This quarterly report on Form 10-Q may contain certain statements that we believe are, or may be considered to be, "forward-looking" statements, 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 use of statements that include phrases such as "believe", "expect", "anticipate", "intend", "plan", "foresee", "may", "will", "estimates", "potential", "continue" or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals also are forward-looking statements. All of these forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those contemplated by the relevant forward-looking statement. 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); fluctuations in oil prices causing changes in gasoline and energy prices, resulting in changes in consumer spending and utility and product costs; product demand and market acceptance risks; further deterioration of economic and business conditions; the effect of competitive products and pricing; the availability of products; management of growth; 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 in this Form 10-Q are made only as of the date of this report and we undertake no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances.

General

The following discussion and analysis should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations, including Critical Accounting Policies, included in the Company's Annual Report on Form 10-K for the year ended February 28, 2009 (fiscal 2009). Unless otherwise noted, all amounts reflect the results of the Company's continuing operations and therefore Man Alive and Paiva store information and results have been excluded from the following information.

The following table sets forth store and square feet information of the Company for each of the following periods:

                                            Thirteen Weeks Ended               Twenty-Six Weeks Ended
                                        August 29,        August 30,        August 29,        August 30,
Number of Stores:                          2009              2008              2009              2008
Finish Line
Beginning of period                            684               700               689               697
Opened                                           1                 2                 1                 6
Closed                                          (4 )              (5 )              (9 )              (6 )

End of period                                  681               697               681               697

                                                                            August 29,        August 30,
                                                                               2009              2008
Square feet information as of:
Finish Line
Square feet                                                                  3,674,694         3,815,597
Average store size                                                               5,396             5,474

Results of Operations

The following table sets forth net sales of the Company by major category for
each of the following periods (in thousands):



                                  Thirteen Weeks Ended (Unaudited)
                Category      August 29, 2009          August 30, 2008
                Footwear    $    259,965      87 %    $    294,133    87 %
                Softgoods         38,768      13 %          42,867    13 %

                Total       $    298,733     100 %    $    337,000   100 %





                                 Twenty-Six Weeks Ended (Unaudited)
               Category      August 29, 2009            August 30, 2008
               Footwear    $    486,857      87 %      $    529,994    87 %
               Softgoods         70,972      13 %            80,025    13 %

               Total       $    557,829     100 %      $    610,019   100 %



The following table and subsequent discussion sets forth operating data of the
Company as a percentage of net sales for the periods indicated below.



                                              Thirteen Weeks Ended                Twenty-Six Weeks Ended
                                          August 29,         August 30,        August 29,         August 30,
                                             2009               2008              2009               2008
                                                   (unaudited)                          (unaudited)
Net sales                                      100.0 %            100.0 %           100.0 %            100.0 %
Cost of sales (including occupancy
costs)                                          68.1               68.2              69.2               69.3

Gross profit                                    31.9               31.8              30.8               30.7
Selling, general and administrative
expenses                                        25.2               24.6              26.6               26.0
Store closing costs                              0.4                0.1               0.3                0.1
Terminated merger-related costs                   -                  -                 -                  -

Operating income                                 6.3                7.1               3.9                4.6
Interest income, net                              -                 0.1                -                 0.1

Income from continuing operations
before income taxes                              6.3                7.2               3.9                4.7
Income tax expense                               2.4                2.8               1.5                1.9

Income from continuing operations                3.9                4.4               2.4                2.8
Loss from discontinued operations,
net of income taxes                             (4.2 )             (0.5 )            (2.7 )             (0.5 )

Net (loss) income                               (0.3 )%             3.9 %            (0.3 )%             2.3 %

Net sales decreased 11.4% to $298.7 million for the thirteen weeks ended August 29, 2009 from $337.0 million for the thirteen weeks ended August 30, 2008. The decrease was attributable to a comparable store net sales decrease of 9.9% for the thirteen weeks ended August 29, 2009 and by reduced sales of closed stores along with down time and reduced square footage related to remodeled/relocated stores. Comparable footwear net sales for the thirteen weeks ended August 29, 2009 decreased 10.3% while comparable softgoods net sales decreased 7.7% for the comparable period. The comparable store net sales decrease of 9.9% was due to continued decreased levels of consumer spending and traffic due to the challenging macroeconomic environment. The Company believes that comparable store net sales for the thirteen weeks ended August 29, 2009 were also affected by a lift in net sales in the prior year related to stimulus checks that the U.S. government provided to individuals.

