SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended August 30, 2008

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from
to

Commission File number 0-20184





The Finish Line, Inc.

(Exact name of
registrant as specified in its charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Indiana                                                        |  | 35-1537210                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer identification number)



|                                                  |  |           
|------------------------------------------------- |  | ----------
|3308 North Mitthoeffer Road Indianapolis, Indiana |  | 46235     
|(Address of principal executive offices)          |  | (zip code)

317-899-1022

(Registrants telephone number, including area code)

(Former name, former address and former
fiscal year, if changed since last report.)





Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



Large accelerated filer   ̈

Accelerated filer  xNon-accelerated filer   ̈ (Do not check if a smaller reporting company)

Smaller reporting company   ̈


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).    Yes   ̈    No  x

Shares of common stock outstanding at September 19, 2008:



|        |  |           
|------- |  | ----------
|Class A |  | 50,583,854
|Class B |  | 4,303,296 









---

PART 1. FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

THE FINISH LINE, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)



|                                  |  |                |         |                  |   |              |  |   |        
|--------------------------------- |  | -------------- | ------- | ---------------- | - | ------------ |  | - | -------
|                                  |  | August 30,2008 |         | September 1,2007 |   | March 1,2008
|                                  |  | (unaudited)    |         | (unaudited)      |   |             
|ASSETS                            |  |                |         |                  |   |              |  |   |        
|CURRENT ASSETS:                   |  |                |         |                  |   |              |  |   |        
|Cash and cash equivalents         |  | $              | 65,035  |                  | $ | 34,182       |  | $ | 72,901 
|Accounts receivable, net          |  |                | 5,192   |                  |   | 8,025        |  |   | 7,746  
|Merchandise inventories, net      |  |                | 269,881 |                  |   | 303,631      |  |   | 268,333
|Income taxes recoverable          |  |                | 27,261  |                  |   | 4,070        |  |   |       
|Deferred income taxes             |  |                |        |                  |   |             |  |   | 16,992 
|Other                             |  |                | 15,041  |                  |   | 18,029       |  |   | 15,835 
|                                  |  |                |         |                  |   |              |  |   |        
|Total current assets              |  |                | 382,410 |                  |   | 367,937      |  |   | 381,807
|                                  |  |                |        
|PROPERTY AND EQUIPMENT:           |  |                |         |                  |   |              |  |   |        
|Land                              |  |                | 1,557   |                  |   | 1,557        |  |   | 1,557  
|Building                          |  |                | 41,453  |                  |   | 41,408       |  |   | 41,429 
|Leasehold improvements            |  |                | 275,925 |                  |   | 280,573      |  |   | 274,249
|Furniture, fixtures and equipment |  |                | 115,072 |                  |   | 111,582      |  |   | 113,995
|Construction in progress          |  |                | 1,684   |                  |   | 3,920        |  |   | 2,842  
|                                  |  |                |         |                  |   |              |  |   |        
|                                  |  |                | 435,691 |                  |   | 439,040      |  |   | 434,072
|Less accumulated depreciation     |  |                | 228,972 |                  |   | 204,936      |  |   | 216,238
|                                  |  |                |         |                  |   |              |  |   |        
|                                  |  |                | 206,719 |                  |   | 234,104      |  |   | 217,834
|                                  |  |                |        
|Deferred income taxes             |  |                | 30,022  |                  |   | 19,931       |  |   | 29,692 
|Goodwill                          |  |                | 5,964   |                  |   | 5,964        |  |   | 5,964  
|Other assets, net                 |  |                | 7,695   |                  |   | 7,868        |  |   | 7,750  
|                                  |  |                |         |                  |   |              |  |   |        
|Total assets                      |  | $              | 632,810 |                  | $ | 635,804      |  | $ | 643,047
|                                  |  |                |         |                  |   |              |  |   |        

See accompanying notes.



2



---

THE FINISH LINE, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)



|                                                                                                          |  |                |         |   |                  |   |         |              |  |   |         |  
|--------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ---------------- | - | ------- | ------------ |  | - | ------- | -
|                                                                                                          |  | August 30,2008 |         |   | September 1,2007 |   |         | March 1,2008 | 
|                                                                                                          |  | (unaudited)    |         |   | (unaudited)      |   |         |              | 
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                      |  |                |         |   |                  |   |         |              |  |   |         |  
|CURRENT LIABILITIES:                                                                                      |  |                |         |   |                  |   |         |              |  |   |         |  
|Accounts payable                                                                                          |  | $              | 69,005  |   |                  | $ | 75,799  |              |  | $ | 63,768  |  
|Terminated merger-related liabilities                                                                     |  |                | 218     |   |                  |   |        |              |  |   | 47,129  |  
|Employee compensation                                                                                     |  |                | 11,658  |   |                  |   | 8,989   |              |  |   | 10,159  |  
|Accrued property and sales tax                                                                            |  |                | 10,217  |   |                  |   | 7,984   |              |  |   | 8,100   |  
|Income taxes payable                                                                                      |  |                |        |   |                  |   |        |              |  |   | 1,734   |  
|Deferred income taxes                                                                                     |  |                | 18,583  |   |                  |   | 8,977   |              |  |   |        |  
|Other liabilities and accrued expenses                                                                    |  |                | 16,269  |   |                  |   | 14,737  |              |  |   | 16,170  |  
|                                                                                                          |  |                |         |   |                  |   |         |              |  |   |         |  
|Total current liabilities                                                                                 |  |                | 125,950 |   |                  |   | 116,486 |              |  |   | 147,060 |  
|                                                                                                          |  |                |        
|Deferred credits from landlords                                                                           |  |                | 56,354  |   |                  |   | 64,071  |              |  |   | 59,642  |  
|Other long-term liabilities                                                                               |  |                | 14,957  |   |                  |   | 9,229   |              |  |   | 15,479  |  
|                                                                                                          |  |                |        
|SHAREHOLDERS EQUITY:                                                                                     |  |                |         |   |                  |   |         |              |  |   |         |  
|Preferred stock, $.01 par value; 1,000 shares authorized; none issued                                     |  |                |        |   |                  |   |        |              |  |   |        |  
|Common stock, $.01 par value                                                                              |  |                |         |   |                  |   |         |              |  |   |         |  
|Class A:                                                                                                  |  |                |         |   |                  |   |         |              |  |   |         |  
|Shares authorized100,000                                                                                 |  |                |         |   |                  |   |         |              |  |   |         |  
|Shares issued(August 30, 2008  55,006; September 1, 2007  47,649; March 1, 2008 
47,649)              |  |                |         |   |                  |   |         |              |  |   |         |  
|                                                                                                          |  |                |        
|Shares outstanding(August 30, 2008  49,609; September 1, 2007  42,135; March 1, 2008 
42,206)         |  |                | 550     |   |                  |   | 476     |              |  |   | 476     |  
|                                                                                                          |  |                |        
|Class B:                                                                                                  |  |                |         |   |                  |   |         |              |  |   |         |  
|Shares authorized10,000                                                                                  |  |                |         |   |                  |   |         |              |  |   |         |  
|Shares issued and outstanding(August 30, 2008  4,303; September 1, 2007  5,141; March 1, 2008  5,141) |  |                | 43      |   |                  |   | 52      |              |  |   | 52      |  
|Additional paid-in capital                                                                                |  |                | 184,854 |   |                  |   | 153,085 |              |  |   | 182,756 |  
|Retained earnings                                                                                         |  |                | 297,252 |   |                  |   | 340,079 |              |  |   | 284,936 |  
|Treasury stock(August 30, 2008  5,397; September 1, 2007  5,514; March 1, 2008  5,443)                |  |                | (47,150 | ) |                  |   | (47,674 | )            |  |   | (47,354 | )
|                                                                                                          |  |                |         |   |                  |   |         |              |  |   |         |  
|Total shareholders equity                                                                                |  |                | 435,549 |   |                  |   | 446,018 |              |  |   | 420,866 |  
|                                                                                                          |  |                |         |   |                  |   |         |              |  |   |         |  
|Total liabilities and shareholders equity                                                                |  | $              | 632,810 |   |                  | $ | 635,804 |              |  | $ | 643,047 |  
|                                                                                                          |  |                |         |   |                  |   |         |              |  |   |         |  

See accompanying notes.



