the Base Salary, Executive shall be eligible to participate in such annual and long-term incentive bonus compensation programs or arrangements established from time to time for executives of the Company.
5.
Employee Benefits
. While employed by the Company hereunder, Executive shall be entitled to participate in the Company’s employee benefit plans as in effect from time to time, on the same basis as those benefits are generally made available to other peer executives of the Company.
6.
Business Expenses
. While employed by the Company hereunder, reasonable business expenses (including travel expenses) incurred by Executive in the performance of Executive’s duties hereunder shall be reimbursed by the Company in accordance with Company policies.
7.
Termination
. Executive’s employment hereunder may be terminated by either party at any time and for any or no reason; provided that Executive will be required to give the Company advance written notice of any resignation of Executive’s employment (as set forth in this Section 7). Notwithstanding any other provision of this Agreement, the provisions of this Section 7 shall exclusively govern Executive’s rights upon termination of employment with the Company and its affiliates.
(a)
By the Company For Cause or By Executive Resignation without Good Reason.
(i)
Executive’s employment hereunder may be terminated by the Company for Cause (as defined below) at any time upon delivery of advance written notice to Executive and, if in the reasonable determination of the Company the acts or omissions of Executive providing the basis for termination for Cause as set forth in Section 7(a)(ii) are curable, after Executive’s failure to cure during a period of 35 days following the date of the delivery of such written notice. Any determination of a Cause by the Company pursuant to the items contained in Sections 7(a)(ii)(A), (B) and (D) may only be made by a majority of the Board. Executive’s employment hereunder shall terminate automatically upon Executive’s resignation without Good Reason (as defined in Section 7(c)); provided, that Executive will be required to give the Company at least 30 days advance written notice of a resignation without Good Reason.
(ii)
For purposes of this Agreement,
“Cause”
shall mean (A) the willful and continued failure by Executive to perform his material duties with respect to the Company or its affiliates for a period of more than 30 days; (B) the willful or intentional engaging by Executive in conduct within the scope of his employment that causes material and demonstrable injury, monetarily or otherwise, to the Company including, without limitation, embezzlement or theft; (C) Executive’s conviction for, or a plea of
nolo contendere
to, the commission of a felony involving moral turpitude; or (D) a material breach of Executive’s covenants set forth in Section 8 and 9 of this Agreement that causes a material and demonstrable injury, monetarily or otherwise, to the Company.
(iii)
If Executive’s employment is terminated by the Company for Cause, or if Executive resigns without Good Reason (except under the circumstances described in Section 7(e) or as provided in Section 7(d)(iii)), Executive shall be entitled to receive:
(A)
the Base Salary through the date of termination (including payment for any accrued but unused vacation time);
(B)
any earned but unpaid portion of Executive’s annual performance bonus (if any) for the fiscal year preceding the fiscal year in which such termination occurs;
(C)
reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the date of Executive’s termination; and
(D)
such employee benefits, if any, as to which Executive may be entitled under the employee benefit plans of the Company according to their terms (the amounts described in clauses (A) through (D) hereof, reduced by any amounts owed by Executive to the Company, being referred to as the
“Accrued Rights”).
Following such termination of Executive’s employment by the Company for Cause or resignation without Good Reason by Executive, except as set forth in this Section 7(a)(iii) or in Section 7(e) or Section 7(d), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(b)
Disability or Death
.
(i) Executive’s employment hereunder shall terminate upon Executive’s death and maybe terminated by the Company if Executive becomes (in the good faith judgment of the Board) physically or mentally incapacitated and is therefore unable for a period of three (3) consecutive months or for an aggregate of six (6) months in any twelve (12) consecutive month period to perform Executive’s duties (such incapacity is hereinafter referred to as “
Disability
”).
(ii) Upon termination of Executive’s employment hereunder for either Disability or death, Executive or Executive’s estate (as the case may be) shall be entitled to receive the Accrued Rights.
Following Executive’s termination of employment due to death or Disability, except as set forth in this Section 7(b)(ii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(c)
By the Company Without Cause, Resignation of Executive with Good Reason or Non-Renewal of Agreement
.
(i) Executive’s employment hereunder may be terminated by the Company at any time without Cause. Executive’s employment hereunder may be terminated by Executive for Good Reason (as defined below).
(ii) For purposes of this Agreement,
“Good Reason”
shall mean if, other than for Cause, any of the following has occurred: (A) any reduction in the Base Salary or Executive’s annual bonus opportunity (except for across the board reductions for all similarly situated executives of the Company); (B) a transfer of Executive’s primary workplace by more than thirty-five (35) miles from its location as of the Effective Date; (C) a material breach by the Company of this Agreement; or (D) if such termination of employment occurs within 30 days prior to or 2 years following a Change in Control (as defined in Section 7(d)), any of (1)
a substantial reduction in Executive’s authority, duties or responsibilities, or (2) the assignment of any duties or responsibilities inconsistent with Executive’s position with the Company;
provided, however,
that, in each case, Good Reason shall cease to exist for an event to the extent that (x) Executive shall have consented, in advance, to such event, (y) 90 days shall elapsed following the initial existence of such event without the Company receiving notice of Good Reason for such event, or (z) Executive has provided the Company with a notice specifying the event within 90 days of the initial existence of such event and the Company has failed to remedy the event within 30 days after receipt of such notice from Executive.
(iii) Except as set forth in Section 7(d), if Executive’s employment is terminated by the Company without Cause (other than by reason of death or Disability) or if Executive resigns for Good Reason, in either case, other than within the period that begins 30 days prior to a Change in Control and ends 2 years following a Change in Control, Executive shall be entitled to receive:
(A) the Accrued Rights; and
(B) subject to (I) Executive’s continued compliance with the provisions of Sections 8 and 9 hereof and (II) Executive’s execution and non-revocation of a general release in favor of the Company and its affiliates in a form reasonably acceptable to the Company:
(1)
a lump sum cash payment equal to the Base Salary, payable, subject to Section 7(g), within 30 days following the date of such termination of employment (the “
Termination Date
”); and
(2)
continued provision of group health benefits to Executive and his dependents for one year following the Termination Date in accordance with the terms thereof and with the same cost as if Executive remained employed during such period; and
(3)
if Executive was eligible to receive one or more cash bonuses for the calendar year during which Executive’s employment is terminated (the “
Termination Year
”), an amount equal to the greater of (y) a pro-rated portion (based on the number of days in the Termination Year during which Executive was employed) of the annual bonus and any other bonus Executive would have received for Termination Year had he remained employed through the entire year (based on the Company’s actual results for the Termination Year) or (z) the average annual bonus actually paid to Executive over the three full fiscal years prior to the Termination Date, payable, subject to Section 7(g), when bonuses are generally paid to the Company’s executives for the Termination Year but no later than two and one half months after the end of the year in which the bonus was earned.
(iv) Except as set forth in Section 7(d), if the Company provides Executive with a written Non-Renewal Notice and in connection therewith, notifies Executive that his employment shall terminate without Cause at the end of the Employment Term, Section 7(c)(iii) shall not apply and Executive shall be entitled to receive, if Executive does not resign, die or suffer a Disability prior to the end of the Employment term or if Executive is not terminated for Cause prior to the end of the Employment Term:
(A)
the Accrued Rights; and
(B)
subject to (I) Executive’s continued compliance with the provisions of Sections 8 and 9 hereof and (11) Executive’s execution and non-revocation of a general release of employment related claims in favor of the Company and its affiliates in a form reasonably acceptable to the Company:
(1)
a lump sum cash payment equal to the Base Salary, payable, subject to Section 7(g), within 30 days following the Termination Date;
(2)
continued provision of group health benefits to Executive and his dependents for one year following the Termination Date in accordance with the terms thereof and with the same cost as if Executive remained employed during such period; and
(3)
if Executive was eligible to receive one or more cash bonuses for the calendar year during which Executive’s employment is terminated (the “Termination Year”), an amount equal to a pro-rated portion (based on the number of days in the Termination Year during which Executive was employed) of the annual bonus and any other bonus Executive would have received for Termination Year had he remained employed through the entire year (based on the Company’s actual results for the Termination Year), payable, subject to Section 7(g), when bonuses are generally paid to the Company’s executives for the Termination Year but no later than two and one half months after the end of the year in which the bonus was earned.
Following Executive’s termination of employment by the Company without Cause (other than by reason of Executive’s death or Disability) or by Executive’s resignation for Good Reason, except as set forth in this Section 7(c)(iii), Section 7(c)(iv) or in Section 7(d), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(d)
Change in Control
.