Gross profit for the thirteen weeks ended August 29, 2009 was $95.4 million, a decrease of $11.9 million (11.1%) from $107.3 million for the thirteen weeks ended August 30, 2008. During this same period, gross profit increased to 31.9% of net sales versus 31.8% for the prior year. The 0.1% increase as a percentage of net sales was due to a 0.5% increase in margin for product sold and a 0.1% decrease in inventory shrink, partially offset by a 0.5% increase in occupancy costs as a percentage of net sales. The 0.5% increase in product margin is primarily a result of 1) being less promotional as the Company's aged inventory, inventory mix and inventory turns continue to improve; 2) an increase in softgoods product margin as the Company has reduced inventory, evolved the Company's offerings and become more focused; and 3) vendor support. The 0.5% increase in occupancy costs as a percentage of net sales was a result of deleveraging due to negative comparable store net sales, partially offset by reduced occupancy costs due to favorable lease negotiations on eligible stores.

Selling, general and administrative expenses were $75.3 million (25.2% of net sales) for the thirteen weeks ended August 29, 2009 compared to $82.8 million (24.6% of net sales) for the thirteen weeks ended August 30, 2008. The 0.6% increase as a percentage of net sales was due to deleveraging from the 11.4% decrease in net sales. The $7.5 million dollar decrease was primarily attributable to a decrease in store payroll, advertising, depreciation, and freight expense due to targeted cost reductions.

Store closing costs were $1.4 million (0.4% of net sales) for the thirteen weeks ended August 29, 2009 compared to $0.3 million (0.1% of net sales) for the thirteen weeks ended August 30, 2008. Store closing costs represent the non-cash write-off of any property and equipment upon a store closing. The $1.1 million increase in store closing costs for the thirteen weeks ended August 29, 2009 compared to the thirteen weeks ended August 30, 2008 is due to the Company getting more aggressive in closing underperforming stores earlier in the leases through co-tenancy violations and kick-out provisions.

Net interest income was $0.1 million for the thirteen weeks ended August 29, 2009 compared to $0.2 million for the thirteen weeks ended August 30, 2008. This decrease was due to lower interest rates during the thirteen weeks ended August 29, 2009 compared to the thirteen weeks ended August 30, 2008, partially offset by higher invested balances during the thirteen weeks ended August 29, 2009.

The Company's income tax expense was $7.1 million and its effective tax rate was 37.6% for the thirteen weeks ended August 29, 2009 compared to income tax expense of $9.5 million and an effective tax rate of 39.0% for the thirteen weeks ended August 30, 2008. The $2.4 million change was primarily due to income from continuing operations before income taxes of $18.8 million for the thirteen weeks ended August 29, 2009 compared to income from continuing operations before income taxes of $24.4 million for the thirteen weeks ended August 30, 2008 along with a decrease in the effective tax rate. The decrease in effective tax rate resulted primarily from a change in investment strategy to invest cash in tax-exempt municipal instruments for the thirteen weeks ended August 29, 2009 versus taxable investments during the thirteen weeks ended August 30, 2008.

Income from continuing operations for the thirteen weeks ended August 29, 2009 was $11.7 million compared to income from continuing operations of $14.9 million for the thirteen weeks ended August 30, 2008. Income from continuing operations per diluted share was $0.21 for the thirteen weeks ended August 29, 2009 compared to income from continuing operations per diluted share of $0.27 for the thirteen weeks ended August 30, 2008. Diluted weighted average shares outstanding were 54.6 million and 54.3 million for the thirteen weeks ended August 29, 2009 and August 30, 2008, respectively.

