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Finish Line Reports Fourth Quarter and Full Fiscal Year 2015 Results

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The Finish Line, Inc. (NASDAQ:FINL) today reported results for the fourth quarter and fiscal year 2015, representing the thirteen and fifty-two weeks ended February 28, 2015.

For the thirteen weeks ended February 28, 2015:

  • Consolidated net sales were $551.3 million, an increase of 6.3% over the prior year period.
  • Finish Line comparable store sales increased 2.6%.
  • On a GAAP basis, diluted earnings per share were $0.87.
  • Non-GAAP diluted earnings per share, which excludes the impact of impairment charges and store closing costs were $0.88.

For the fifty-two weeks ended February 28, 2015:

  • Consolidated net sales were a record $1.82 billion, an increase of 9.0% over the prior year.
  • Finish Line comparable store sales increased 3.2%.
  • On a GAAP basis, diluted earnings per share increased 9.0% over the prior year to $1.70.
  • Non-GAAP diluted earnings per share, which excludes the impact of impairment charges and store closing costs, employee resignation costs, and the recognition of a one-time tax benefit were $1.67.

“Our fourth quarter results, especially for our core business, represent a solid finish to a disappointing year,” said Glenn Lyon, Chairman and Chief Executive Officer of Finish Line. “We quickly reduced expenses and gained better leverage to deliver earnings ahead of plan. At the same time, we made progress rebalancing our inventory to better align with customer demand. While there is still work to be done to achieve operational excellence throughout the Company, we have a sound plan in place to improve profitability and continue our long track record of returning increased value to our shareholders.”

Balance Sheet

As of February 28, 2015, consolidated merchandise inventories increased 13.2% to $344.4 million compared to $304.2 million as of March 1, 2014.

The company repurchased 0.7 million shares of common stock in the fourth quarter, totaling $15.9 million. For the full year, Finish Line repurchased 2.7 million shares totaling $68.1 million. The Board has authorized a new 5 million share repurchase plan. The new plan will commence upon completion of the current plan which has 1.2 million shares remaining.

As of February 28, 2015, the company had no interest-bearing debt and $148.2 million in cash and cash equivalents, compared to $229.1 million as of March 1, 2014.

Outlook

For the fiscal year ending February 27, 2016, Finish Line expects comparable store sales to be up in the low single to mid single digit range and earnings per share to increase in the low single to mid single digit range over fiscal year 2015 non-GAAP diluted earnings per share of $1.67.

Q4 Fiscal 2015 Conference Call Today, March 27, 2015 at 8:30 a.m.

The company will host a conference call for investors today, March 27, 2015, at 8:30 a.m. Eastern. To participate in the live conference call, dial 866-923-8645 (U.S. and Canada) or 660-422-4970 (International), conference ID #1414984. The live conference call will also be accessible online at www.finishline.com. A replay of the conference call can be accessed approximately two hours following the completion of the call by dialing 855-859-2056, conference ID #1414984. This recording will be made available through Monday, April 27, 2015. The replay will also be accessible online at www.finishline.com.

Annual Meeting July 16, 2015

The company’s Board of Directors has established July 16, 2015 as the date of the 2015 annual meeting of shareholders, with May 15, 2015 as the record date for this meeting.

Disclosure Regarding Non-GAAP Measures

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

About The Finish Line, Inc.

The Finish Line, Inc. is a premium retailer of athletic shoes, apparel and accessories. Headquartered in Indianapolis, Finish Line has approximately 1,030 Finish Line branded locations primarily in U.S. malls and shops inside Macy’s department stores and employs more than 14,000 sneakerologists who help customers every day connect with their sport, their life and their style. Online shopping is available at www.finishline.com and www.macys.com. Mobile shopping is available at m.finishline.com. Follow Finish Line on Twitter at Twitter.com/FinishLine and “like” Finish Line on Facebook at Facebook.com/FinishLine. Track loyalty points and find store and product information with the free Finish Line app downloadable for iOS and Android customers.

Finish Line also operates the Running Specialty Group. This includes 76 specialty running stores in 17 states and the District of Columbia under The Running Company, Run On!, Blue Mile, Boulder Running Company, Roncker’s Running Spot, Running Fit, VA Runner, Capital RunWalk, Richmond RoadRunner, Garry Gribble’s Running Sports, Run Colorado, Raleigh Running Outfitters, Striders, Indiana Running Company and JackRabbit Sports banners. More information is available at www.run.com or www.boulderrunningcompany.com.