(i) For purposes of this Agreement, “
Change
in
Control
” shall mean the consummation of one or more of the following:
(A) the sale, exchange, lease or other disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any “person” or “group” (as such terms are used in the Securities Exchange Act of 1934, as amended);
(B) any person or group, other than Alan Cohen, David Klapper or Larry Sablosky (each a “
Founder
”) is or becomes the beneficial owner, directly or indirectly, of more than 35% of the total voting power of the voting stock of the Company (or any entity which controls the Company or which is a successor to all or substantially all of the assets of the Company), including by way of merger, consolidation, tender or exchange offer or otherwise;
(C) a merger, consolidation or similar reorganization of the Company with or into another entity, if the shareholders of the common stock of the Company immediately prior to such transaction do not own a majority of the voting power of the voting stock of the surviving company or its parent immediately after the transaction in substantially the same proportions as immediately prior to such transaction; or
(D) during any 12-month period, individuals who at the beginning of such period constituted the Board (together with any new directors whose election by the Board (whether through the filling of a vacancy or otherwise) or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company then still in office, who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease or any reason to constitute a majority of the board of directors then in office.
(ii) In the event of a Change in Control (determined without regard to subclause (A) of the definition set forth in Section 7(d)(i)), notwithstanding any provision in any equity compensation plan maintained by the Company or any award agreement between the Company and Executive, all stock options and awards of restricted stock granted to Executive, which are outstanding and have not otherwise vested shall be deemed vested immediately prior to the consummation of the Change in Control (determined without regard to subclause (A) of the definition set forth in Section 7(d)(i)). For purposes of this Section 7(d)(ii), the terms “stock option” and “restricted stock” should be read to include all other similar equity instruments.
(iii) If Executive’s employment is terminated by the Company without Cause (other than by reason of death or Disability) or if Executive resigns for Good Reason, in either case, during the period that begins 30 days prior to a Change in Control (as defined below) and ends 2 years following a Change in Control, Executive shall be entitled to receive:
(A) the Accrued Rights; and
(B) subject to (I) Executive’s continued compliance with the provisions of Sections 8 and 9 hereof and (II) Executive’s execution and non-revocation of a general release of employment related claims in favor of the Company and its affiliates in a form reasonably acceptable to the Company:
(1) a lump sum cash payment equal to 2.5 times the sum of (i) the Base Salary, plus (ii) Executive’s target annual bonus for Termination Year, plus (iii) the value of any other bonus the executive could have earned during the year of termination pursuant to the Company’s then existing bonus programs, payable, subject to Section 7(g), within 30 days following the Termination Date; and
(2) continued provision of group health benefits to Executive and his dependents for two years following the Termination Date in accordance with the terms thereof and with the same cost as if Executive remained employed during such period.
Following Executive’s termination of employment by the Company without Cause (other than by reason of Executive’s death or Disability) or by Executive’s resignation for Good Reason, except as set forth in this Section 7(d)(iii), Section 7(c)(iii), or Section 7(c)(iv), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(e)
By Executive without Good Reason Following a Change in Control
. If Executive resigns without Good Reason during the 30-day period that begins on the first anniversary of a Change in Control, Executive shall be entitled to receive:
(i) the Accrued Rights; and
(ii) subject to (I) Executive’s continued compliance with the provisions of Sections 8
and 9 hereof and (II) Executive’s execution and non-revocation of a general release in favor of the Company and its affiliates in a form reasonably acceptable to the Company, a lump sum cash payment equal to the Base Salary, payable, subject to Section 7(g), within 30 days following the Termination Date.
(f)
Parachute Taxes
.
(i) If any payments, rights or benefits (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement of Executive with the Company or any person affiliated with the Company) (“
Covered
Payments
”) received or to be received by Executive will be subject to the tax (the “
Excise
Tax”)
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “
Code
”) (or any similar tax that may hereafter be imposed), then, except as set forth in Section 7(f)(ii), the Company shall pay to Executive an amount in addition to the Covered Payments (“
Gross-Up Payment
”) as calculated below. The Gross-Up Payment shall be in an amount such that, after deduction of any Excise Tax on the Covered Payments and any federal, state and local income and employment tax and Excise Tax on the Gross-Up Payment, but before deduction for any federal, state or local income and employment tax on the Covered Payments, the net amount retained by Executive shall be equal to the Covered Payments.
(ii) Notwithstanding anything in this Agreement to the contrary, if the Covered Payments do not exceed 110% of Safe Harbor Amount (as defined below), then the portion of the Covered Payments that would be treated as “parachute payments” under Section 280G of the Code (“
Covered
Parachute
Payments
”) shall be reduced so that the Covered Parachute Payments, in the aggregate, are reduced to the Safe Harbor Amount. For purposes of this Agreement, the term “
Safe Harbor Amount
” means the largest portion of the Covered Payments that would result in no portion of the Covered Payments being subject to the Excise Tax. In the event that it is determined that the amount of any Covered Payments will be reduced in accordance with this Section 7(f), Executive shall have the right to designate which of the Covered Payments shall be reduced and to what extent, provided, that Executive may not so elect to the extent that, in the determination of counsel to the Company, such election would cause Executive to be subject to the Excise Tax.
(iii) The determination of (A) whether an event described in Section 280G(b)(2)(A)(i) of the Code has occurred, (B) the amount of any Gross-Up Payment, (C) the value of any Covered Parachute Payments and the Safe Harbor Amount, (D) whether any reduction in the Covered Payments is required under Section 7(f)
(ii), and (E) the amount of any such reduction, shall be made initially by an independent accounting firm selected by the Board as constituted prior to any Change in Control (the “
Accountants
”). For purposes of making the calculations required by this Section 7(f), the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of the Code, and other applicable legal authority. The Company and Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 7(f). The Company shall bear and be solely responsible for all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 7(f).
(iv) Executive shall promptly notify the Company in writing of any claim by any taxing authority that, if successful, would require the payment by the Company of a Gross-Up Payment; provided, however, that failure by Executive to give such notice promptly shall not result in a waiver or forfeiture of any of Executive’s rights under this Section 7(f), except to the extent of actual damage suffered by the Company as a result of such failure. If the Company notifies Executive in writing within 15 days after receiving such notice that it desires to contest such claim (and demonstrates to the reasonable satisfaction of Executive its ability to pay any resulting Gross-Up Payment), Executive shall:
(A) give the Company any information reasonably requested by the Company relating to such claim;
(B) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by the Company that is reasonably acceptable to Executive;
(C) cooperate with the Company in good faith in order effectively to contest such claim; and
(D) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company’s actions do not unreasonably interfere with or prejudice Executive’s disputes with the taxing authority as to other issues; and provided, further, that the Company shall bear and pay on an after-tax and as-incurred basis, all attorneys fees, costs and expenses (including additional interest, penalties and additions to tax) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax and as-incurred basis, for all resulting taxes (including, without limitation, income and excise taxes), interest, penalties and additions to tax.
(v) Notwithstanding anything herein to the contrary, any payment required under this Section 7(f) shall be made by the end of Executive’s taxable year next following the Company’s taxable year in which Executive remits the payment. In addition, any right to reimbursement of expenses incurred due to a tax audit or litigation addressing the existence or amount of a tax liability, whether Federal, state, local, or foreign, shall be made by the end of Executive’s taxable year following Executive’s taxable year in which the taxes that are the subject of the audit or litigation are remitted to the taxing authority, or where as a result of such audit or litigation no taxes are remitted, the end of Executive’s taxable year following Executive’s taxable year in which the audit is completed or there is a final and nonappealable settlement or other resolution of the litigation. This Section 7(f)(v) shall be interpreted consistent with Treas. Reg. §409A-3(i)(l)(v).
(g)
Effect of Section 409A of the Code
. Notwithstanding anything to the contrary in this Agreement, if the Company determines (i) that on the date Executive’s employment with the Company terminates or at such other time that the Company determines to be relevant, Executive is a “specified employee” (as such term is defined under Section 409A) of the Company and (ii) that any payments to be provided to Executive pursuant to this Agreement are or may become subject to the additional tax under Section 409A(a)(l)(B) of the Code or any other taxes or penalties imposed under Section 409A of the Code (“
Section 409A Taxes
”) if provided at the time otherwise required under this Agreement then (A) such payments shall be delayed until the date that is six months after date of Executive’s “separation from service” (as such term is defined under Section 409A of the Code) with the Company, or such shorter period that, as determined by the Company, is sufficient to avoid the imposition of Section 409A Taxes (the “
Payment Delay Period
”) and (B) such payments shall be increased by an amount equal to interest on such payments for the Payment Delay Period at a rate equal to the prime rate in effect as of the date the payment was first due plus one point (for this purpose, the prime rate will be based on the rate published from time to time in The Wall Street Journal).