Loss from discontinued operations, net of income taxes was $12.6 million for the thirteen weeks ended August 29, 2009 (4.2% of net sales) compared to $1.8 million for the thirteen weeks ended August 28, 2008 (0.5% of net sales). For the thirteen weeks ended August 29, 2009, the loss from discontinued operations of Man Alive included operating losses of $1.7 million as well as $18.4 million related to the loss on the sale of Man Alive. This $18.4 million loss was made up of the $7.7 million Purchase Price Rebate, $7.6 million inventory write-off, $6.7 million property and equipment write-off, and $2.3 million in other charges, partially offset by the reversal of "Deferred credits from landlords" of $5.9 million. The $20.1 million of loss from discontinued operations was offset partially by an income tax benefit of $7.5 million. For the thirteen weeks ended August 30, 2008, the $1.8 million loss from discontinued operations, net of income taxes represented operating losses. See Note 3 to the Company's unaudited financial statements in this document for a further discussion of the Company's discontinued operations.

Net sales decreased 8.6% ($52.2 million) to $557.8 million for the twenty-six weeks ended August 29, 2009 from $610.0 million for the twenty-six weeks ended August 30, 2008. The decrease was attributable to a comparable store net sales decrease of 7.2% for the twenty-six weeks ended August 29, 2009 and reduced sales of $11.2 million from 20 closed stores along with down time and reduced square footage related to remodeled/relocated stores, partially offset by a $1.5 million increase from 4 new stores opened subsequent to August 30, 2008 and a $1.5 million increase in net sales from existing stores that were open only part of the twenty-six weeks ended August 30, 2008. Comparable footwear net sales for the twenty-six weeks ended August 29, 2009 decreased 6.9% while comparable softgoods net sales decreased 9.7% for the comparable period. The 7.2% comparable store net sales decrease was due to continued decreased levels of consumer spending and traffic due to the macroeconomic environment along with tough comparisons as the Company believes there was a lift in sales related to stimulus checks provided by the U.S. government during a portion of the twenty-six weeks last year.

Gross profit for the twenty-six weeks ended August 29, 2009 was $171.7 million (30.8% of net sales), a decrease of $15.6 million (8.3%) from $187.3 million (30.7% of net sales) for the twenty-six weeks ended August 30, 2008. This 0.1% increase as a percentage of net sales was due to a 0.3% increase in margin for product sold along with a 0.2% decrease in inventory shrink, partially offset by a 0.4% increase in occupancy costs as a percentage of net sales. The 0.3% increase in product margin is primarily a result of 1) being less promotional as the Company's aged inventory, inventory mix and inventory turns continue to improve as the Company focuses on premium product; 2) an increase in softgoods product margin as the Company has reduced inventory, evolved the Company's offerings and become more focused; and 3) vendor support. The 0.4% increase in occupancy costs as a percentage of net sales was a result of deleveraging due to negative comparable store net sales, partially offset by reduced occupancy costs due to favorable lease negotiations on eligible stores.

Selling, general and administrative expenses decreased $10.3 million (6.5%) to $148.4 million (26.6% of net sales) for the twenty-six weeks ended August 29, 2009 from $158.7 million (26.0% of net sales) for the twenty-six weeks ended August 30, 2008. The 0.6% increase as a percentage of net sales was due primarily to deleveraging from the negative comparable store net sales. The $10.3 million decrease was primarily attributable to a decrease in store payroll, advertising, depreciation and freight expenses due to expense reduction efforts.