3



---

THE FINISH LINE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)



|                                                       |  |                      |         |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|------------------------------------------------------ |  | -------------------- | ------- | - | ---------------------- | - | ------- | -------------- |  | - | ---------------- | - |  | - | ------- | -
|                                                       |  | Thirteen Weeks Ended |         |   | Twenty-Six Weeks Ended |  
|                                                       |  | August 30,2008       |         |   | September 1,2007       |   |         | August 30,2008 |  |   | September 1,2007 |  
|Net sales                                              |  | $                    | 353,312 |   |                        | $ | 339,959 |                |  | $ | 641,251          |   |  | $ | 625,710 |  
|Cost of sales (including occupancy costs)              |  |                      | 242,600 |   |                        |   | 238,702 |                |  |   | 447,412          |   |  |   | 447,360 |  
|                                                       |  |                      |         |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|Gross profit                                           |  |                      | 110,712 |   |                        |   | 101,257 |                |  |   | 193,839          |   |  |   | 178,350 |  
|Selling, general and administrative expenses           |  |                      | 89,260  |   |                        |   | 89,296  |                |  |   | 170,649          |   |  |   | 170,111 |  
|Terminated merger-related costs                        |  |                      | 45      |   |                        |   | 225     |                |  |   | 83               |   |  |   | 225     |  
|                                                       |  |                      |         |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|Operating income                                       |  |                      | 21,407  |   |                        |   | 11,736  |                |  |   | 23,107           |   |  |   | 8,014   |  
|Interest income, net                                   |  |                      | 244     |   |                        |   | 237     |                |  |   | 499              |   |  |   | 700     |  
|                                                       |  |                      |         |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|Income from continuing operations before income taxes  |  |                      | 21,651  |   |                        |   | 11,973  |                |  |   | 23,606           |   |  |   | 8,714   |  
|Income tax expense                                     |  |                      | 8,431   |   |                        |   | 5,068   |                |  |   | 9,521            |   |  |   | 4,409   |  
|                                                       |  |                      |         |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|Income from continuing operations                      |  |                      | 13,220  |   |                        |   | 6,905   |                |  |   | 14,085           |   |  |   | 4,305   |  
|Loss from discontinued operations, net of income taxes |  |                      | (126    | ) |                        |   | (8,703  | )              |  |   | (123             | ) |  |   | (9,974  | )
|                                                       |  |                      |         |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|Net income (loss)                                      |  | $                    | 13,094  |   |                        | $ | (1,798  | )              |  | $ | 13,962           |   |  | $ | (5,669  | )
|                                                       |  |                      |         |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|Income (loss) per basic share:                         |  |                      |         |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|Income from continuing operations                      |  | $                    | 0.24    |   |                        | $ | 0.14    |                |  | $ | 0.26             |   |  | $ | 0 .09   |  
|Loss from discontinued operations                      |  |                      |        |   |                        |   | (0.18   | )              |  |   |                 |   |  |   | (0.21   | )
|                                                       |  |                      |         |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|Net income (loss)                                      |  | $                    | 0.24    |   |                        | $ | (0.04   | )              |  | $ | 0.26             |   |  | $ | (0.12   | )
|                                                       |  |                      |         |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|Basic weighted average shares                          |  |                      | 53,902  |   |                        |   | 47,188  |                |  |   | 53,712           |   |  |   | 47,162  |  
|                                                       |  |                      |         |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|Income (loss) per diluted share:                       |  |                      |         |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|Income from continuing operations                      |  | $                    | 0.24    |   |                        | $ | 0.14    |                |  | $ | 0.26             |   |  | $ | 0.09    |  
|Loss from discontinued operations                      |  |                      |        |   |                        |   | (0.18   | )              |  |   |                 |   |  |   | (0.21   | )
|                                                       |  |                      |         |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|Net income (loss)                                      |  | $                    | 0.24    |   |                        | $ | (0.04   | )              |  | $ | 0.26             |   |  | $ | (0.12   | )
|                                                       |  |                      |         |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|Diluted weighted average shares                        |  |                      | 54,764  |   |                        |   | 47,188  |                |  |   | 54,330           |   |  |   | 47,162  |  
|                                                       |  |                      |         |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|Dividends declared per share                           |  | $                    | 0.030   |   |                        | $ |        |                |  | $ | 0.030            |   |  | $ | 0.025   |  
|                                                       |  |                      |         |   |                        |   |         |                |  |   |                  |   |  |   |         |  

See accompanying notes.



4



---

THE FINISH LINE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)(Unaudited)