(h)
Notice of Termination
. Any termination of employment by the Company for Cause shall be communicated by written Notice of Termination to Executive in accordance with Section 11(h) hereof. In addition, any termination of employment by Executive for Good Reason shall be communicated by written Notice of Termination to the Company in accordance with Section 11(h) hereof. For purposes of this Agreement, a “
Notice of Termination
” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated.
(i)
Board/Committee Resignation
. Upon termination of Executive’s employment for any reason, Executive agrees that Executive shall automatically be deemed to have resigned as of the date of such termination, from the Board (and any committees thereof) and the board of directors or similar governing body (and any committees thereof) of any of the Company’s affiliates, and any position in which Executive is acting on behalf of or as a representative of the Company (such as a trustee or administrative committee member with respect to a tax-qualified retirement plan).
8.
Non-Competition; Non-Solicitation
.
(a) Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and its affiliates and accordingly agrees as follows:
(i) During the Restricted Period (as defined below), Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (“
Person
”), directly or indirectly:
(A) engage, in a competitive capacity, in any business that competes with the Company’s business in the athletic specialty and/or sporting goods retail industry (a “
Competitive
Business
”) in the United States;
(B) in a competitive capacity, enter the employ of, or render any services to, or enter into any contractual agreement or relationship with any Person (or any division or controlled or controlling affiliate of any Person) that engages in a Competitive Business;
(C) acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant or transfer any business to, or in any other way facilitate any other Person’s ability to engage in a Competitive Business; or
(D) interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Company or any of its affiliates and its customers, suppliers, partners, investors or vendors.
(ii) Notwithstanding anything to the contrary in this Agreement, Executive may, directly or indirectly own, solely as an investment, securities of any Person engaged in a Competitive Business that are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling Person of, or a member of a group that controls, such Person and (ii) does not, directly or indirectly, own 5% or more of any class of securities of such Person.
(iii) During the Restricted Period, Executive shall not, whether on Executive’s own behalf or on behalf of or in conjunction with any Person, directly or indirectly:
(E) solicit or encourage any employee of the Company or its affiliates to leave the employment of the Company or its affiliates; or
(F) hire any such employee who was employed by the Company or its affiliates as of the date of Executive’s termination of employment with the Company or who left the employment of the Company or its affiliates coincident with, or within one year prior to or after, the termination of Executive’s employment with the Company.
(b) It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section 8
to be reasonable, if a final judicial determination is made by a court of competent
jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that ally restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.
(c) For purposes of this Agreement, “
Restricted Period
” shall mean the period commencing on the Effective Date and ending (i) 12 months following the Termination Date if Executive’s employment with the Company terminates under the circumstances described in Section 7(c) or Section 7(e), (ii) 24 months following the Termination Date if Executive’s employment with the Company terminates under the circumstances described in Section 7(d)(iii), or (iii) upon the date Executive ceases to be employed by the Company for any other reason.
9.
Confidentiality; Intellectual Property
.
(a)
Confidentiality.
(i)
Executive will not at any time (whether during or after Executive’s employment with the Company) (x) retain or use for the benefit, purposes or account of Executive or any other Person (other than the Company); or (y) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations), any non-public, proprietary or confidential information including without limitation trade secrets, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, store site selection, new store openings, government and regulatory activities and approvals - concerning the past, current or future business, activities and operations of the Company, its subsidiaries or affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis (“
Confidential
Information
”) without the prior written authorization of the Board.
(ii)
“
Confidential
Information
” shall not include any information that is (a) generally known to the industry or the public other than as a result of Executive’s breach of this covenant; (b) made legitimately available to Executive without a confidentiality restriction by a third party without breach of any confidentiality obligation of that third party; or (c) required by law to be disclosed; provided, that Executive shall give prompt written notice to the Company of such requirement, disclose no more information than is so required, and cooperate with any attempts by the Company to obtain a protective order or similar treatment.
(iii)
Except as required by law, Executive shall not disclose to anyone, other than Executive’s immediate family and legal or financial advisors, the existence or contents of this Agreement; provided, that Executive may disclose to any prospective future employer the provisions of Sections 8 and 9 of this Agreement provided they agree to maintain the confidentiality of such terms.
(iv)
Upon termination of Executive’s employment with the Company for any reason, Executive shall (x) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company, its subsidiaries or affiliates; (y) immediately destroy, delete, or return to the Company, at the Company’s option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executive’s possession or control (including any of the foregoing stored or located in Executive’s office, home, laptop or other computer, whether or not Company property) that contain Confidential Information or otherwise relate to the business of the Company, its affiliates and subsidiaries, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information; and (z) notify and fully cooperate with the Company regarding the delivery or destruction of any other Confidential Information of which Executive is or becomes aware.
(b)
The provisions of this Section 9 shall survive the termination of Executive’s employment for any reason.
10.
Specific Performance
. Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Section 8 or Section 9 would be inadequate and the Company would suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy that may then be available.
11.
Miscellaneous.
(a)
Governing Law: Jurisdiction
. This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana, without regard to conflicts of laws principles thereof. Any and all disputes between the parties which may arise pursuant to this Agreement will be heard and determined before an appropriate federal court in the Southern District of Indiana, or, if not maintainable therein, then in an appropriate Indiana state court in Marion County, Indiana. The parties acknowledge that such courts have jurisdiction to interpret and enforce the provisions of this Agreement, and the parties consent to, and waive any and all objections that they may have as to, personal jurisdiction and/or venue in such courts.
(b)
Entire Agreement/Amendments
. This Agreement contains the entire understanding of the parties with respect to the employment of Executive by the Company. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto.
(c)
No Waiver
. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.
(d)
Severability
. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.
(e)
Assignment
. This Agreement, and all of Executive’s rights and duties hereunder, shall not be assignable or delegable by Executive. Any purported assignment or delegation by Executive in violation of ht foregoing shall be null and void
ab initio
and of no force or effect. This Agreement may be assigned by the Company to a Person that is an affiliate or a successor in interest to any portion of ht business operation of the Company. Upon such assignment, the rights and obligations of the company hereunder shall become the rights and obligations of such affiliate or successor Person.
(f)
Set Off; No Mitigation
. The Company’s obligation to pay Executive the amounts provided and to make the arrangements provided hereunder shall be subject to set-off, counterclaim or recoupment of amounts owed by Executive to the Company or its affiliates; provided, however, that in no event shall Executive be obligated to seek other employment or taken any other action by way of mitigation of the amounts payable to Executive under Section 7 of this Agreement.
(g)
Successors; Binding Agreement
. This Agreement shall inure to the benefit of and be binding upon personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
(h)
Notice
. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three days after it has been mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below in this Agreement, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
If to the Company:
The Finish Line, Inc.
3308 N. Mitthoeffer Road
Indianapolis, Indiana 46235
Attention: Chairperson of the Compensation and Stock Option Committee
If to Executive:
To the most recent address of Executive set forth in the personnel records of the Company.
(i)
Prior Agreements
. This Agreement supersedes all prior agreements and understandings (including verbal agreements) between Executive and the Company and/or its affiliates regarding the terms and conditions of Executive’s employment with the Company and/or its affiliates including, without limitation, the Original Agreement
(j)
Cooperation
. Executive shall provide Executive’s reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding), which relates to events occurring during Executive’s employment hereunder. This provision shall survive any termination of this Agreement.
(k)
Withholding Taxe
s. The Company may withhold from any amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
(l)
Counterparts
. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Employment Agreement as of the day and year first above written.
THE FINISH LINE, INC.
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By:
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/s/ GLENN S. LYON
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/s/ EDWARD WILHELM
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Name:
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Glenn S. Lyon
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Edward Wilhelm
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Title:
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CEO
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Exhibit 10.13
AMENDMENT NUMBER ONE TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDMENT NUMBER ONE TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “
Amendment
”) is entered into effective as of February 28, 2011 between THE FINISH LINE, INC., an Indiana corporation (the “
Company
”), and EDWARD WILHELM (the “
Executive
”).
