The Finish Line is Finished With JackRabbit

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The Finish Line is Finished With JackRabbit

01/27/2017
Athletic retailer The Finish Line, Inc. plans to exit the unprofitable JackRabbit business (formerly Running Specialty Group). The retailer has entered into a definitive agreement with affiliates of CriticalPoint Capital, LLC, a Los Angeles-based private investment firm. The Finish Line's board of directors has approved this transaction which is expected to close by the end of its fiscal fourth quarter, subject to customary closing conditions.

"As we exit the running specialty business, we dedicate our entire focus to serving our core Finish Line and Finish Line Macy's customers and driving profitable results that provide return to our shareholders," said Sam Sato, CEO of Finish Line. "The JackRabbit team – both in their main offices in Denver and throughout the field – genuinely work hard to serve running and fit enthusiasts within their local communities. With CriticalPoint retaining those employees, they will continue to deliver a high level of customer service and offer industry leading branded footwear, apparel and accessories.”

Under the terms of the definitive agreement, affiliates of CriticalPoint Capital will become the owner of JackRabbit as specified in the purchase agreement which includes 65 retail stores currently operating under several banners, all JackRabbit leasehold interests and lease liabilities, intellectual property and the JackRabbit trademark and name. JackRabbit staff will be employed by an affiliate of CriticalPoint Capital.

With its exit from the JackRabbit business, Finish Line expects to incur a pre-tax charge in the fourth quarter of approximately $33 million to $36 million which includes cash costs of approximately $11 million to $12 million and non-cash charges for the remainder related to the net assets of JackRabbit as well as certain other exit costs. The costs to exit the JackRabbit business and the resulting tax benefits will be reported in discontinued operations. The company also expects to realize a cash tax benefit on this disposition of JackRabbit totaling approximately $29 million to $31 million which includes a benefit associated with the projected fourth quarter pre-tax loss and the benefit associated with the goodwill impairment charge of $44 million recorded during the company's third quarter. The company expects to receive a portion of the cash tax benefit in the fourth quarter of its current fiscal year and the remaining portion in its fiscal 2018.

Peter J. Solomon Company LLC advised the Finish Line board and management team with respect to the sale.

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