|                                                                                                   |  |                        |         |   |                   |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                                   |  | Twenty-Six Weeks Ended |        
|                                                                                                   |  | August 30, 2008        |         |   | September 1, 2007 |  
|OPERATING ACTIVITIES:                                                                              |  |                        |         |   |                   |   |         |  
|Net income (loss)                                                                                  |  | $                      | 13,962  |   |                   | $ | (5,669  | )
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                        |         |   |                   |   |         |  
|Asset impairment                                                                                   |  |                        |        |   |                   |   | 11,527  |  
|Depreciation and amortization                                                                      |  |                        | 19,387  |   |                   |   | 21,244  |  
|Deferred income taxes                                                                              |  |                        | 35,245  |   |                   |   | (8,207  | )
|Share-based compensation                                                                           |  |                        | 2,191   |   |                   |   | 3,206   |  
|Loss on disposal of property and equipment                                                         |  |                        | 471     |   |                   |   | 507     |  
|Excess tax benefits from share-based compensation                                                  |  |                        | (11     | ) |                   |   | (158    | )
|Changes in operating assets and liabilities:                                                       |  |                        |         |   |                   |   |         |  
|Accounts receivable, net                                                                           |  |                        | 2,554   |   |                   |   | 4,820   |  
|Merchandise inventories, net                                                                       |  |                        | (1,548  | ) |                   |   | (16,331 | )
|Other current assets                                                                               |  |                        | 794     |   |                   |   | (662    | )
|Accounts payable                                                                                   |  |                        | 5,237   |   |                   |   | (7,827  | )
|Employee compensation                                                                              |  |                        | 1,499   |   |                   |   | 371     |  
|Accrued income taxes payable/recoverable                                                           |  |                        | (29,603 | ) |                   |   | (10,579 | )
|Terminated merger-related liabilities                                                              |  |                        | (46,911 | ) |                   |   |        |  
|Other liabilities and accrued expenses                                                             |  |                        | 570     |   |                   |   | 781     |  
|Deferred credits from landlords                                                                    |  |                        | (3,288  | ) |                   |   | (401    | )
|                                                                                                   |  |                        |         |   |                   |   |         |  
|Net cash provided by (used in) operating activities                                                |  |                        | 549     |   |                   |   | (7,378  | )
|                                                                                                   |  |                       
|INVESTING ACTIVITIES:                                                                              |  |                        |         |   |                   |   |         |  
|Additions to property and equipment                                                                |  |                        | (9,171  | ) |                   |   | (19,919 | )
|Proceeds from disposals of property and equipment                                                  |  |                        | 569     |   |                   |   | 145     |  
|Purchases of available-for-sale marketable securities                                              |  |                        |        |   |                   |   | (58,750 | )
|Proceeds from sale of available-for-sale marketable securities                                     |  |                        |        |   |                   |   | 58,750  |  
|                                                                                                   |  |                        |         |   |                   |   |         |  
|Net cash used in investing activities                                                              |  |                        | (8,602  | ) |                   |   | (19,774 | )
|                                                                                                   |  |                       
|FINANCING ACTIVITIES:                                                                              |  |                        |         |   |                   |   |         |  
|Proceeds from short-term borrowings                                                                |  |                        | 5,000   |   |                   |   | 1,800   |  
|Repayments on short-term borrowings                                                                |  |                        | (5,000  | ) |                   |   | (1,800  | )
|Dividends paid to shareholders                                                                     |  |                        |        |   |                   |   | (2,376  | )
|Proceeds from issuance of common stock                                                             |  |                        | 176     |   |                   |   | 688     |  
|Excess tax benefits from share-based compensation                                                  |  |                        | 11      |   |                   |   | 158     |  
|                                                                                                   |  |                        |         |   |                   |   |         |  
|Net cash provided by (used in) financing activities                                                |  |                        | 187     |   |                   |   | (1,530  | )
|Net decrease in cash and cash equivalents                                                          |  |                        | (7,866  | ) |                   |   | (28,682 | )
|Cash and cash equivalents at beginning of period                                                   |  |                        | 72,901  |   |                   |   | 62,864  |  
|                                                                                                   |  |                        |         |   |                   |   |         |  
|Cash and cash equivalents at end of period                                                         |  | $                      | 65,035  |   |                   | $ | 34,182  |  
|                                                                                                   |  |                        |         |   |                   |   |         |  

See accompanying notes.



5



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THE FINISH LINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



|1. | Summary of Significant Accounting Policies
|-- | ------------------------------------------

Basis of
Presentation

The accompanying unaudited consolidated financial statements of The Finish Line, Inc., along with its wholly-owned
subsidiaries, (collectively, the Company) have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. Preparation of the financial statements requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary
for a fair presentation, have been included.

The Company has experienced, and expects to continue to experience, significant variability in
sales and net income (loss) from reporting period to reporting period. Therefore, the results of the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year.

These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Companys
Annual Report on Form 10-K for the year ended March 1, 2008 (fiscal 2008).



|2. | Terminated Merger
|-- | -----------------

On June 17, 2007, the
Company entered into an Agreement and Plan of Merger (the Merger Agreement) with Genesco Inc. (Genesco) under which the Company agreed to acquire all of the outstanding common shares of Genesco for $54.50 per share in cash
(the Merger), subject to certain conditions.

UBS Loan Finance LLC and UBS Securities LLC (collectively, UBS)
committed to provide financing for the Merger and ongoing working capital requirements of the combined company of up to $1.8 billion through a combination of a Senior Secured Revolving Credit Facility, a Senior Secured Term Loan and a Senior
Unsecured Bridge Facility (the UBS Financing). On September 19, 2007, the Company received a communication from UBS indicating its intention to defer further work on the closing documents for the Merger pending its analysis of
Genescos financial condition and performance. The same day, Genesco delivered a letter to the Company demanding that the Company immediately consummate the Merger. On September 21, 2007, Genesco filed a lawsuit in the Chancery Court in
Nashville, Tennessee seeking an order of specific performance requiring the Company to take all steps necessary to consummate the Merger contemplated by the Merger Agreement. The Company filed an answer, counterclaim and third-party claim for
declaratory judgment in connection with this action seeking, among other things, a declaratory judgment that a Company Material Adverse Effect had occurred under the Merger Agreement. UBS intervened as a defendant in the Nashville, Tennessee case
and filed an answer to Genescos complaint. On November 13, 2007, Genesco amended its complaint to add an alternative claim for damages. On November 15, 2007, the Company filed an answer to Genescos amended complaint asserting
that a Company Material Adverse Effect had occurred under the Merger Agreement and asserting a counterclaim against Genesco for intentional or negligent misrepresentation. On that day, UBS filed an answer to Genescos amended complaint and a
counterclaim asserting fraud against Genesco.

On November 14, 2007, the Company was named as a defendant, along with Genesco, in a
complaint for declaratory relief filed by UBS in the United States District Court for the Southern District of New York. UBS was seeking a declaration in the New York federal district court action that its commitment letter for the UBS Financing
(the Commitment), which expired on April 30, 2008 (after an extension agreed to by UBS), was void and/or may properly be terminated by UBS because the Company would not be able to provide, prior to the expiration of the Commitment,
a valid solvency certificate attesting to the solvency of the combined Finish Line-Genesco entity resulting from the Merger.

The trial of
the issues in the Chancery Court in Nashville concluded on December 18, 2007, and the Chancery Court issued its opinion on December 27, 2007. The Chancery Court held that the Company was required to close the Merger with Genesco and use
its reasonable best efforts to obtain the financing required to do so (i.e., either the UBS Financing which was the subject of the New York action, or alternative financing on terms not materially less favorable in the aggregate than the UBS
Financing). Although the Chancery Court held that the deterioration in Genescos financial condition and operating results constituted a material adverse effect (MAE), it also found that Genescos decline in performance was due
to general economic conditions and was not disproportionate to its peers. As a result, the MAE fell within one of the MAE carve-outs in the Merger Agreement and the Company was, therefore, not excused from completing the Merger based on
Genescos decline in financial condition and operating results. The Chancery Court reserved for determination by the United States District Court for the Southern District of New York whether the merged entity would be insolvent.



6



---

On March 3, 2008, the Company entered into a Settlement Agreement with UBS and Genesco relating to
the actions filed by UBS in the United States District Court for the Southern District of New York and filed by Genesco in the Chancery Court for the State of Tennessee (the Litigation). The parties agreed to settle the Litigation and to
terminate the Merger Agreement and Commitment. As consideration for these agreements, the Company and UBS agreed to make a cash payment in the amount of $175,000,000 (of which the Company agreed to pay $39,000,000 and UBS agreed to pay
$136,000,000). The Company also agreed to issue 6,518,971 shares of the Companys Class A Common Stock (the Shares) to Genesco. Pursuant to the Settlement Agreement, the Company paid the $39,000,000 cash payment and delivered
the Shares to Genesco on March 7, 2008. The Company filed a registration statement relating to the Shares with the Securities and Exchange Commission on April 4, 2008, which was declared effective on April 28, 2008. Genesco delivered
the Shares to Genesco shareholders on June 13, 2008. The Company does not expect to incur any significant ongoing costs relating to this matter.