WHEREAS, the Company and the Executive are parties to the Employment Agreement dated March 30, 2009 (the “
Original Agreement
”); and
WHEREAS, the Company and the Executive desire to amend and modify certain provisions contained in the Original Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Section 7(a)(iii)(B) of the Original Agreement is hereby amended and restated in its entirety to read as follows:
“(B) any earned but unpaid portion of Executive’s annual performance bonus (if any) for the fiscal year preceding the fiscal year in which such termination occurs;”
2. Section 7(b)(ii) of the Original Agreement is hereby amended and restated in its entirety to read as follows:
“(ii) Upon termination of Executive’s employment hereunder for either Disability or death, Executive or Executive’s estate (as the case may be) shall be entitled to receive:
(A) the Accrued Rights; and
(B) if Executive was eligible to receive one or more cash bonuses for the fiscal year during which Executive’s employment is terminated (the “
Termination Year
”), an amount equal to a pro-rated portion (based on the number of days in the Termination Year during which Executive was employed) of the annual cash bonus and any other cash bonus Executive would have received for the Termination Year had he remained employed through the entire fiscal year (based on the Company’s actual performance for the Termination Year), payable, subject to Section 7(g), when bonuses are generally paid to the Company’s executives for the Termination Year but no later than two and one half months after the end of the fiscal year in which the cash bonus was earned.”
3. Section 7(c)(iii)(B)(1) of the Original Agreement is hereby amended and restated in its entirety to read as follows:
“(1) a lump sum cash payment equal to 1.5 times the Base Salary, payable, subject to Section 7(g), within 30 days following the date of such termination of employment (the “
Termination Date
”); and”
4. Section 7(c)(iii)(B)(3) of the Original Agreement is hereby amended and restated in its entirety to read as follows:
“(3) if Executive was eligible to receive one or more cash bonuses for the Termination Year, an amount equal to a pro-rated portion (based on the number of days in the Termination Year during which Executive was employed) of the annual cash bonus and any other cash bonus Executive would have received for the Termination Year had he remained employed through the entire fiscal year (based on the Company’s actual performance for the Termination Year), payable, subject to Section 7(g), when bonuses are generally paid to the Company’s executives for the Termination Year but no later than two and one half months after the end of the fiscal year in which the cash bonus was earned.”
5. Section 7(c)(iv)(B)(3) of the Original Agreement is hereby amended and restated in its entirety to read as follows:
“(3) if Executive was eligible to receive one or more cash bonuses for the Termination Year, an amount equal to a pro-rated portion (based on the number of days in the Termination Year during which Executive was employed) of the annual cash bonus and any other cash bonus Executive would have received for the Termination Year had he remained employed through the entire fiscal year (based on the Company’s actual performance for the Termination Year), payable, subject to Section 7
(g), when bonuses are generally paid to the Company’s executives for the Termination Year but no later than two and one half months after the end of the fiscal year in which the cash bonus was earned.”
6. Except as specifically amended herein, all other terms and conditions contained in the Original Agreement shall remain unchanged and shall continue in full force and effect. This Amendment may be executed in one or more counterparts, each of which when taken together shall be deemed one original Amendment.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment Number One to Amended and Restated Employment Agreement as of the day and year first above written.
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/s/ EDWARD WILHELM
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Edward Wilhelm
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THE FINISH LINE, INC.
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By:
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/s/ GLENN S. LYON
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Glenn S. Lyon, Chairman of the Board
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Exhibit 10.18
AMENDMENT NUMBER ONE TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDMENT NUMBER ONE TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “
Amendment
”) is entered into on February 25, 2010 between THE FINISH LINE, INC., an Indiana corporation (the “
Company
”), and GLENN S. LYON (the “
Executive
”).
WHEREAS, the Company and the Executive are parties to the Amended and Restated Employment Agreement dated December 31, 2008 (the “
Original Agreement
”); and
WHEREAS, the Internal Revenue Service has issued Notice 2008-13 and based on the Company’s evaluation of that notice the Company and the Executive have concluded that it is in the best interests of the Company and the Executive to amend the Original Agreement in order to ensure that certain compensation paid to the Executive continues to be “qualified performance based compensation” under Section 162(m) of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Section 7(c)(iii)(B)(1) of the Original Agreement is hereby amended and restated to read in its entirety as follows:
“(1) a lump sum cash payment equal to 2.5 times the Base Salary, payable, subject to Section 7(g), within 30 days following the date of such termination of employment (the “
Termination Date
”); and”
2. Section 7(c)(iii)(B)(3) of the Original Agreement is hereby amended and restated to read as follows:
“(3) if Executive was eligible to receive one or more cash bonuses for the calendar year during which Executive’s employment is terminated (the “
Termination Year
”), an amount equal to a pro-rated portion (based on the number of days in the Termination Year during which Executive was employed) of the annual cash bonus and any other cash bonus Executive would have received for the Termination Year had he remained employed through the entire year (based on the Company’s actual performance for the Termination Year), payable, subject to Section 7(g), when bonuses are generally paid to the Company’s executives for the Termination Year but no later than two and one half months after the end of the year in which the cash bonus was earned.”
3. Except as specifically amended herein, all other terms and conditions contained in the Original Agreement shall remain unchanged and shall continue in full force and effect. This Amendment may be executed in one or more counterparts, each of which when taken together shall be deemed one original Amendment.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment Number One to Amended and Restated Employment Agreement as of the day and year first above written.
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/s/ GLENN S. LYON
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Glenn S. Lyon
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THE FINISH LINE, INC.
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By:
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/s/ BILL KIRKENDALL
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Bill Kirkendall, Chair of the Compensation Committee
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Exhibit 10.19
AMENDMENT NUMBER TWO TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDMENT NUMBER TWO TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “
Amendment
”) is entered into effective as of February 28, 2011 between THE FINISH LINE, INC., an Indiana corporation (the “
Company
”), and GLENN S. LYON (the “
Executive
”).
WHEREAS, the Company and the Executive are parties to the Amended and Restated Employment Agreement dated December 31, 2008, as amended by the Amendment Number One to Amended and Restated Employment Agreement dated February 25, 2010 (the “
Original Agreement
”); and
WHEREAS, the Company and the Executive desire to amend and modify certain provisions contained in the Original Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Section 7(a)(iii)(B) of the Original Agreement is hereby amended and restated in its entirety to read as follows:
“(B) any earned but unpaid portion of Executive’s annual performance bonus (if any) for the fiscal year preceding the fiscal year in which such termination occurs;”
2. Section 7(b)(ii) of the Original Agreement is hereby amended and restated in its entirety to read as follows:
“(ii) Upon termination of Executive’s employment hereunder for either Disability or death, Executive or Executive’s estate (as the case may be) shall be entitled to receive:
(A) the Accrued Rights; and
(B) if Executive was eligible to receive one or more cash bonuses for the fiscal year during which Executive’s employment is terminated (the “
Termination Year
”), an amount equal to a pro-rated portion (based on the number of days in the Termination Year during which Executive was employed) of the annual cash bonus and any other cash bonus Executive would have received for the Termination Year had he remained employed through the entire fiscal year (based on the Company’s actual performance for the Termination Year), payable, subject to Section 7(g), when bonuses are generally paid to the Company’s executives for the Termination Year but no later than two and one half months after the end of the fiscal year in which the cash bonus was earned.”
3. Section 7(c)(iii)(B)(3) of the Original Agreement is hereby amended and restated in its entirety to read as follows:
“(3) if Executive was eligible to receive one or more cash bonuses for the Termination Year, an amount equal to a pro-rated portion (based on the number of days in the Termination Year during which Executive was employed) of the annual cash bonus and any other cash bonus Executive would have received for the Termination Year had he remained employed through the entire fiscal year (based on the Company’s actual performance for the Termination Year), payable, subject to Section 7(g), when bonuses are generally paid to the Company’s executives for the Termination Year but no later than two and one half months after the end of the fiscal year in which the cash bonus was earned.”
4. Section 7(c)(iv)(B)(3) of the Original Agreement is hereby amended and restated in its entirety to read as follows:
“(3) if Executive was eligible to receive one or more cash bonuses for the Termination Year, an amount equal to a pro-rated portion (based on the number of days in the Termination Year during which Executive was employed) of the annual cash bonus and any other cash bonus Executive would have received for the Termination Year had he remained employed through the entire fiscal year (based on the Company’s actual performance for the Termination Year), payable, subject to Section 7(g), when bonuses are generally paid to the Company’s executives for the Termination Year but no later than two and one half months after the end of the fiscal year in which the cash bonus was earned.”
5. Except as specifically amended herein, all other terms and conditions contained in the Original Agreement shall remain unchanged and shall continue in full force and effect. This Amendment may be executed in one or more counterparts, each of which when taken together shall be deemed one original Amendment.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment Number Two to Amended and Restated Employment Agreement as of the day and year first above written.
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/s/ GLENN S. LYON
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Glenn S. Lyon
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THE FINISH LINE, INC.