Forward-Looking Statements

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

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

The Finish Line, Inc.
Consolidated Statements of Income
(In thousands, except per share and store/shop data)
Thirteen Weeks Ended Fifty-Two Weeks Ended
February 28,

2015

March 1,

2014

February 28,

2015

March 1,

2014

(Unaudited) (Unaudited (Unaudited)
Net sales $ 551,347 $ 518,872 $ 1,820,586 $ 1,670,410
Cost of sales (including occupancy costs) 363,298 332,609 1,236,783 1,122,967
Gross profit 188,049 186,263 583,803 547,443
Selling, general and administrative expenses 123,754 117,668 459,455 424,571
Impairment charges and store closing costs 763 1,557 3,918 2,767
Operating income 63,532 67,038 120,430 120,105
Interest (expense) income, net (21 ) 10 (15 ) 37
Gain on sale of investment 2,076 2,076
Income before income taxes 63,511 69,124 120,415 122,218
Income tax expense 23,078 26,370 40,673 47,166
Net income 40,433 42,754 79,742 75,052
Net loss attributable to redeemable noncontrolling interest 390 249 2,251 1,851
Net income attributable to The Finish Line, Inc. $ 40,823 $ 43,003 $ 81,993 $ 76,903
Diluted earnings per share attributable to The Finish Line, Inc. shareholders $ 0.87 $ 0.87 $ 1.70 $ 1.56
Diluted weighted average shares 46,593 48,605 47,658 48,701
Dividends declared per share $ 0.09 $ 0.08 $ 0.33 $ 0.29
Finish Line store activity for the period:
Beginning of period 642 658 645 645
Opened 1 10 22
Closed (6 ) (13 ) (18 ) (22 )
End of period 637 645 637 645
Square feet at end of period 3,471,448 3,507,865
Average square feet per store 5,450 5,439
Branded shops within department stores activity for the period:
Beginning of period 397 181 185 3
Opened 5 213 183
Closed (2 ) (1 ) (3 ) (1 )
End of period 395 185 395 185
Square feet at end of period 404,521 229,685
Average square feet per shop 1,024 1,242
Running Specialty store activity for the period:
Beginning of period 66 47 48 27
Acquired 5 2 20 15
Opened 3 7
Closed (1 ) (1 )
End of period 71 48 71 48
Square feet at end of period 262,148 155,930
Average square feet per store 3,692 3,249
Thirteen Weeks Ended Fifty-Two Weeks Ended
February 28,

2015

March 1,

2014

February 28,

2015

March 1,

2014

Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales (including occupancy costs) 65.9 64.1 67.9 67.2
Gross profit 34.1 35.9 32.1 32.8
Selling, general and administrative expenses 22.4 22.7 25.3 25.4
Impairment charges and store closing costs 0.1 0.3 0.2 0.2
Operating income 11.6 12.9 6.6 7.2
Interest (expense) income, net
Gain on sale of investment 0.4 0.1
Income before income taxes 11.6 13.3 6.6 7.3
Income tax expense 4.2 5.1 2.2 2.8
Net income 7.4 8.2 4.4 4.5
Net loss attributable to redeemable noncontrolling interest 0.1 0.1 0.1
Net income attributable to The Finish Line, Inc. 7.4 % 8.3 % 4.5 % 4.6 %

Condensed Consolidated
Balance Sheets

February 28,

2015

March 1,

2014

(Unaudited)
ASSETS
Cash and cash equivalents $ 148,201 $ 229,079
Merchandise inventories, net 344,396 304,209
Other current assets 37,691 33,675
Property and equipment, net 274,360 223,182
Goodwill 34,719 25,608
Other assets, net 10,119 9,192
Total assets $ 849,486 $ 824,945
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities $ 197,128 $ 193,670
Deferred credits from landlords 29,143 27,658
Other long-term liabilities 33,481 19,659
Redeemable noncontrolling interest, net 90 1,774
Shareholders’ equity 589,644 582,184
Total liabilities and shareholders’ equity $ 849,486 $ 824,945

The Finish Line, Inc.
Reconciliation of Gross Profit, GAAP to Gross Profit, Non-GAAP (Unaudited)
(In thousands)

Thirteen Weeks Ended Fifty-Two Weeks Ended
February 28, 2015 March 1, 2014 February 28, 2015 March 1, 2014
Gross profit, GAAP $ 188,049 34.1 % $ 186,263 35.9 % $ 583,803 32.1 % $ 547,443 32.8 %
Start-up costs 5,758 0.3
Gross profit, Non-GAAP $ 188,049 34.1 % $ 186,263 35.9 % $ 583,803 32.1 % $ 553,201 33.1 %

Reconciliation of Selling, General and Administrative Expenses, GAAP to
Selling, General and Administrative Expenses, Non-GAAP (Unaudited)
(In thousands)