The Terminated merger-related liabilities of $47,129,000 on the Consolidated Balance Sheets as of March 1, 2008, consisted of the $39,000,000 cash payment and $8,129,000 of unpaid legal and
professional fees related to the terminated merger and settlement. As of August 30, 2008, the Terminated merger-related liabilities consisted of unpaid legal and professional fees of $218,000 related to the terminated merger and
settlement.



7



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|3. | Discontinued Operations of Paiva
|-- | --------------------------------

On
August 27, 2007, the Board of Directors of the Company approved managements recommendation to proceed with the closure of the Companys Paiva stores. The decision to take this action resulted from a thorough assessment and analysis,
which revealed the concept was not demonstrating the potential necessary to deliver an acceptable long-term return on investment. The Company closed all 15 Paiva stores and online business during the thirteen weeks ended December 1, 2007. The
results of operations of Paiva have been classified in discontinued operations for all periods presented. The financial results of the Paiva operations, which are included in discontinued operations in the accompanying Consolidated Statements of
Operations, were as follows (in thousands):



|                                                     |  |                      |      |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|---------------------------------------------------- |  | -------------------- | ---- | - | ---------------------- | - | ------- | -------------- |  | - | ---------------- | - |  | - | ------- | -
|                                                     |  | Thirteen Weeks Ended |      |   | Twenty-Six Weeks Ended |  
|                                                     |  | August 30,2008       |      |   | September 1,2007       |   |         | August 30,2008 |  |   | September 1,2007 |  
|                                                     |  | (unaudited)          |      |   | (unaudited)            |  
|Net sales                                            |  | $                    |     |   |                        | $ | 3,007   |                |  | $ |                 |   |  | $ | 5,588   |  
|                                                     |  |                      |      |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|Loss from discontinued operations                    |  | $                    | (206 | ) |                        | $ | (14,745 | )              |  | $ | (201             | ) |  | $ | (16,691 | )
|Income tax benefit                                   |  |                      | (80  | ) |                        |   | (6,042  | )              |  |   | (78              | ) |  |   | (6,717  | )
|                                                     |  |                      |      |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|Loss from discontinued operations, net of income tax |  | $                    | (126 | ) |                        | $ | (8,703  | )              |  | $ | (123             | ) |  | $ | (9,974  | )
|                                                     |  |                      |      |   |                        |   |         |                |  |   |                  |   |  |   |         |  

For the thirteen and twenty-six weeks ended September 1, 2007, the loss from discontinued
operations of Paiva included operating losses as well as $11,527,000 related to impairment of long-lived assets, $936,000 of lease related expenses for leases terminated, and $600,000 of inventory write-downs.

Based on the Companys current estimates as of August 30, 2008, future lease payments, including estimated lease termination payments, and
repayment of unamortized construction allowances are expected to result in a total cash outlay of approximately $639,000 and $699,000, respectively. Unamortized construction allowances are included within Deferred credits from landlords.
The Company anticipates that all cash payments will occur within the next 4 months.

The balance and net activity for the estimated future
lease payments, including estimated lease termination payments, which are included within Other liabilities and accrued expenses, are as follows (in thousands):



|                           |  |               |        |  
|-------------------------- |  | ------------- | ------ | -
|                           |  | Lease Reserve |       
|                           |  | (unaudited)   |       
|Balance at March 1, 2008   |  | $             | 1,574  |  
|Provision                  |  |               | 194    |  
|Cash payments              |  |               | (1,129 | )
|                           |  |               |        |  
|Balance at August 30, 2008 |  | $             | 639    |  
|                           |  |               |        |  



|4. | Fair Value Measurements
|-- | -----------------------

On March 2, 2008, the
Company adopted Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements (FAS 157). FAS 157 provides a single definition of fair value and a common framework for measuring fair
value as well as new disclosure requirements for fair value measurements used in financial statements. Under FAS 157, fair value is determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants exclusive of any transaction costs. FAS 157 also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market
data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The Company has cash equivalents of short-term money market funds backed by U.S. Treasury securities. The Primary
objective of our short-term investment activities is to preserve our capital for the purpose of funding operations and we do not enter into short-term investments for trading or speculative purposes. The fair value is based on unadjusted quoted
market prices for the funds in active markets with sufficient volume and frequency. The adoption of FAS 157 did not have an impact on the Companys results of operations, financial condition or liquidity.

In February 2008, the Financial Accounting Standards Board (FASB) issued FSP FAS 157-1, Application of FASB Statement No. 157 to
FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 (FSP FAS 157-1). FSP FAS 157-1 amended FAS 157 to exclude
from its scope SFAS No. 13, Accounting for Leases, and its related interpretive accounting pronouncements that address leasing transactions. Also in February 2008, the FASB issued FSP FAS 157-2, Effective Date of FASB
Statement No. 157 (FSP FAS 157-2). FSP FAS 157-2 amended FAS 157 to defer the effective date of FAS 157 for non-financial assets and non-financial liabilities to fiscal years beginning after November 15, 2008 (fiscal 2010
for the Company), except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis, at least annually. These include goodwill, other nonamortizable intangible assets, asset retirement obligations and
liabilities recorded in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. The Company is currently assessing the impact of FAS 157 on its non-financial assets and non-financial
liabilities measured at fair value on a nonrecurring basis, however does not expect it to have a significant impact on the Companys results of operations, financial condition or liquidity.



8



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|5. | Recent Accounting Pronouncements
|-- | --------------------------------

In February 2007,
the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (FAS 159). FAS 159 permits entities to choose to measure many financial instruments and certain other items at fair
value. The standard also establishes presentation and disclosure requirements designed to facilitate comparison between entities that choose different measurement attributes for similar types of assets and liabilities. If the fair value option is
elected, the effect of the first remeasurement to fair value is reported as a cumulative effect adjustment to the opening balance of retained earnings. The statement is applied prospectively upon adoption. The Company did not elect fair value
treatment for any assets or liabilities under FAS 159 as of March 2, 2008.

In May 2008, the FASB issued SFAS No. 162, The
Hierarchy of Generally Accepted Accounting Principles (FAS 162). FAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with GAAP. FAS 162 directs the GAAP hierarchy to the entity, not the independent auditors, as the entity is responsible for selecting accounting principles for financial statements that are
presented in conformity with GAAP. FAS 162 is effective 60 days following the SECs approval of the Public Company Accounting Oversight Board amendments to remove the GAAP hierarchy from the auditing standards. FAS 162 is not expected to have
an impact on the Companys financial statements.