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By:
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/s/ BILL KIRKENDALL
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Bill Kirkendall, Chair of the Compensation Committee
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Exhibit 10.26
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “
Agreement
”) is made and entered into effective as of January 1, 2012 (the “
Effective
Date
”) by and between The Finish Line, Inc. (the “
Company
”) and Mark S. Landau (“
Executive
”).
WHEREAS, the Company has offered to employ Executive as Executive Vice President, Chief Business Development Officer and Executive has accepted such employment; and
WHEREAS, the Company and Executive desire to enter into an employment agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and Executive agree as follows:
1.
Employment; Term
. The Company hereby agrees to employ Executive, and Executive hereby accepts such employment with the Company, in each case, on the terms and subject to the conditions hereinafter set forth. Subject to the provisions of Section 7 of this Agreement. Executive shall be employed by the Company for a period commencing on the Effective Date and ending on December 31, 2012 (as such period may be extended pursuant to the terms hereof, the “
Employment
Term
”) on the terms and subject to the conditions set forth in this Agreement; provided, however, that commencing with January 1, 2013 and on each anniversary thereafter (each an “
Extension
Date
”), the Employment Term shall be automatically extended for an additional one-year period, unless the Company or Executive provides the other party hereto with written notice at least 180 days before the next Extension Date that the Employment Term shall not be so extended (“
Non-Renewal
Notice
”).
2.
Position
.
(a)
While employed by the Company hereunder, Executive shall serve as Executive Vice President, Chief Development Officer. In such position, Executive shall have such duties and authority as shall be determined from time to time by the Company’s Chief Executive Officer (the “
CEO
”) and the board of directors of the Company (the “
Board
”).
(b)
While employed by the Company hereunder, Executive will devote his full business time and best efforts to the performance of Executive’s duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise which would conflict or interfere with the rendition of such services to the Company either directly or indirectly, without the prior written consent of the Board or the CEO.
(c)
Executive’s principal place of employment shall be at the Company’s corporate headquarters in Indianapolis, Indiana. Executive shall relocate from his principal residence of Short Hills, New Jersey, and shall be reimbursed as on the attached Exhibit A.
3.
Base Salary
. As compensation for services rendered to the Company, the Company shall initially pay Executive a base salary at the annual rate of $420,000. Executive shall be entitled to such increases in Executive’s base salary, if any, as may be determined from time to time in the sole discretion of the Board. Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as the “
Base
Salary
.”
4.
Bonuses; Equity Grants
. In addition to the Base Salary, Executive shall be eligible to participate in such annual and long-term incentive bonus compensation programs or arrangements established from time to time for other peer executives of the Company. For the current fiscal year (2012), Executive will be eligible to participate in the Executive Officer Bonus Program (EOBP) and the Long-Term Executive Bonus Program (LTIB) beginning in fiscal year 2012, subject to the rules and conditions of those bonus programs, as approved by the Board; provided, that Executive’s participation will be on a pro-rated basis of 33%, subject to performance against measurements established for the plans. Executive will be eligible to receive a sign-on grant of 25,000 restricted shares (3 year cliff vesting) and a sign-on grant of 25,000 options (4 year vesting schedule).
5.
Employee Benefits
. While employed by the Company hereunder, Executive shall be entitled to participate in the Company’s employee benefit plans in effect from time to time, on the same basis as those benefits are generally made available to other peer executives of the Company. The Company shall reimburse Executive for Executive’s current COBRA health insurance premium for the month of January 2012.
6.
Business Expenses
. While employed by the Company hereunder, reasonable business expenses (including travel expenses) incurred by Executive in the performance of Executive’s duties hereunder shall be reimbursed by the Company in accordance with Company policies.
7.
Termination
. Executive’s employment hereunder may be terminated by either party at any time and for any or no reason; provided, that Executive will be required to give the Company advance written notice of any resignation of Executive’s employment (as set forth in this Section 7). Notwithstanding any other provision of this Agreement, the provisions of this Section 7 shall exclusively govern Executive’s rights upon termination of employment with the Company and its affiliates.
(a)
By the Company For Cause or By Executive Resignation without Good Reason.
(i)
Executive’s employment hereunder may be terminated by the Company for Cause (as defined below) at any time upon delivery of advance written notice to Executive and, if in the reasonable determination of the Company the acts or omissions of Executive providing the basis for termination for Cause as set forth in Section 7(a)(ii) are curable, after Executive’s failure to cure during a period of 35 days following the date of the delivery of such written notice. Any determination of a Cause by the Company pursuant to the items contained in Sections 7(a)(ii)(A), (B) and (D) may only be made by a majority of the Board. Executive’s employment hereunder shall terminate automatically upon Executive’s resignation without Good Reason (as defined in Section 7(c)); provided, that Executive will be required to give the Company at least 30 days advance written notice of a resignation without Good Reason.
(ii)
For purposes of this Agreement,
“Cause”
shall mean (A) the willful and continued failure by Executive to perform his material duties with respect to the Company or its affiliates for a period of more than 30 days; (B) the willful or intentional engaging by Executive in conduct within the scope of his employment that causes material and demonstrable injury, monetarily or otherwise, to the Company including, without limitation, embezzlement or theft; (C) Executive’s conviction for, or a plea of
nolo contendere
to, the commission of a felony involving moral turpitude; or (D) a material breach of Executive’s covenants set forth in Section 8 and 9 of this Agreement that causes a material and demonstrable injury, monetarily or otherwise, to the Company.
(iii)
If Executive’s employment is terminated by the Company for Cause, or if Executive resigns without Good Reason (except under the circumstances described in Section 7(e) or as provided in Section 7(d)(iii)), Executive shall be entitled to receive:
(A)
the Base Salary through the date of termination (including payment for any accrued but unused vacation time);
(B)
any earned but unpaid portion of Executive’s annual performance bonus (if any) for the fiscal year preceding the fiscal year in which such termination occurs;
(C)
reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the date of Executive’s termination; and
(D)
such employee benefits, if any, as to which Executive may be entitled under the employee benefit plans of the Company according to their terms (the amounts described in clauses (A) through (D) hereof, reduced by any amounts owed by Executive to the Company, being referred to as the
“Accrued Rights”).
Following such termination of Executive’s employment by the Company for Cause or resignation without Good Reason by Executive, except as set forth in this Section 7(a)(iii) or in Section 7(e) or Section 7(d), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(b)
Disability or Death
.
(i) Executive’s employment hereunder shall terminate upon Executive’s death and maybe terminated by the Company if Executive becomes (in the good faith judgment of the Board) physically or mentally incapacitated and is therefore unable for a period of three (3) consecutive months or for an aggregate of six
(6) months in any twelve (12) consecutive month period to perform Executive’s duties (such incapacity is hereinafter referred to as “
Disability
”).
(ii) Upon termination of Executive’s employment hereunder for either Disability or death, Executive or Executive’s estate (as the case may be) shall be entitled to receive:
(A) the Accrued Rights; and
(B) if Executive was eligible to receive one or more cash bonuses for the fiscal year during which Executive’s employment is terminated (the “
Termination Year
”), an amount equal to a pro-rated portion (based on the number of days in the Termination Year during which Executive was employed) of the annual cash bonus and any other cash bonus Executive would have received for the Termination Year had he remained employed through the entire fiscal year (based on the Company’s actual performance for the Termination Year), payable, subject to Section 7(g), when bonuses are generally paid to the Company’s executives for the Termination Year but no later than two and one half months after the end of the fiscal year in which the cash bonus was earned.
Following Executive’s termination of employment due to death or Disability, except as set forth in this Section 7(b)(ii), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(c)
By the Company Without Cause, Resignation of Executive with Good Reason or Non-Renewal of Agreement
.
(i) Executive’s employment hereunder may be terminated by the Company at any time without Cause. Executive’s employment hereunder may be terminated by Executive for Good Reason (as defined below).
(ii) For purposes of this Agreement,
“Good Reason”
shall mean if, other than for Cause, any of the following has occurred: (A) any reduction in the Base Salary or Executive’s annual bonus opportunity (except for across the board reductions for all similarly situated executives of the Company); (B) a transfer of Executive’s primary workplace by more than thirty-five (35) miles from its location as of the Effective Date; (C) a material breach by the Company of this Agreement; or (D) if such termination of employment occurs within 30 days prior to or 2 years following a Change in Control (as defined in Section 7(d)), any of (1)
a substantial reduction in Executive’s authority, duties or responsibilities, or (2) the assignment of any duties or responsibilities inconsistent with Executive’s position with the Company;
provided, however,
that, in each case, Good Reason shall cease to exist for an event to the extent that (x) Executive shall have consented, in advance, to such event, (y) 90 days shall elapsed following the initial existence of such event without the Company receiving notice of Good Reason for such event, or (z) Executive has provided the Company with a notice specifying the event within 90 days of the initial existence of such event and the Company has failed to remedy the event within 30 days after receipt of such notice from Executive.
