The Finish Line, Inc. recorded a net loss of $1.8 million for the second quarter ended September 1, 2007, after net income of $9.9 million in the year-ago quarter. In diluted earnings per share terms, the company experienced a loss of 4 cents per diluted share versus net income of 21 cents per diluted share last year. Included in the Q2 loss is a pre-tax charge of $13.0 million (17 cents per diluted share) for the impairment of assets, write down of inventory and lease costs related to the recently announced closure of the company's 15 Paiva stores. Diluted weighted average shares outstanding were 47,188,000 for Q2 versus 47,612,000 shares outstanding for Q2 LY.


Net sales increased 1.3% to $343.0 million for Q2 compared to $338.6 million reported for Q2 LY. Comparable store net sales decreased 4.7% for Q2 as compared to the 6.6% decrease reported for Q2 LY.


Merchandise inventories on a consolidated basis were $303.6 million at September 1, 2007 compared to $322.7 million at August 26, 2006. As of September 1, 2007, on a per square foot basis, consolidated inventories decreased 11%, and Finish Line store merchandise inventories decreased 8% compared to one year ago.


Mr. Alan H. Cohen, Chairman and Chief Executive Officer of Finish Line stated, “During the quarter, we made progress on several key operating initiatives including: reorganizing our footwear buying and planning teams, evolving our product assortment to emphasize premium products in both performance and sport style categories, remerchandising our stores, and increasing our investment in our direct-to-consumer business. We believe these initiatives will lead to improved financial performance in the coming quarters. In addition, we have reduced Finish Line store inventory 8% on a per square foot basis. This reduction makes room for a strong flow of new products going into the important holiday season.”


YEAR-TO-DATE RESULTS:


For the twenty-six weeks ended September 1, 2007 the company reported a net loss of $5.7 million, or 12 cents per diluted share versus net income of $14.3 million, or 30 cents per diluted share for the twenty-six weeks ended August 26, 2006. As noted above, included in the YTD loss is a pre-tax charge of $13.0 million (17 cents per diluted share) related to the recently announced closure of the company's 15 Paiva stores. Diluted weighted average shares outstanding were 47,162,000 for YTD versus 48,119,000 shares outstanding for YTD LY.


Net sales increased 0.6% to $631.3 million for YTD compared to $627.7 million for YTD LY. Comparable store net sales decreased 4.4% for YTD versus a 6.8% decrease reported for YTD LY.


 
                                           The Finish Line, Inc.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share and
store data)

Thirteen Thirteen Twenty-Six Twenty-Six
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
September September
1, August 26, 1, August 26,
2007 2006 2007 2006
——— ——— ——— ———-

Net sales $342,966 $338,635 $631,299 $627,681
Cost of sales (including
occupancy expenses) 243,401 236,810 454,895 439,939
——- ——- ——- ——-
Gross profit 99,565 101,825 176,404 187,742

Selling, general, and
administrative expenses 91,047 85,973 173,554 165,599
Asset impairment 11,527 — 11,527 —
——- ——- ——- ——-
Operating (loss) income (3,009) 15,852 (8,677) 22,143

Interest income, net 237 150 700 885
——- ——- ——- ——-
(Loss) income before income taxes (2,772) 16,002 (7,977) 23,028
(Benefit) provision for income
taxes (974) 6,081 (2,308) 8,751
——- ——- ——- ——-
Net (loss) income ($1,798) $9,921 ($5,669) $14,277
======= ======= ======= =======
Diluted weighted average
shares outstanding 47,188 47,612 47,162 48,119
======= ======= ======= =======
Diluted net (loss) income per
share ($0.04) $0.21 ($0.12) $0.30
======= ======= ======= =======

Dividends declared per share $ — $0.025 $0.025 $0.050
======= ======= ======= =======

Number of stores open at end of
period:
Finish Line 697 672
Man Alive 95 76
Paiva 15 6