In May 2008, the FASB staff revisited Emerging Issues Task Force (EITF)
issue No. 03-6 and issued FASB Staff Position (FSP) No. EITF 03-6-1, Determining Whether Instruments Granted in Shared-Based Payment Transactions are Participating Securities. FSP EITF 03-6-01 requires unvested
share-based payments that entitle employees to receive nonrefundable dividends to also be considered participating securities, as defined in EITF 03-6. This FSP is effective for fiscal years beginning after December 15, 2008 and interim periods
within those years with early adoption prohibited. The Company has not yet determined the impact if any, that FSP EITF 03-6-1 may have on its results of operations and financial position.



|6. | Common Stock
|-- | ------------

Pursuant to the Settlement Agreement
entered into with UBS and Genesco (see Note 2), the Company issued 6,518,971 shares of the Companys Class A Common Stock (the Shares) to Genesco on March 7, 2008. The Company filed a registration statement relating to the
Shares with the Securities and Exchange Commission on April 4, 2008, which was declared effective on April 28, 2008. Genesco distributed the Shares to Genesco shareholders on June 13, 2008.

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. The Company suspended 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 cash dividend of $1,646,000 was paid on September 15, 2008 to shareholders of record on August 29, 2008 and was accrued at August 30, 2008 in
Other liabilities and accrued expenses.

On July 17, 2008, the Companys Board of Directors authorized a new stock
repurchase program to repurchase up to 5 million shares of the Companys Class A common stock, or approximately 9% of the aggregate Class A and Class B common stock outstanding. Under the stock repurchase program, the Company may
purchase shares through December 31, 2011. The Company believes that adoption of the repurchase program could be a viable use of excess cash. Such purchases, if any, will occur from time to time, as market conditions warrant and as the Company
deems appropriate when judged against other alternative uses of cash. The Company did not purchase any shares under the new stock repurchase program during the thirteen weeks ended August 30, 2008.



9



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

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,
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; the effect of economic conditions including conditions
resulting from the current turmoil in the financial services industry and depressed demand in the housing market; 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, including Critical Accounting Policies, included in the Companys Annual Report on Form 10-K for the year ended March 1, 2008 (fiscal 2008). Unless otherwise noted, all amounts reflect the results of the
Companys continuing operations and therefore 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 by brand for each of the following periods:



|                    |  |                      |   |  |                        |   |  |                |   |  |                  |  
|------------------- |  | -------------------- | - |  | ---------------------- | - |  | -------------- | - |  | ---------------- | -
|                    |  | Thirteen Weeks Ended |   |  | Twenty-Six Weeks Ended |  
|Number of Stores:   |  | August 30,2008       |   |  | September 1,2007       |   |  | August 30,2008 |   |  | September 1,2007 |  
|Finish Line         |  |                      |   |  |                        |   |  |                |   |  |                  |  
|Beginning of period |  | 700                  |   |  | 695                    |   |  | 697            |   |  | 690              |  
|Opened              |  | 2                    |   |  | 5                      |   |  | 6              |   |  | 11               |  
|Closed              |  | (5                   | ) |  | (3                     | ) |  | (6             | ) |  | (4               | )
|                    |  |                      |   |  |                        |   |  |                |   |  |                  |  
|End of period       |  | 697                  |   |  | 697                    |   |  | 697            |   |  | 697              |  
|                    |  |                      |   |  |                        |   |  |                |   |  |                  |  
|Man Alive           |  |                      |   |  |                        |   |  |                |   |  |                  |  
|Beginning of period |  | 94                   |   |  | 93                     |   |  | 94             |   |  | 86               |  
|Opened              |  |                     |   |  | 3                      |   |  |               |   |  | 10               |  
|Closed              |  |                     |   |  | (1                     | ) |  |               |   |  | (1               | )
|                    |  |                      |   |  |                        |   |  |                |   |  |                  |  
|End of period       |  | 94                   |   |  | 95                     |   |  | 94             |   |  | 95               |  
|                    |  |                      |   |  |                        |   |  |                |   |  |                  |  
|Total               |  |                      |   |  |                        |   |  |                |   |  |                  |  
|Beginning of period |  | 794                  |   |  | 788                    |   |  | 791            |   |  | 776              |  
|Opened              |  | 2                    |   |  | 8                      |   |  | 6              |   |  | 21               |  
|Closed              |  | (5                   | ) |  | (4                     | ) |  | (6             | ) |  | (5               | )
|                    |  |                      |   |  |                        |   |  |                |   |  |                  |  
|End of period       |  | 791                  |   |  | 792                    |   |  | 791            |   |  | 792              |  
|                    |  |                      |   |  |                        |   |  |                |   |  |                  |  



|                               |  |                |  |                 
|------------------------------ |  | -------------- |  | ----------------
|                               |  | August 30,2008 |  | September 1,2007
|Square feet information as of: |  |                |  |                 
|Finish Line                    |  |                |  |                 
|Square feet                    |  | 3,815,597      |  | 3,861,838       
|Average store size             |  | 5,474          |  | 5,541           
|Man Alive                      |  |                |  |                 
|Square feet                    |  | 326,407        |  | 326,336         
|Average store size             |  | 3,472          |  | 3,435           
|Total                          |  |                |  |                 
|Square feet                    |  | 4,142,004      |  | 4,188,174       



10



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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       |        
|Category  |  | August 30, 2008(unaudited) |         |  | September 1, 2007(unaudited) |  
|Footwear  |  | $                          | 294,133 |  | 83                           | % |  | $ | 279,302 |  | 82  | %
|Softgoods |  |                            | 59,179  |  | 17                           | % |  |   | 60,657  |  | 18  | %
|          |  |                            |         |  |                              |   |  |   |         |  |     |  
|Total     |  | $                          | 353,312 |  | 100                          | % |  | $ | 339,959 |  | 100 | %



|          |  |                            |         |  |                              |   |  |   |         |  |     |  
|--------- |  | -------------------------- | ------- |  | ---------------------------- | - |  | - | ------- |  | --- | -
|          |  | Twenty-Six Weeks Ended     |        
|Category  |  | August 30, 2008(unaudited) |         |  | September 1, 2007(unaudited) |  
|Footwear  |  | $                          | 530,344 |  | 83                           | % |  | $ | 511,620 |  | 82  | %
|Softgoods |  |                            | 110,907 |  | 17                           | % |  |   | 114,090 |  | 18  | %
|          |  |                            |         |  |                              |   |  |   |         |  |     |  
|Total     |  | $                          | 641,251 |  | 100                          | % |  | $ | 625,710 |  | 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. All amounts reflect the results of the Companys continuing operations unless otherwise noted.



|                                                      |  |                      |   |  |                        |   |  |                |   |  |                  |  
|----------------------------------------------------- |  | -------------------- | - |  | ---------------------- | - |  | -------------- | - |  | ---------------- | -
|                                                      |  | Thirteen Weeks Ended |   |  | Twenty-Six Weeks Ended |  
|                                                      |  | August 30,2008       |   |  | September 1,2007       |   |  | August 30,2008 |   |  | September 1,2007 |  
|                                                      |  | (unaudited)          |   |  | (unaudited)            |  
|Net sales                                             |  | 100.0                | % |  | 100.0                  | % |  | 100.0          | % |  | 100.0            | %
|Cost of sales (including occupancy costs)             |  | 68.7                 |   |  | 70.2                   |   |  | 69.8           |   |  | 71.5             |  
|                                                      |  |                      |   |  |                        |   |  |                |   |  |                  |  
|Gross profit                                          |  | 31.3                 |   |  | 29.8                   |   |  | 30.2           |   |  | 28.5             |  
|Selling, general and administrative expenses          |  | 25.3                 |   |  | 26.3                   |   |  | 26.6           |   |  | 27.2             |  
|Terminated merger-related costs                       |  |                     |   |  | 0.1                    |   |  |               |   |  |                 |  
|                                                      |  |                      |   |  |                        |   |  |                |   |  |                  |  
|Operating income                                      |  | 6.0                  |   |  | 3.4                    |   |  | 3.6            |   |  | 1.3              |  
|Interest income, net                                  |  | 0.1                  |   |  | 0.1                    |   |  | 0.1            |   |  | 0.1              |  
|                                                      |  |                      |   |  |                        |   |  |                |   |  |                  |  
|Income from continuing operations before income taxes |  | 6.1                  |   |  | 3.5                    |   |  | 3.7            |   |  | 1.4              |  
|Income tax expense                                    |  | 2.4                  |   |  | 1.5                    |   |  | 1.5            |   |  | 0.7              |  
|                                                      |  |                      |   |  |                        |   |  |                |   |  |                  |  
|Income from continuing operations                     |  | 3.7                  | % |  | 2.0                    | % |  | 2.2            | % |  | 0.7              | %
|                                                      |  |                      |   |  |                        |   |  |                |   |  |                  |  



