This excerpt taken from the FINL 10-Q filed Sep 27, 2007.
ITEM 1A: RISK FACTORS
Other than as described below, there are no material changes to the risk factors previously reported under Item 1A of the Companys Annual Report on Form 10-K for the fiscal year ended March 3, 2007, which Item 1A is incorporated by this reference. In addition to the risk factors described below, if the Merger with Genesco is completed, the risk factors previously reported under Item 1A of the Companys Annual Report on Form 10-K for the fiscal year ended March 3, 2007 would generally apply to the combined company, rather than solely to The Finish Line, Inc.
The Merger with Genesco may not be completed and the Company may not be able to respond to litigation relating to the Merger.
The proposed acquisition of Genesco is subject to the satisfaction of certain closing conditions described in the Merger Agreement. There can be no assurance that the conditions required to complete the merger will be either satisfied or waived.
If the proposed Merger is not completed for any reason, the Company will have incurred substantial expenses without realizing the anticipated benefits of the Merger. The Company has incurred substantial legal, accounting and financial advisory fees, and the Companys management team has devoted considerable time and effort in connection with the Merger, which may have diverted managements attention away from other business matters.
In connection with its purported rights under its financing commitment letter, UBS has demanded that the Company obtain certain documents, books and records from Genesco and that Genesco make available certain knowledgeable persons to UBS or its representatives regarding Genescos recent financial performance. The Company has made the requested demands to Genesco pursuant to the Merger Agreement, but as of September 26, 2007, Genesco has refused to comply. The Company has delivered to Genesco a notice under the Merger Agreement advising Genesco that it is in breach of its obligations under the Merger Agreement. UBS may contend that the Companys failure to cause Genesco to deliver the requested documents, books and records and access to persons is an excuse to performance of its obligations under its financing commitment letter.
Further, the Company has received communications from UBS indicating UBSs intention to defer further work on the closing documents pending its analysis of Genescos financial condition and performance, and Genesco has filed suit against the Company seeking an order requiring the Company to take all steps necessary to consummate the Merger. If UBS does not provide the financing under its financing commitment letter and is excused from its funding obligations and Genesco is successful in the litigation and obtains an order of specific performance requiring the Company to perform under the Merger Agreement, then the Company would not be able to perform under the Merger Agreement. Alternatively, or in addition to an order of specific performance, Genesco may seek monetary damages against the Company allegedly suffered by Genesco as a result of the Companys failure or inability to complete the Merger. Under these circumstances, there can be no assurance the Company would be able to respond to any or all of such damage award.
If the Merger is completed, the Company will have significant indebtedness outstanding and may incur additional indebtedness that could negatively affect our business and prevent us from satisfying our obligations under our indebtedness.
If the Merger is completed, the Company will be highly leveraged. After giving effect to the completion of the Merger, the Company would have approximately $1.6 billion of indebtedness. The Companys debt obligations may adversely affect its operations in a number of ways and the Company can make no assurance that cash flow from operations will be sufficient to service its debt and meet its other operating and capital expenditure requirements.
The Companys high level of indebtedness could have various negative effects, including the following:
The Companys integration with Genesco may prove to be difficult, strain the Companys resources and subject the Company to liabilities. The Company may not realize the expected benefits of the acquisition.
This Merger, if completed, would be substantially larger than any of the Companys previous acquisitions. The expansion of the Companys business and operations resulting from the acquisition of Genesco, including the differences in the strategies and infrastructures of our companies, may strain our administrative, operational and financial resources. The integration of The Finish Line, Inc. and Genesco would require the time, effort, attention and dedication of management resources and may distract management from their other responsibilities in unpredictable ways. The integration process could create a number of potential challenges and adverse consequences, including the possible unexpected loss of key employees or suppliers, a possible loss of sales, an increase in operating and other costs and the need to modify operating accounting controls and procedures as well as information systems. The Company may have difficulty integrating Genescos operations with its operations, including with respect to coordinating geographically separate organizations, coordinating marketing functions and consolidating corporate and administrative infrastructures, as well as the potential for unanticipated incompatibility of purchasing, logistics and administration methods. The integration of Genesco, if completed, may not generate anticipated sales increases. In addition, the integration of Genesco may subject the Company to liabilities existing at Genesco, some of which may be unknown. These types of challenges and uncertainties could have a material adverse effect on our business, cash flows, results of operations and financial condition. Our ability to realize
the anticipated benefits of the Merger will depend, in part, on our ability to successfully integrate the businesses of The Finish Line, Inc. and Genesco and the Company cannot assure you that the combination of the two companies will result in the realization of the full benefits anticipated from the acquisition. In particular, if we are unable to successfully implement our planned integration with Genesco and realize the expected benefits with respect thereto, our results of operations and cash flows could be adversely affected.
Genescos actual financial results may vary significantly from the projections filed with its proxy.
In connection with the merger, Genesco prepared projected financial information that were filed with the SEC on July 11, 2007 as part of its proxy statement relating to the merger. At the time they were prepared, the projections reflected numerous assumptions concerning Genescos anticipated future performance with respect to prevailing and anticipated market and economic conditions, which were and remain beyond Genescos control, and which may not materialize. Projections are inherently subject to uncertainties and to a wide variety of significant business, economic and competitive risks. Actual results may vary significantly from the projections.
Our failure to obtain consents to change of control provisions in certain of Genescos contracts may adversely affect the combined companys business and operations.
A substantial portion of Genescos real property leases as well as some of its intellectual property licenses have change of control provisions that may be triggered by the Merger. While we are in the process of negotiating with the relevant landlords and licensors to obtain their consent to the change of control, there can be no assurances that we will be able to do so. If we are unable to obtain the consent of these landlords, we may be unable to continue operations in the stores subject to those leases. If we are unable to obtain the consent of these licensors, we may be unable to continue to sell the product lines that are subject to those license agreements. The occurrence of any of the foregoing, either individually or in the aggregate, may adversely affect our business, cash flows, results of operations and financial condition.