Thirteen Weeks Ended Fifty-Two Weeks Ended
February 28, 2015 March 1, 2014 February 28, 2015 March 1, 2014
Selling, general and administrative expenses, GAAP $ 123,754 22.4 % $ 117,668 22.7 % $ 459,455 25.3 % $ 424,571 25.4 %
Employee resignation costs (842 ) (0.1 )
Start-up costs (2,202 ) (0.1 )
Selling, general and administrative expenses, Non-GAAP $ 123,754 22.4 % $ 117,668 22.7 % $ 458,613 25.2 % $ 422,369 25.3 %

Reconciliation of Operating Income, GAAP to Operating Income, Non-GAAP (Unaudited)
(In thousands)

Thirteen Weeks Ended Fifty-Two Weeks Ended
February 28, 2015 March 1, 2014 February 28, 2015 March 1, 2014
Operating income, GAAP $ 63,532 11.6 % $ 67,038 12.9 % $ 120,430 6.6 % $ 120,105 7.2 %
Impairment charges and store closing costs 763 0.1 1,557 0.3 3,918 0.2 2,767 0.2
Employee resignation costs 842 0.1
Start-up costs 7,960 0.4
Operating income, Non-GAAP $ 64,295 11.7 % $ 68,595 13.2 % $ 125,190 6.9 % $ 130,832 7.8 %

Reconciliation of Income Tax Expense, GAAP to Income Tax Expense, Non-GAAP (Unaudited)
(In thousands)

Thirteen Weeks Ended Fifty-Two Weeks Ended
February 28, 2015 March 1, 2014 February 28, 2015 March 1, 2014
Income tax expense, GAAP $ 23,078 4.2 % $ 26,370 5.1 % $ 40,673 2.2 % $ 47,166 2.8 %
Tax affect of:
Impairment charges and store closing costs 293 601 0.1 1,508 0.1 1,074 0.1
Employee resignation costs 324
Start-up costs 3,109 0.2
Gain on sale of investment (802 ) (0.2 ) (802 ) (0.1 )
One-time tax benefit 4,313 0.3
Income tax expense, Non-GAAP $ 23,371 4.2 % $ 26,169 5.0 % $ 46,818 2.6 % $ 50,547 3.0 %

Reconciliation of Net Income Attributable to The Finish Line, Inc., GAAP to
Net Income Attributable to The Finish Line, Inc., Non-GAAP (Unaudited)
(In thousands)

Thirteen Weeks Ended Fifty-Two Weeks Ended
February 28, 2015 March 1, 2014 February 28, 2015 March 1, 2014
Net income attributable to The Finish Line, Inc., GAAP $ 40,823 7.4 % $ 43,003 8.3 % $ 81,993 4.5 % $ 76,903 4.6 %
Impairment charges and store closing costs, net of income taxes* 470 0.1 956 0.2 2,354 0.2 1,693 0.1
Employee resignation costs, net of income taxes 518
Start-up costs, net of income taxes 4,851 0.3
Gain on sale of investment, net of income taxes** (962 ) (0.2 ) (962 ) (0.1 )
One-time tax benefit (4,313 ) (0.3 )
Net income attributable to The Finish Line, Inc., Non-GAAP $ 41,293 7.5 % $ 42,997 8.3 % $ 80,552 4.4 % $ 82,485 4.9 %

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

** Net of increase to net loss attributable to redeemable noncontrolling interest related to gain on sale of investment of $312.

Reconciliation of Diluted Earnings Per Share Attributable to The Finish Line, Inc. Shareholders, GAAP to
Diluted Earnings Per Share Attributable to The Finish Line, Inc. Shareholders, Non-GAAP (unaudited)

Thirteen Weeks Ended Fifty-Two Weeks Ended
February 28,

2015

March 1,

2014

February 28,

2015

March 1,

2014

Diluted earnings per share attributable to The Finish Line, Inc. shareholders, GAAP $ 0.87 $ 0.87 $ 1.70 $ 1.56
Impairment charges and store closing costs, net of income taxes and redeemable noncontrolling interest 0.01 0.02 0.05 0.03
Employee resignation costs, net of income taxes 0.01
Start-up costs, net of income taxes 0.10
Gain on sale of investment, net of income taxes and redeemable noncontrolling interest (0.02 ) (0.02 )
One-time tax benefit (0.09 )
Diluted earnings per share attributable to The Finish Line, Inc. shareholders, Non-GAAP $ 0.88 $ 0.87 $ 1.67 $ 1.67

Note: See Disclosure Regarding Non-GAAP Measures above.

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