11



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THIRTEEN WEEKS ENDED AUGUST 30, 2008 COMPARED TO THIRTEEN WEEKS ENDED SEPTEMBER 1, 2007

Consolidated net sales increased 3.9% to $353.3 million for the thirteen weeks ended August 30, 2008 from $340.0 million for the thirteen weeks ended
September 1, 2007. The increase was attributable to a comparable store net sales increase of 4.7% for the thirteen weeks ended August 30, 2008 offset partially by reduced sales of closed stores along with down time and reduced square
footage related to remodeled/relocated stores. The 4.7% increase in comparable store net sales was attributable to a 4.9% increase for Finish Line stores and a 1.3% increase for Man Alive stores. Comparable footwear net sales for the thirteen weeks
ended August 30, 2008 increased 6.1% while comparable softgoods net sales decreased 1.6% for the comparable period. The 6.1% increase in comparable footwear net sales is primarily due to a 10.6% increase in average selling price for footwear at
Finish Line stores offset partially by a 4.3% reduction in the units of footwear sold for the thirteen weeks ended August 30, 2008 compared to the thirteen weeks ended September 1, 2007. The 1.6% decrease in comparable softgoods net sales
was attributable to a 10.0% increase in Man Alive comparable softgoods net sales and a 5.4% decrease in Finish Line comparable softgoods net sales. The 10.0% increase in softgoods at Man Alive was primarily attributable to the transition in product
assortment from hip-hop apparel to street wear offerings and a key item strategy including graphic t-shirts and a denim selection. Finish Lines decrease of 5.4% in softgoods is primarily the result of managements plan to reduce softgoods
inventory levels and focus on increasing inventory turns and the return on investment.

Gross profit for the thirteen weeks ended
August 30, 2008 was $110.7 million, an increase of $9.4 million (9.3%) from $101.3 million for the thirteen weeks ended September 1, 2007. During this same period, gross profit increased to 31.3% of net sales versus 29.8% for the
prior year. The 1.5% increase as a percentage of net sales was due to a 1.0% increase in margin for product sold, a 0.1% decrease in shrink and a 0.4% decrease in occupancy costs as a percentage of net sales. The 1.0% increase in product margin is
primarily a result of being less promotional as the Companys aged inventory, inventory mix and inventory turns continue to improve as we focus on premium product. The 0.4% decrease in occupancy costs as a percentage of net sales was a result
of leveraging due to positive comparable store net sales of 4.7%.

Selling, general and administrative expenses were $89.3 million (25.3% of
net sales) for the thirteen weeks ended August 30, 2008 compared to $89.3 million (26.3% of net sales) for the thirteen weeks ended September 1, 2007. The 1.0% decrease as a percentage of net sales was due primarily to a decrease in
advertising, depreciation and freight expense of 0.5%, 0.3%, and 0.3% as a percentage of net sales, respectively, from expense reduction initiatives.

Net interest income was $0.2 million (0.1% of net sales) for the thirteen-week periods ended August 30, 2008 and September 1, 2007.

The Companys income tax expense was $8.4 million for the thirteen weeks ended August 30, 2008 compared to an income tax expense of $5.1 million
for the thirteen weeks ended September 1, 2007. The $3.3 million change was primarily due to income from continuing operations before income taxes of $21.7 million for the thirteen weeks ended August 30, 2008 compared to income from
continuing operations before income taxes of $12.0 million for the thirteen weeks ended September 1, 2007.

Income from continuing
operations for the thirteen weeks ended August 30, 2008 was $13.2 million compared to income from continuing operations of $6.9 million for the thirteen weeks ended September 1, 2007. Income from continuing operations per diluted share was
$0.24 for the thirteen weeks ended August 30, 2008 compared to income from continuing operations per diluted share of $0.14 for the thirteen weeks ended September 1, 2007. Diluted weighted average shares outstanding were 54.8 million
and 47.2 million for the thirteen weeks ended August 30, 2008 and September 1, 2007, respectively. The 7.6 million increase in diluted weighted average shares outstanding is primarily related to the issuance of 6.5 million
shares to Genesco on March 7, 2008 pursuant to the Settlement Agreement entered into with UBS and Genesco.

TWENTY-SIX WEEKS ENDED AUGUST 30,
2008 COMPARED TO TWENTY-SIX WEEKS ENDED SEPTEMBER 1, 2007

Consolidated net sales increased 2.5% ($15.6 million) to $641.3 million
for the twenty-six weeks ended August 30, 2008 from $625.7 million for the twenty-six weeks ended September 1, 2007. Of this increase, $5.3 million was attributable to sales from 14 stores that were not open during the twenty-six weeks of
last year, a $2.9 million increase in net sales from existing stores open only part of the first twenty-six weeks of last year, and a comparable store net sales increase of 3.1% for the twenty-six weeks ended August 30, 2008. The consolidated
net sales increase was partially offset by reduced sales from 14 closed stores since the twenty-six weeks ended September 1, 2007 along with down time and reduced square footage related to remodeled/relocated stores. The 3.1% increase in
comparable store net sales was attributable to a 3.4% increase for Finish Line stores partially offset by a 2.7% decrease for Man Alive stores. Comparable footwear net sales for the twenty-six weeks ended August 30, 2008 increased 4.4% while
comparable softgoods net sales decreased 2.8%. The 4.4% increase in comparable footwear net sales was primarily a result of an 8.1% increase in average selling price for footwear at Finish Line stores for the twenty-six weeks ended August 30,
2008 offset partially by a 3.6% decrease in the footwear units sold during the twenty-six weeks ended August 30, 2008 compared to the twenty-six weeks ended September 1, 2007. The 2.8% decrease in comparable softgoods net sales was
attributable to a 4.6% increase in Man Alive comparable softgoods net sales and a 5.3% decrease in Finish Line comparable softgoods net sales. The 4.6% increase in softgoods at Man Alive was primarily attributable to the transition in product
assortment from hip-hop apparel to street wear offerings and a key item strategy including graphic t-shirts and denim selection. Finish Lines decrease of 5.3% in softgoods is primarily the result of managements plan to reduce softgoods
inventory levels and focus on increasing inventory turns and the return on investment.