Store closing costs were $1.6 million (0.3% of net sales) for the twenty-six weeks ended August 29, 2009 compared to $0.3 million (0.1% of net sales) for the twenty-six weeks ended August 30, 2008. Store closing costs represent the non-cash write-off of any property and equipment upon a store closing. The $1.3 million increase in store closing costs for the twenty-six weeks ended August 29, 2009 compared to the twenty-six weeks ended August 30, 2008 is due to the Company getting more aggressive in closing underperforming stores earlier in the leases through co-tenancy violations and kick-out provisions.

Net interest income was $0.2 million for the twenty-six weeks ended August 29, 2009 compared to net interest income of $0.5 million for the twenty-six weeks ended August 30, 2008. This decrease was due to lower interest rates earned during the twenty-six weeks ended August 29, 2009 compared to the twenty-six weeks ended August 30, 2008, partially offset by higher invested balances during the twenty-six weeks ended August 29, 2009.

The Company's income tax expense was $8.4 million and its effective tax rate was 38.4% for the twenty-six weeks ended August 29, 2009 compared to $11.6 million and 40.2% for the twenty-six weeks ended August 30, 2008. The $3.2 million change was due primarily to income from continuing operations before income taxes of $21.9 million for the twenty-six weeks ended August 29, 2009 compared to income from continuing operations before incomes taxes of $28.8 million for the twenty-six weeks ended August 30, 2008 along with a decrease in the effective tax rate. The decrease in effective tax rate was due primarily to a decrease in tax expense related to discrete items along with a change in investment strategy to invest more in tax-exempt municipal instruments for the twenty-six weeks ended August 29, 2009 compared to taxable investments for the twenty-six weeks ended August 30, 2008.

Income from continuing operations for the twenty-six weeks ended August 29, 2009 was $13.5 million compared to income from continuing operations of $17.3 million for the twenty-six weeks ended August 30, 2008. Income from continuing operations per diluted share was $0.24 for the twenty-six weeks ended August 29, 2009 compared to income from continuing operations per diluted share of $0.32 for the twenty-six weeks ended August 30, 2008. Diluted weighted average shares outstanding were 54.5 million and 54.0 million for the twenty-six weeks ended August 29, 2009 and August 30, 2008, respectively.

Loss from discontinued operations, net of income taxes was $15.0 million for the twenty-six weeks ended August 29, 2009 (2.7% of net sales) compared to $3.2 million for the twenty-six weeks ended August 28, 2008 (0.5% of net sales). For the twenty-six weeks ended August 29, 2009, the loss from discontinued operations of Man Alive included operating losses of $5.6 million as well as $18.4 million related to the loss on the sale of Man Alive. This $18.4 million loss was made up of the $7.7 million Purchase Price Rebate, $7.6 million inventory write-off, $6.7 million property and equipment write-off, and $2.3 million in other charges, partially offset by the reversal of "Deferred credits from landlords" of $5.9 million. The $24.0 million of loss from discontinued operations was offset partially by an income tax benefit of $9.0 million. For the twenty-six weeks ended August 30, 2008, the $3.2 million loss from discontinued operations, net of income taxes represented operating losses. See Note 3 to the Company's unaudited financial statements included in this document for further discussion of the Company's discontinued operations.

The Company had net cash of $41.4 million provided by its operating activities during the twenty-six weeks ended August 29, 2009 as compared to $0.5 million net cash provided by operating activities during the twenty-six weeks ended August 30, 2008. Included in the $0.5 million for the twenty-six weeks ended August 30, 2008 was $39.0 million paid for the cash portion of the Settlement Agreement (see Note 2 to the Consolidated Financial Statements). At August 29, 2009, the Company had cash and cash equivalents of $142.9 million and no interest bearing debt. Cash equivalents are invested in short-term money market funds invested primarily in high-quality tax-exempt municipal instruments with daily liquidity.