(iii) Except as set forth in Section 7(d), if Executive’s employment is terminated by the Company without Cause (other than by reason of death or Disability) or if Executive resigns for Good Reason, in either case, other than within the period that begins 30 days prior to a Change in Control and ends 2 years following a Change in Control, Executive shall be entitled to receive:
(A) the Accrued Rights; and
(B) subject to (I) Executive’s continued compliance with the provisions of Sections 8 and 9 hereof and (II) Executive’s execution and non-revocation of a general release in favor of the Company and its affiliates in a form reasonably acceptable to the Company:
(1)
a lump sum cash payment equal to 1.5 times the Base Salary, payable, subject to Section 7(g), within 30 days following the date of such termination of employment (the “
Termination Date
”); and
(2)
continued provision of group health benefits to Executive and his dependents for one year following the Termination Date in accordance with the terms thereof and with the same cost as if Executive remained employed during such period; and
(3)
if Executive was eligible to receive one or more cash bonuses for the Termination Year, an amount equal to a pro-rated portion (based on the number of days in the Termination Year during which Executive was employed) of the annual cash bonus and any other cash bonus Executive would have received for Termination Year had he remained employed through the entire fiscal year (based on the Company’s actual results for the Termination Year), payable, subject to Section 7(g), when bonuses are generally paid to the Company’s executives for the Termination Year but no later than two and one half months after the end of the fiscal year in which the cash bonus was earned.
(iv) Except as set forth in Section 7(d), if the Company provides Executive with a written Non-Renewal Notice and in connection therewith, notifies Executive that his employment shall terminate without Cause at the end of the Employment Term, Section 7(c)(iii) shall not apply and Executive shall be entitled to receive, if Executive does not resign, die or suffer a Disability prior to the end of the Employment term or if Executive is not terminated for Cause prior to the end of the Employment Term:
(A)
the Accrued Rights; and
(B)
subject to (I) Executive’s continued compliance with the provisions of Sections 8 and 9 hereof and (11) Executive’s execution and non-revocation of a general release of employment related claims in favor of the Company and its affiliates in a form reasonably acceptable to the Company:
(1)
a lump sum cash payment equal to the Base Salary, payable, subject to Section 7(g), within 30 days following the Termination Date;
(2)
continued provision of group health benefits to Executive and his dependents for one year following the Termination Date in accordance with the terms thereof and with the same cost as if Executive remained employed during such period; and
(3)
if Executive was eligible to receive one or more cash bonuses for the Termination Year, an amount equal to a pro-rated portion (based on the number of days in the Termination Year during which Executive was employed) of the annual bonus and any other cash bonus Executive would have received for Termination Year had he remained employed through the entire fiscal year (based on the Company’s actual results for the Termination Year), payable, subject to Section 7(g), when bonuses are generally paid to the Company’s executives for the Termination Year but no later than two and one half months after the end of the fiscal year in which the cash bonus was earned.
Following Executive’s termination of employment by the Company without Cause (other than by reason of Executive’s death or Disability) or by Executive’s resignation for Good Reason, except as set forth in this Section 7(c)(iii), Section 7(c)(iv) or in Section 7(d), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(d)
Change in Control
.
(i) For purposes of this Agreement, “
Change
in
Control
” shall mean the consummation of one or more of the following:
(A) the sale, exchange, lease or other disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any “person” or “group” (as such terms are used in the Securities Exchange Act of 1934, as amended);
(B) any person or group is or becomes the beneficial owner, directly or indirectly, of more than 35% of the total voting power of the voting stock of the Company (or any entity which controls the Company or which is a successor to all or substantially all of the assets of the Company), including by way of merger, consolidation, tender or exchange offer or otherwise;
(C) a merger, consolidation or similar reorganization of the Company with or into another entity, if the shareholders of the common stock of the Company immediately prior to such transaction do not own a majority of the voting power of the voting stock of the surviving company or its parent immediately after the transaction in substantially the same proportions as immediately prior to such transaction; or
(D) during any 12-month period, individuals who at the beginning of such period constituted the Board (together with any new directors whose election by the Board (whether through the filling of a vacancy or otherwise) or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company then still in office, who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease or any reason to constitute a majority of the board of directors then in office.
(ii) In the event of a Change in Control (determined without regard to subclause (A) of the definition set forth in Section 7(d)(i)), notwithstanding any provision in any equity compensation plan maintained by the Company or any award agreement between the Company and Executive, all stock options and awards of restricted stock granted to Executive, which are outstanding and have not otherwise vested shall be deemed vested immediately prior to the consummation of the Change in Control (determined without regard to subclause (A) of the definition set forth in Section 7(d)(i)). For purposes of this Section 7(d)(ii), the terms “stock option” and “restricted stock” should be read to include all other similar equity instruments.
(iii) If Executive’s employment is terminated by the Company without Cause (other than by reason of death or Disability) or if Executive resigns for Good Reason, in either case, during the period that begins 30 days prior to a Change in Control (as defined below) and ends 2 years following a Change in Control, Executive shall be entitled to receive:
(A) the Accrued Rights; and
(B) subject to (I) Executive’s continued compliance with the provisions of Sections 8 and 9 hereof and (II) Executive’s execution and non-revocation of a general release of employment related claims in favor of the Company and its affiliates in a form reasonably acceptable to the Company:
(1) a lump sum cash payment equal to 2.5 times the sum of (i) the Base Salary, plus (ii) Executive’s target annual bonus for Termination Year, plus (iii) the value of any other bonus Executive could have earned during the year of termination pursuant to the Company’s then existing bonus programs, payable, subject to Section 7(g), within 30 days following the Termination Date; and
(2) continued provision of group health benefits to Executive and his dependents for two years following the Termination Date in accordance with the terms thereof and with the same cost as if Executive remained employed during such period.
Following Executive’s termination of employment by the Company without Cause (other than by reason of Executive’s death or Disability) or by Executive’s resignation for Good Reason, except as set forth in this Section 7(d)(iii), Section 7(c)(iii), or Section 7(c)(iv), Executive shall have no further rights to any compensation or any other benefits under this Agreement.
(e)
By Executive without Good Reason Following a Change in Control
. If Executive resigns without Good Reason during the 30-day period that begins on the first anniversary of a Change in Control, Executive shall be entitled to receive:
(i) the Accrued Rights; and
(ii) subject to (I) Executive’s continued compliance with the provisions of Sections 8
and 9 hereof and (II) Executive’s execution and non-revocation of a general release in favor of the Company and its affiliates in a form reasonably acceptable to the Company, a lump sum cash payment equal to the Base Salary, payable, subject to Section 7(g), within 30 days following the Termination Date.
(f)
Parachute Taxes
.
(i) If any payments, rights or benefits (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement of Executive with the Company or any person affiliated with the Company) (“
Covered
Payments
”) received or to be received by Executive will be subject to the tax (the “
Excise
Tax”)
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “
Code
”) (or any similar tax that may hereafter be imposed), then, except as set forth in Section 7(f)(ii), the Company shall pay to Executive an amount in addition to the Covered Payments (“
Gross-Up Payment
”) as calculated below. The Gross-Up Payment shall be in an amount such that, after deduction of any Excise Tax on the Covered Payments and any federal, state and local income and employment tax and Excise Tax on the Gross-Up Payment, but before deduction for any federal, state or local income and employment tax on the Covered Payments, the net amount retained by Executive shall be equal to the Covered Payments.
(ii) Notwithstanding anything in this Agreement to the contrary, if the Covered Payments do not exceed 110% of Safe Harbor Amount (as defined below), then the portion of the Covered Payments that would be treated as “parachute payments” under Section 280G of the Code (“
Covered
Parachute
Payments
”) shall be reduced so that the Covered Parachute Payments, in the aggregate, are reduced to the Safe Harbor Amount. For purposes of this Agreement, the term “Safe Harbor Amount” means the largest portion of the Covered Payments that would result in no portion of the Covered Payments being subject to the Excise Tax. In the event that it is determined that the amount of any Covered Payments will be reduced in accordance with this Section 7(f), Executive shall have the right to designate which of the Covered Payments shall be reduced and to what extent, provided, that Executive may not so elect to the extent that, in the determination of counsel to the Company, such election would cause Executive to be subject to the Excise Tax.
