M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

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Thursday, December 6, 2007

Finish Line's Earnings

Finish Line released third quarter earnings yesterday.  According to Finish Line: 

The Finish Line, Inc. (Nasdaq: FINL) reported consolidated net sales from continuing operations of $268.7 million for the thirteen weeks ended December 1, 2007 ("3rd quarter" or "Q3"), a decrease of 4.0% from consolidated net sales from continuing operations of $280.0 million for the thirteen weeks ended November 25, 2006 ("Q3 LY"). Due to the shift of one week in the retail calendar due to last year's 53-week year, Q3LY included approximately $6.7 million of additional sales due to an additional week of the Back To School selling season.

The poor performance of Finish Line here, together with similar poor performance recently by Foot Locker, Shoe Carnival, Shoe Pavilion, etc. buttress Genesco's claim of no MAC under the exclusion for "changes in general economic conditions that affect the industries" Genesco operates.  Nonetheless, yesterday it was also announced that a shareholder class action had been filed against Genesco.  According to the plaintiffs' attorney press release (Law Offices Bernard M. Gross, P.C.?):

The complaint charges Genesco and certain of its officers and directors with violations of the Securities Act of 1934. Genesco is in the footwear business. The complaint alleges that during the Class Period, defendants made false and misleading statements concerning Genesco's business and prospects. As a result of their representations, Genesco was seen as an attractive acquisition target for Foot Locker, Inc. and others. Subsequently, The Finish Line, Inc. made an increased offer, based on Genesco's purported success. When the truth about Genesco's results began to be revealed, however, Finish Line indicated it would no longer pursue the acquisition. Then, on November 26, 2007, Genesco received a subpoena from the U.S. Attorney's office for the Southern District of New York seeking documents related to its merger agreement and in connection with alleged violations of federal fraud statutes. On this news, Genesco's stock plunged to $25.44 per share on November 27, 2007, almost a 16% drop.

A few other law firms also filed complaints (or it may have been a joint filing -- unclear).  In any event, expect Finish Line to add this to its arsenal or purpoted MAC claims.  More complexity, more uncertainty.

http://lawprofessors.typepad.com/mergers/2007/12/finish-lines-ea.html

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