Consolidated merchandise inventories were $221.4 million at August 29, 2009 compared to $239.4 million at February 28, 2009 and $269.9 million at August 30, 2008. Consolidated merchandise inventories at February 28, 2009 and August 30, 2008 contained Man Alive inventory of $6.0 million and $14.3 million, respectively. On a comparable per square foot basis, Finish Line merchandise inventories decreased 10.1% at August 29, 2009 compared to August 30, 2008. The 10.1% decrease per square foot compared to August 30, 2008 is a result of management's plan to reduce inventory levels and increase inventory turns.

The Company's working capital was $295.4 million at August 29, 2009, which was a $16.2 million increase from $279.2 million at February 28, 2009.

The Company had net cash provided by investing activities of $3.0 million for the twenty-six weeks ended August 29, 2009 compared to net cash used in investing activities of $8.6 million for the twenty-six weeks ended August 30, 2008. The $3.0 million provided in the twenty-six weeks ended August 29, 2009 was from $14.9 million in proceeds from the sale of marketable securities, partially offset by $7.6 million in payments related to the sale of Man Alive and $4.4 million of capital expenditures.

For the year ending February 27, 2010, the Company intends to open approximately 4 to 5 Finish Line stores (one opened during the twenty-six weeks ended August 29, 2009), as well as remodel approximately 5 to 8 existing Finish Line stores (5 remodeled during the twenty-six weeks ended August 29, 2009). In addition, the Company has various other corporate capital and technology projects. The Company expects capital expenditures for the current fiscal year to approximate $10.0 to $13.0 million. Management believes that cash on hand, operating cash flow and the Company's existing $75.0 million unsecured committed Credit Agreement (the "Credit Agreement"), which expires on February 25, 2010, will provide sufficient capital to satisfy the Company's working capital requirements in the foreseeable future. The Credit Agreement also provides that, under certain circumstances, the Company may increase the aggregate principal amount of revolving loans by up to an additional $75.0 million. The Company is in the process of renewing the Credit Agreement, which is expected to be completed in the 4th quarter.

On July 17, 2008, the Company's Board of Directors authorized a new stock repurchase program to repurchase up to 5,000,000 shares of the Company's outstanding Class A common stock. Under the stock repurchase program, the Company may purchase shares through December 31, 2011. The Company did not repurchase any shares under the new stock program during the twenty-six weeks ended August 29, 2009.

On July 22, 2004, the Company's Board of Directors instituted a quarterly cash dividend program of $0.025 per share of Class A and Class B Common Stock. In light of the Merger Agreement entered into with Genesco on June 17, 2007, the Company decided to suspend future quarterly dividends beginning with the thirteen weeks ended September 1, 2007 until further notice. On July 17, 2008, the Company's Board of Directors reinstated the quarterly cash dividend program with a 20% increase to $0.03 per share of Class A and Class B common stock. The Company declared dividends of $3.3 million during the twenty-six weeks ended August 29, 2009. As of August 29, 2009, dividends declared but not paid of $1.7 million were accrued in "Other liabilities and accrued expenses" on the Consolidated Balance Sheets. Further declarations of dividends, if any, remain at the discretion of the Company's Board of Directors.

The Company's contractual obligations primarily consist of long-term debt, operating leases, and purchase orders for merchandise inventory. For the twenty-six weeks ended August 29, 2009, the Company's contractual obligations have been reduced due to the sale of Man Alive from those identified in the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 2009. The Company's total operating lease obligations of $471.5 million as of February 28, 2009 have been reduced by approximately $46.2 million due to the sale of Man Alive and the assignment of those operating leases to the Buyer. Therefore, the Company's total operating lease obligations as of August 29, 2009 were approximately $425.3 million. The only other changes in the contractual obligations identified in the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 2009 are those which occur in the normal course of business (primarily changes in the Company's merchandise inventory related to purchase obligations, which fluctuate throughout the year as a result of the seasonal nature of the Company's operations, and reduction of operating leases due to store closings).

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to adopt accounting policies related to estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, management evaluates its accounting policies, estimates and judgments, including those related to inventories, long-lived assets and contingencies. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

There have been no material changes to the critical accounting policies and estimates disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 2009.