(iii) The determination of (A) whether an event described in Section 280G(b)(2)(A)(i) of the Code has occurred, (B) the amount of any Gross-Up Payment, (C) the value of any Covered Parachute Payments and the Safe Harbor Amount, (D) whether any reduction in the Covered Payments is required under Section 7(f)(ii), and (E) the amount of any such reduction, shall be made initially by an independent accounting firm selected by the Board as constituted prior to any Change in Control (the “
Accountants
”). For purposes of making the calculations required by this Section 7(f), the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of the Code, and other applicable legal authority. The Company and Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 7(f). The Company shall bear and be solely responsible for all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 7(f).
(iv) Executive shall promptly notify the Company in writing of any claim by any taxing authority that, if successful, would require the payment by the Company of a Gross-Up Payment; provided, however, that failure by Executive to give such notice promptly shall not result in a waiver or forfeiture of any of Executive’s rights under this Section 7(f), except to the extent of actual damage suffered by the Company as a result of such failure. If the Company notifies Executive in writing within 15 days after receiving such notice that it desires to contest such claim (and demonstrates to the reasonable satisfaction of Executive its ability to pay any resulting Gross-Up Payment), Executive shall:
(A) give the Company any information reasonably requested by the Company relating to such claim;
(B) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by the Company that is reasonably acceptable to Executive;
(C) cooperate with the Company in good faith in order effectively to contest such claim; and
(D) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company’s actions do not unreasonably interfere with or prejudice Executive’s disputes with the taxing authority as to other issues; and provided, further, that the Company shall bear and pay on an after-tax and as-incurred basis, all attorneys fees, costs and expenses (including additional interest, penalties and additions to tax) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax and as-incurred basis, for all resulting taxes (including, without limitation, income and excise taxes), interest, penalties and additions to tax.
(v) Notwithstanding anything herein to the contrary, any payment required under this Section 7(f) shall be made by the end of Executive’s taxable year next following the Company’s taxable year in which
Executive remits the payment. In addition, any right to reimbursement of expenses incurred due to a tax audit or litigation addressing the existence or amount of a tax liability, whether Federal, state, local, or foreign, shall be made by the end of Executive’s taxable year following Executive’s taxable year in which the taxes that are the subject of the audit or litigation are remitted to the taxing authority, or where as a result of such audit or litigation no taxes are remitted, the end of Executive’s taxable year following Executive’s taxable year in which the audit is completed or there is a final and nonappealable settlement or other resolution of the litigation. This Section 7(f)(v) shall be interpreted consistent with Treas. Reg. §409A-3(i)(l)(v).
(g)
Effect of Section 409.4 of the Code
. Notwithstanding anything to the contrary in this Agreement, if the Company determines (i) that on the date Executive’s employment with the Company terminates or at such other time that the Company determines to be relevant, Executive is a “specified employee” (as such term is defined under Section 409A) of the Company and (ii) that any payments to be provided to Executive pursuant to this Agreement are or may become subject to the additional tax under Section 409A(a)(l)(B) of the Code or any other taxes or penalties imposed under Section 409A of the Code (“
Section 409A Taxes
”) if provided at the time otherwise required under this Agreement then (A) such payments shall be delayed until the date that is six months after date of Executive’s “separation from service” (as such term is defined under Section 409.4 of the Code) with the Company, or such shorter period that, as determined by the Company, is sufficient to avoid the imposition of Section 409A Taxes (the “
Payment Delay Period
”) and (B) such payments shall be increased by an amount equal to interest on such payments for the Payment Delay Period at a rate equal to the prime rate in effect as of the date the payment was first due plus one point (for this purpose, the prime rate will be based on the rate published from time to time in The Wall Street Journal).
(h)
Notice of Termination
. Any termination of employment by the Company for Cause shall be communicated by written Notice of Termination to Executive in accordance with Section 11(h) hereof. In addition, any termination of employment by Executive for Good Reason shall be communicated by written Notice of Termination to the Company in accordance with Section 11(h) hereof. For purposes of this Agreement, a “
Notice of Termination
” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated.
(i)
Board/Committee Resignation
. Upon termination of Executive’s employment for any reason, Executive agrees that Executive shall automatically be deemed to have resigned as of the date of such termination, from the Board (and any committees thereof) and the board of directors or similar governing body (and any committees thereof) of any of the Company’s affiliates, and any position in which Executive is acting on behalf of or as a representative of the Company (such as a trustee or administrative committee member with respect to a tax-qualified retirement plan).
8.
Non-Competition; Non-Solicitation
.
(a) Executive acknowledges and recognizes the highly competitive nature of the businesses of the Company and its affiliates and accordingly agrees as follows:
(i) During the Restricted Period (as defined below), Executive will not, whether on Executive’s own behalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever (“
Person
”), directly or indirectly:
(A) engage, in a competitive capacity, in any business that competes with the Company’s business in the athletic specialty and/or sporting goods retail industry (a “
Competitive
Business
”) in the United States;
(B) in a competitive capacity, enter the employ of, or render any services to, or enter into any contractual agreement or relationship with any Person (or any division or controlled or controlling affiliate of any Person) that engages in a Competitive Business;
(C) acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant or transfer any business to, or in any other way facilitate any other Person’s ability to engage in a Competitive Business; or
(D) interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between the Company or any of its affiliates and its customers, suppliers, partners, investors or vendors.
(ii) Notwithstanding anything to the contrary in this Agreement, Executive may, directly or indirectly own, solely as an investment, securities of any Person engaged in a Competitive Business that are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling Person of, or a member of a group that controls, such Person and (ii) does not, directly or indirectly, own 5% or more of any class of securities of such Person.
(iii) During the Restricted Period, Executive shall not, whether on Executive’s own behalf or on behalf of or in conjunction with any Person, directly or indirectly:
(E) solicit or encourage any employee of the Company or its affiliates to leave the employment of the Company or its affiliates; or
(F) hire any such employee who was employed by the Company or its affiliates as of the date of Executive’s termination of employment with the Company or who left the employment of the Company or its affiliates coincident with, or within one year prior to or after, the termination of Executive’s employment with the Company.
(b) It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section 8
to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that ally restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.
(c) For purposes of this Agreement, “
Restricted Period
” shall mean the period on the Effective Date and ending (i) 12 months following the Termination Date if Executive’s employment with the Company terminates under the circumstances described in Section 7(c) or Section 7(e), (ii) 24 months following the Termination Date if Executive’s employment with the Company terminates under the circumstances described in Section 7(d)(iii), or (iii) upon the date Executive ceases to be employed by the Company for any other reason.
9.
Confidentiality; Intellectual Property
.
(a)
Confidentiality
.
(i)
Executive will not at any time (whether during or after Executive’s employment with the Company) (x) retain or use for the benefit, purposes or account of Executive or any other Person (other than the Company); or (y) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside the Company (other than its professional advisers who are bound by confidentiality obligations), any non-public, proprietary or confidential information including without limitation trade secrets, know-how, research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, store site selection, new store openings, government and regulatory activities and approvals - concerning the past, current or future business, activities and operations of the Company, its subsidiaries or affiliates and/or any third party that has disclosed or provided any of same to the Company on a confidential basis (“
Confidential
Information
”) without the prior written authorization of the Board.
(ii)
“
Confidential
Information
” shall not include any information that is (a) generally known to the industry or the public other than as a result of Executive’s breach of this covenant; (b) made legitimately available to Executive without a confidentiality restriction by a third party without breach of any
confidentiality obligation of that third party; or (c) required by law to be disclosed; provided, that Executive shall give prompt written notice to the Company of such requirement, disclose no more information than is so required, and cooperate with any attempts by the Company to obtain a protective order or similar treatment.
(iii)
Except as required by law, Executive shall not disclose to anyone, other than Executive’s immediate family and legal or financial advisors, the existence or contents of this Agreement; provided, that Executive may disclose to any prospective future employer the provisions of Sections 8 and 9 of this Agreement provided they agree to maintain the confidentiality of such terms.
(iv)
Upon termination of Executive’s employment with the Company for any reason, Executive shall (x) cease and not thereafter commence use of any Confidential Information or intellectual property (including without limitation, any patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other source indicator) owned or used by the Company, its subsidiaries or affiliates; (y) immediately destroy, delete, or return to the Company, at the Company’s option, all originals and copies in any form or medium (including memoranda, books, papers, plans, computer files, letters and other data) in Executive’s possession or control (including any of the foregoing stored or located in Executive’s office, home, laptop or other computer, whether or not Company property) that contain Confidential Information or otherwise relate to the business of the Company, its affiliates and subsidiaries, except that Executive may retain only those portions of any personal notes, notebooks and diaries that do not contain any Confidential Information; and (z) notify and fully cooperate with the Company regarding the delivery or destruction of any other Confidential Information of which Executive is or becomes aware.