12



---

Gross profit for the twenty-six weeks ended August 30, 2008 was $193.8 million (30.2% of net sales),
an increase of $15.4 million (8.7%) over the $178.4 million (28.5% of net sales) for the twenty-six weeks ended September 1, 2007. This 1.7% increase as a percentage of net sales was due to a 1.5% increase in margin for product sold and a
0.2% decrease in occupancy costs as a percentage of net sales. The 1.5% increase in product margin is primarily a result of being less promotional as the Companys aged inventory, inventory mix and inventory turns continue to improve as we
focus on premium product. The 0.2% decrease in occupancy costs as a percentage of net sales was a result of leveraging due to positive comparable store net sales of 3.1%.

Selling, general and administrative expenses increased $0.5 million (0.3%) to $170.6 million (26.6% of net sales) for the twenty-six weeks ended August 30, 2008 from $170.1 million (27.2% of net sales) for
the twenty-six weeks ended September 1, 2007. The 0.6% decrease as a percentage of net sales was due primarily to a decrease in depreciation and freight expense of 0.3% and 0.3% as a percentage of net sales, respectively, as a result of
leveraging due to the increase in comparable store net sales of 3.1% for the twenty-six weeks ended August 30, 2008 as well as continually reviewing and adjusting our logistics strategy.

Net interest income was $0.5 million (0.1% of net sales) for the twenty-six weeks ended August 30, 2008 compared to net interest income of $0.7
million (0.1% of net sales) for the twenty-six weeks ended September 1, 2007, a decrease of $0.2 million (28.7%). This decrease was primarily due to lower interest rates earned during the twenty-six weeks ended August 30, 2008 compared to
the twenty-six weeks ended September 1, 2007.

The Companys income tax expense was $9.5 million and its effective tax rate was
40.3% for the twenty-six weeks ended August 30, 2008 compared to $4.4 million and 50.6% for the twenty-six weeks ended September 1, 2007. The $5.1 million change was due to income from continuing operations before income taxes of $23.6
million for the twenty-six weeks ended August 30, 2008 compared to income from continuing operations before incomes taxes of $8.7 million for the twenty-six weeks ended September 1, 2007. The 10.3% change in effective tax rate relates to a
decrease in the state tax expense recorded in the twenty-six weeks ended August 30, 2008 compared to the twenty-six weeks ended September 1, 2007 related to income tax contingencies pursuant to Financial Accounting Standards Board
Interpretation No. 48, Accounting for Income Taxes and certain state tax rate changes.

Income from continuing operations
for the twenty-six weeks ended August 30, 2008 was $14.1 million compared to income from continuing operations of $4.3 million for the twenty-six weeks ended September 1, 2007. Income from continuing operations per diluted share was $0.26
for the twenty-six weeks ended August 30, 2008 compared to income from continuing operations per diluted share of $0.09 for the twenty-six weeks ended September 1, 2007. Diluted weighted average shares outstanding were 54.3 million
and 47.2 million for the twenty-six weeks ended August 30, 2008 and September 1, 2007, respectively. Diluted shares outstanding for the twenty-six weeks ended August 30, 2008 includes the impact of the 6.5 million shares
issued to Genesco related to the Settlement Agreement (see Note 2 to the Consolidated Financial Statements).



13



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Liquidity and Capital Resources

The Company had net cash of $0.5 million provided by its operating activities during the twenty-six weeks ended August 30, 2008 as compared to $7.4 million net cash used during the twenty-six weeks ended
September 1, 2007.

Consolidated merchandise inventories were $269.9 million at August 30, 2008 compared to $268.3 million at
March 1, 2008 and $303.6 at September 1, 2007. On a comparable per square foot basis, consolidated merchandise inventories decreased 9.6% at August 30, 2008 compared to September 1, 2007 (Finish Line decreased 9.9%), and were
1.5% higher than at March 1, 2008. The 9.6% decrease per square foot compared to September 1, 2007 is a result of managements plan to reduce inventory levels and increase inventory turns.

The Companys working capital was $256.5 million at August 30, 2008, which was a $21.8 million increase from $234.7 million at March 1,
2008.

The Company used net cash in its investing activities of $8.6 million for the twenty-six weeks ended August 30, 2008 compared
to net cash used in investing activities of $19.8 million for the twenty-six weeks ended September 1, 2007. The $8.6 million used in the twenty-six weeks ended August 30, 2008 was the result of capital expenditures of $9.2 million
primarily used for constructing new stores and remodeling existing stores.

At August 30, 2008, the Company had cash and cash
equivalents of $65.0 million, no marketable securities and no interest bearing debt. Cash equivalents are primarily invested in U.S. treasury instruments with daily liquidity.

For the year ending February 28, 2009, the Company currently plans to open approximately 9 to 10 Finish Line stores (6 opened during the twenty-six
weeks ended August 30, 2008), as well as remodel approximately 15 to 17 existing Finish Line stores (14 remodeled during the twenty-six weeks ended August 30, 2008). In addition, the Company has various other corporate capital and
technology projects. The Company expects capital expenditures for the current fiscal year to approximate $16.0 to $18.0 million. Management believes that cash on hand, operating cash flow and the Companys existing $75.0 million bank facility,
which expires on February 25, 2010, will provide sufficient capital to complete the Companys current store expansion program and to satisfy the Companys working capital requirements in the foreseeable future.

Pursuant to the Settlement Agreement entered into with UBS and Genesco (see Note 2 to the Consolidated Financial Statements), the Company issued
6,518,971 shares of the Companys Class A Common Stock (the Shares) to Genesco on March 7, 2008. The Company filed a registration statement relating to the Shares with the Securities and Exchange Commission on
April 4, 2008, which was declared effective on April 28, 2008. Genesco distributed the Shares to Genesco shareholders on June 13, 2008.

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. The Company suspended 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 cash dividend of $1,646,000 was paid on September 15, 2008 to shareholders of record on August 29, 2008.

On July 17, 2008, the Companys Board of Directors authorized a new stock repurchase program to repurchase up to 5 million shares of the Companys Class A common stock, or approximately 9% of the aggregate
Class A and Class B common stock outstanding. Under the stock repurchase program, the Company may purchase shares through December 31, 2011. The Company believes that adoption of the repurchase program could be a viable use of excess cash.
Such purchases, if any, will occur from time to time, as market conditions warrant and as the Company deems appropriate when judged against other alternative uses of cash. The Company did not purchase any shares under the new stock repurchase
program during the thirteen weeks ended August 30, 2008.