(b)
The provisions of this Section 9 shall survive the termination of Executive’s employment for any reason.
10.
Specific Performance
. Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Section 8 or Section 9 would be inadequate and the Company would suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy that may then be available.
11.
Miscellaneous
.
(a)
Governing Law: Jurisdiction
. This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana, without regard to conflicts of laws principles thereof. Any and all disputes between the parties which may arise pursuant to this Agreement will be heard and determined before an appropriate federal court in the Southern District of Indiana, or, if not maintainable therein, then in an appropriate Indiana state court in Marion County, Indiana. The parties acknowledge that such courts have jurisdiction to interpret and enforce the provisions of this Agreement, and the parties consent to, and waive any and all objections that they may have as to, personal jurisdiction and/or venue in such courts.
(b)
Entire Agreement/Amendments
. This Agreement contains the entire understanding of the parties with respect to the employment of Executive by the Company. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto.
(c)
No Waiver
. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.
(d)
Severability
. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.
(e)
Assignment
. This Agreement, and all of Executive’s rights and duties hereunder, shall not be assignable or delegable by Executive. Any purported assignment or delegation by Executive in violation of ht foregoing shall be null and void
ab initio
and of no force or effect. This Agreement may be assigned by the Company to a Person that
is an affiliate or a successor in interest to any portion of ht business operation of the Company. Upon such assignment, the rights and obligations of the company hereunder shall become the rights and obligations of such affiliate or successor Person.
(f)
Set Off; No Mitigation
. The Company’s obligation to pay Executive the amounts provided and to make the arrangement provided hereunder shall be subject to set-off, counterclaim or recoupment of amounts owed by Executive to the Company or its affiliates; provided, however, that in no event shall Executive be obligated to seek other employment or taken any other action by way of mitigation of the amounts payable to Executive under Section 7 of this Agreement.
(g)
Successors; Binding Agreement
. This Agreement shall inure to the benefit of and be binding upon personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
(h)
Notice
. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three days after it has been mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below in this Agreement, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
If to the Company:
The Finish Line, Inc.
3308 N. Mitthoeffer Road
Indianapolis, Indiana 46235
Attention: Chairman & CEO
With a copy (which shall not constitute notice) to the Company’s General Counsel at the same address.
If to Executive:
Mark S. Landau
2 Robert Drive
Short Hills, NJ 07078
(or otherwise to the most recent address of Executive set forth in the personnel records of the Company)
(i)
Prior Agreements
. This Agreement supersedes all prior agreements and understandings (including verbal agreements) between Executive and the Company and/or its affiliates regarding the terms and conditions of Executive’s employment with the Company and/or its affiliates.
(j)
Cooperation
. Executive shall provide Executive’s reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding), which relates to events occurring during Executive’s employment hereunder. This provision shall survive any termination of this Agreement.
(k)
Withholding Taxes
. The Company may withhold from any amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
(l)
Counterparts
. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Employment Agreement effective as of the day and year first above written.
THE FINISH LINE, INC.
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By:
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/s/ GLENN S. LYON
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/s/ MARK S. LANDAU
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Name:
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Glenn S. Lyon
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Mark S. Landau
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Title:
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Chairman & CEO
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Exhibit A
Relocation Assistance.
Finish Line is prepared to assist you with the expense of relocation as stated in the relocation policy provided to you with exceptions noted below:
You will be eligible for a relocation package that includes two (2) trips for two people up to 3 days/2 nights each trip, reimbursement of pre-approved and reasonable relocation costs of up to $100,000 (net) for reimbursable relocation items as outlined in the Finish Line Relocation Policy, which includes temporary housing in Indianapolis, use of a moving company provided by Finish Line, and selling and closing costs and incidental expenses (subject to receipts). Per IRS regulations, portions of this reimbursement are taxable (e.g. all expenses except for the physical move itself). Finish Line will seek to gross up these payments to cover what we anticipate will be taxable portions. In the event that you do not exhaust these funds for relocation, the difference will be paid to you in the form of a lump-sum sign on bonus. This payment, if applicable will be made no earlier than February 1, 2012 and not later than May 31, 2012. Any expenses incurred prior to December 31, 2011 are excluded from this allowance.
The above relocation expenses will be reimbursed to you or paid on your behalf by the company in the form of a loan that will have no repayment obligation conditioned upon your continued employment for a period of not less than 24 months. In the event that you voluntarily terminate your employment with the Company, or you are terminated for cause: a) before the conclusion of 12 months of employment, you will be required to repay the Company 100% of these expenses; b) if between 12 - 18 months of employment, you will be required to repay two-thirds of these expenses; and c) if between 18 and 24 months of employment, you will be required to repay one-third of these expenses.
Exhibit 21
SUBSIDIARIES OF THE FINISH LINE, INC.
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Subsidiary
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State of Incorporation
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Percentage of Ownership
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The Finish Line USA, Inc.
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Indiana
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100%
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The Finish Line Distribution, Inc.
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Indiana
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100%
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Finish Line Transportation Co., Inc.
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Indiana
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100%
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The Finish Line MA, Inc.
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Indiana
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100%
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Spike’s Holding, LLC
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Indiana
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100%
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The Running Specialty Group, LLC
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Indiana
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51%
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The Running Specialty Group Acquisitions 1, LLC
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Indiana
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100%
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*
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*
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The Running Specialty Group Acquisitions 1, LLC is owned 100% by The Running Specialty Group, LLC
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Exhibit 23
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
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(1)
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Registration Statement (Form S-8 No. 33-84590) pertaining to The Finish Line, Inc. Non-Employee Director Stock Option Plan,
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(2)
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Registration Statements (Form S-8 Nos. 333-100427 and 333-126881) pertaining to The Finish Line, Inc. 2002 Stock Incentive Plan,
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(3)
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Registration Statement (Form S-8 No. 333-118069) pertaining to The Finish Line, Inc. Employee Stock Purchase Plan,
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(4)
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Registration Statement (Form S-8 No. 333-160751) pertaining to The Finish Line, Inc. 2009 Incentive Plan,
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(5)
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Registration Statement (Form S-3 No. 333-150091) of the Finish Line, Inc., and
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(6)
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Registration Statement (Form S-3 No. 333-182628) of the Finish Line, Inc.
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of our reports dated
April 29, 2014
, with respect to the consolidated financial statements of The Finish Line, Inc., and the effectiveness of internal control over financial reporting of The Finish Line, Inc. included in this Annual Report (Form 10-K) of The Finish Line, Inc. for the year ended
March 1, 2014
.
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/s/ Ernst & Young LLP
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Indianapolis, Indiana
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April 29, 2014
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Exhibit 31.1
CERTIFICATION
I, Glenn S. Lyon, certify that:
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1.
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I have reviewed this Annual Report on Form 10-K of The Finish Line, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date:
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April 29, 2014
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By:
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/s/ GLENN S. LYON
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Glenn S. Lyon
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Chairman and Chief Executive Officer
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Exhibit 31.2
CERTIFICATION
I, Edward W. Wilhelm, certify that:
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1.
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I have reviewed this Annual Report on Form 10-K of The Finish Line, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date:
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April 29, 2014
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By:
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/s/ EDWARD W. WILHELM
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Edward W. Wilhelm
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Executive Vice President, Chief Financial Officer
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Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Each of the undersigned hereby certifies, in his capacity as an officer of The Finish Line, Inc. (the “Company”), for purposes of 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to the best of his knowledge:,
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•
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The Annual Report on Form 10-K of the Company for the year ended
March 1, 2014
fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78); and
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•
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The information contained in such Annual Report on Form 10-K fairly presents, in all material aspects, the financial condition and results of operation of the Company.
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Date:
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April 29, 2014
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By:
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/
S
/ G
LENN
S. L
YON
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Glenn S. Lyon
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Chairman and Chief Executive Officer
(Principal Executive Officer)
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By:
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/s/ E
DWARD
W. W
ILHELM
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Edward W. Wilhelm
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Executive Vice President,
Chief Financial Officer
(Principal Financial Officer)
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A signed original of this written statement required by Section 906 has been provided to The Finish Line, Inc. and will be retained by The Finish Line, Inc. and forwarded to the Securities and Exchange Commission or its staff upon request.