14



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Discontinued Operations of Paiva

On August 27, 2007, the Board of Directors of the Company approved managements recommendation to proceed with the closure of the Companys Paiva stores. The decision to take this action resulted from a
thorough assessment and analysis, which revealed the concept was not demonstrating the potential necessary to deliver an acceptable long-term return on investment. The Company closed all 15 Paiva stores and online business during the thirteen weeks
ended December 1, 2007. The results of operations of Paiva have been classified in discontinued operations for all periods presented. The financial results of the Paiva operations, which are included in discontinued operations in the
accompanying Consolidated Statements of Operations, were as follows (in thousands):



|                                                     |  |                      |      |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|---------------------------------------------------- |  | -------------------- | ---- | - | ---------------------- | - | ------- | -------------- |  | - | ---------------- | - |  | - | ------- | -
|                                                     |  | Thirteen Weeks Ended |      |   | Twenty-Six Weeks Ended |  
|                                                     |  | August 30,2008       |      |   | September 1,2007       |   |         | August 30,2008 |  |   | September 1,2007 |  
|                                                     |  | (unaudited)          |      |   | (unaudited)            |  
|Net sales                                            |  | $                    |     |   |                        | $ | 3,007   |                |  | $ |                 |   |  | $ | 5,588   |  
|                                                     |  |                      |      |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|Loss from discontinued operations                    |  | $                    | (206 | ) |                        | $ | (14,745 | )              |  | $ | (201             | ) |  | $ | (16,691 | )
|Income tax benefit                                   |  |                      | (80  | ) |                        |   | (6,042  | )              |  |   | (78              | ) |  |   | (6,717  | )
|                                                     |  |                      |      |   |                        |   |         |                |  |   |                  |   |  |   |         |  
|Loss from discontinued operations, net of income tax |  | $                    | (126 | ) |                        | $ | (8,703  | )              |  | $ | (123             | ) |  | $ | (9,974  | )
|                                                     |  |                      |      |   |                        |   |         |                |  |   |                  |   |  |   |         |  

For the thirteen and twenty-six weeks ended September 1, 2007, the loss from discontinued
operations of Paiva included operating losses as well as $11.5 million related to impairment of long-lived assets, $0.9 million of lease related expenses for leases terminated, and $0.6 million of inventory write-downs.

Based on the Companys current estimates as of August 30, 2008, future lease payments, including estimated lease termination payments, and
repayment of unamortized construction allowances are expected to result in a total cash outlay of approximately $0.6 million and $0.7 million, respectively. The Company anticipates that all cash payments will occur within the next 4 months.

The balance and net activity for the estimated future lease payments, including estimated lease termination payments, are as follows (in
thousands):



|                           |  |               |        |  
|-------------------------- |  | ------------- | ------ | -
|                           |  | Lease Reserve |       
|                           |  | (unaudited)   |       
|Balance at March 1, 2008   |  | $             | 1,574  |  
|Provision                  |  |               | 194    |  
|Cash payments              |  |               | (1,129 | )
|                           |  |               |        |  
|Balance at August 30, 2008 |  | $             | 639    |  
|                           |  |               |        |  

Contractual Obligations

The Companys contractual obligations primarily consist of long-term debt, operating leases and purchase orders for merchandise inventory. There have been no significant changes to the Companys contractual
obligations identified in the Companys Annual Report on Form 10-K for the fiscal year ended March 1, 2008, other than the payment on March 7, 2008 of $39.0 million pursuant to the Settlement Agreement to Genesco and 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 additional
operating leases entered into due to store openings).

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 March 1, 2008.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

For a discussion of the Companys market risk associated with interest rates as of March 1, 2008 see Quantitative and Qualitative Disclosures about Market Risk in Item 7A of Part II of the Companys Annual
Report on Form 10-K for the fiscal year ended March 1, 2008. For the twenty-six weeks ended August 30, 2008, there has been no significant change in related market risk factors.



15



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|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Disclosure Controls
and Procedures. With the participation of our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the Exchange Act)), as of the end of the period covered by this report. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end
of such period, our disclosure controls and procedures were effective in ensuring that (i) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities Exchange Commissions rules and forms and (ii) information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated
and communicated to the Companys management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting. There have not been any changes in our internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



16



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PART IIOTHER INFORMATION



|ITEM 1: | LEGAL PROCEEDINGS
|------- | -----------------

The Company is subject from time
to time, to certain legal proceedings and claims in the ordinary course of conducting its business. Although it is not possible to predict with certainty the eventual outcome of any litigation, in the opinion of management, the Companys legal
proceedings are not expected to have a material adverse effect on the Companys financial position or results of operations.



|ITEM 1A: | RISK FACTORS
|-------- | ------------

Risk factors that affect the
Companys business and financial results are discussed in Item 1A: Risk Factors in the Companys Annual Report on Form 10-K for the fiscal year ended March 1, 2008. There has been no significant change to identified risk
factors for the twenty-six weeks ended August 30, 2008.



|ITEM 2: | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

None.



|ITEM 3: | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

None.



|ITEM 4: | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

On July 17, 2008 the Company held its Annual Meeting of Shareholders at which the following matters were approved by the Companys shareholders by the votes indicated:



|(a) | The following Class III director (Alan H. Cohen) was elected to serve until the 2011 Annual Meeting of Shareholders or until his successor have been duly elected and qualified. Of
the 37,027,318 shares (1 vote per share) of Class A common stock and the 5,141,336 shares (10 votes per share) of Class B common stock represented at the meeting, the director was elected by the following votes:
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Number Of Votes Received



|           |  |               |  |                 
|---------- |  | ------------- |  | ----------------
|Votes For  |  | Votes Against |  | Votes Abstaining
|77,501,457 |  | 10,928,736    |  | 10,485          



|(b) | Approval of Amendment to the Companys 2002 Stock Incentive Plan:
|--- | -----------------------------------------------------------------



|           |  |               |  |                 
|---------- |  | ------------- |  | ----------------
|Votes For  |  | Votes Against |  | Votes Abstaining
|78,304,019 |  | 3,760,635     |  | 6,376,024       



|(c) | Ratification of the Appointment of Ernst & Young LLP as the Companys Independent Auditors:
|--- | -------------------------------------------------------------------------------------------



|           |  |               |  |                 
|---------- |  | ------------- |  | ----------------
|Votes For  |  | Votes Against |  | Votes Abstaining
|88,267,477 |  | 153,994       |  | 19,207          



|ITEM 5: | OTHER INFORMATION
|------- | -----------------

None.



|ITEM 6: | EXHIBITS
|------- | --------

(a) Exhibits



10.1

Amendment No. 2 to the 2002 Stock Incentive Plan of The Finish Line, Inc. (incorporated by reference to Appendix A of the Registrants
Definitive Proxy Statement on Schedule 14A filed with the Securities Exchange Commission on June 17, 2008, and incorporated by reference herein)31.1

Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a) and 15d-14(a), as amended31.2

Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a14(a) and 15d-14(a), as amended32

Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002




17



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                         |  |                                                                                          
|------------------------ |  | -----------------------------------------------------------------------------------------
|                         |  | THE FINISH LINE, INC.                                                                    
|                         | 
|Date: September 26, 2008 |  | By: /s/ Kevin S. Wampler                                                                 
|                         |  | Kevin S. Wampler Executive Vice President-Chief
Financial Officer and Assistant Secretary



18



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Exhibit Index



|              |  |                                                                                                                                                                                                                                                                                        
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                            
|10.1          |  | Amendment No. 2 to the 2002 Stock Incentive Plan of The Finish Line, Inc. (incorporated by reference to Appendix A of the Registrants
Definitive Proxy Statement on Schedule 14A filed with the Securities Exchange Commission on June 17, 2008, and incorporated by reference herein)
|              | 
|31.1          |  | Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a) and 15d- 14(a), as amended                                                                                                                                                                            
|              | 
|31.2          |  | Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a) and 15d- 14(a), as amended                                                                                                                                                                            
|              | 
|32            |  | Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                 



19