SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Fiscal Quarter Ended 1-8668
April 1, 1994 Commission File Number
___________________________
FINGERHUT COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1396490
(State of Incorporation) (I.R.S. Employer Identification No.)
4400 Baker Road, Minnetonka, Minnesota 55343
(Address of principal executive offices)
(612) 932-3100
(Registrant's telephone number, including area code)
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 _____
As of April 29, 1994, 46,291,648 shares of the Registrant's Common Stock, $.01
par value, were outstanding.
<PAGE>2
FINGERHUT COMPANIES, INC.
FORM 10-Q
April 1, 1994
TABLE OF CONTENTS
Part I - Financial Information Page
Item 1. Financial Statements
Consolidated Statements of Earnings (Unaudited) -
thirteen weeks ended April 1, 1994 and
March 26, 1993 ....................................... 3
Consolidated Statements of Financial Position
(Unaudited) - April 1, 1994, March 26, 1993 and
December 31, 1993 .................................... 4
Consolidated Statements of Cash Flows (Unaudited) -
thirteen weeks ended April 1, 1994 and
March 26, 1993........................................ 5
Condensed Notes to Consolidated Financial
Statements (Unaudited)................................ 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition..................... 8
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders .. 11
Item 6. Exhibits and Reports on Form 8-K ..................... 11
Signatures..................................................... 12
<PAGE>3
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands of dollars, except per share data)
(Unaudited)
Thirteen Weeks Ended
April 1, March 26,
1994 1993
Revenues:
Net sales $ 324,681 $ 340,962
Finance income, net 37,463 30,845
------- -------
362,144 371,807
Costs and expenses:
Product cost 160,389 171,591
Administrative and selling expenses 133,768 132,582
Provision for uncollectible accounts 38,673 43,146
Discount on sale of accounts receivable 6,922 3,513
Interest expense, net 6,990 9,715
------- -------
346,742 360,547
------- -------
Earnings before taxes 15,402 11,260
Provision for income taxes 5,429 3,496
------- -------
Net earnings $ 9,973 $ 7,764
======= =======
Earnings per share $ .20 $ .16
======= =======
Dividends $ .04 $ .04
======= =======
Weighted average shares 50,760,001 49,541,684
========== ==========
See accompanying Condensed Notes to Consolidated Financial Statements.
<PAGE>4
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of dollars)
(Unaudited)
April 1, March 26, December 31,
1994 1993 1993
ASSETS
Current assets:
Cash and cash equivalents $ 36,301 $ 25,229 $ 66,571
Customer accounts receivable, net 324,224 300,997 333,543
Inventories, net 145,240 163,223 149,389
Promotional material 71,577 59,121 56,083
Deferred income taxes 63,229 68,177 68,404
Other 9,409 7,151 8,218
------- ------- -------
Total current assets 649,980 623,898 682,208
Property and equipment, net 182,919 169,343 182,510
Excess of cost over fair value of
net assets acquired, net 43,825 47,315 43,977
Customer lists, net 9,945 15,520 10,067
Other assets 56,563 11,975 53,215
------- ------- -------
$ 943,232 $ 868,051 $ 971,977
======= ======= =======
LIABILITIES
Current liabilities:
Accounts payable $ 127,811 $ 115,580 $ 120,307
Accrued payroll and employee benefits 20,767 31,539 36,545
Other accrued liabilities 44,950 51,606 49,639
Current portion of long-term debt 311 337 305
Current income taxes payable - - 26,179
------- ------- -------
Total current liabilities 193,839 199,062 232,975
Long-term debt, less current portion 246,753 247,120 246,820
Deferred income taxes 15,107 9,798 15,459
Other non-current liabilities 5,084 4,298 4,334
------- ------- -------
460,783 460,278 499,588
------- ------- -------
STOCKHOLDERS' EQUITY
Preferred stock - - -
Common Stock 463 460 461
Additional paid-in capital 256,918 252,404 254,984
Earnings reinvested 225,068 154,909 216,944
------- ------- -------
Total stockholders' equity 482,449 407,773 472,389
------- ------- -------
$ 943,232 $ 868,051 $ 971,977
======= ======= =======
See accompanying Condensed Notes to Consolidated Financial Statements.
<PAGE>5
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
Thirteen Weeks Ended
April 1, March 26,
1994 1993
Cash flows from operating activities:
Net earnings $ 9,973 $ 7,764
Adjustments to reconcile net earnings to
net cash used by operating activities:
Depreciation and amortization 8,126 6,555
Change in assets and liabilities, excluding
the effects of business divestitures:
Customer accounts receivable, net (2,236) 19,695
Inventories, net 4,149 (15,808)
Promotional material and other current assets (16,685) (8,315)
Accounts payable 7,504 (35,839)
Accrued payroll and employee benefits (15,778) (4,559)
Other accrued liabilities (4,689) (8,940)
Current income taxes payable (25,208) (19,675)
Deferred income taxes 4,823 5,049
Other (2,774) 980
-------- --------
Net cash used by operating activities (32,795) (53,093)
-------- --------
Cash flows from investing activities:
Proceeds from business divestitures 11,555 -
Additions to property and equipment (8,085) (7,670)
-------- --------
Net cash provided (used) by investing activities 3,470 (7,670)
-------- --------
Cash flows from financing activities:
Repayments of long-term debt (61) (66)
Issuance of common stock 965 1,211
Cash dividends paid (1,849) (1,835)
-------- --------
Net cash used by financing activities (945) (690)
-------- --------
Net decrease in cash and cash equivalents (30,270) (61,453)
Cash and cash equivalents at beginning of period 66,571 86,682
-------- --------
Cash and cash equivalents at end of period $ 36,301 $ 25,229
======== ========
Supplemental noncash investing and financing activities:
Tax benefit from exercise of non-qualified
stock options $ 971 $ 1,042
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 3,166 $ 14,800
Cash paid during the period for income taxes $ 27,638 $ 18,732
Included in cash and cash equivalents were liquid investments with
maturities of fifteen days or less.
See accompanying Condensed Notes to Consolidated Financial Statements.
<PAGE>6
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
1. Consolidated financial statements
The consolidated financial statements of Fingerhut Companies, Inc.
("Company") reflect the financial position and results of operations of
the Company and its wholly owned subsidiaries. The Company's principal
subsidiaries are Fingerhut Corporation ("Fingerhut") and USA Direct
Incorporated ("USA Direct"). COMB Corporation was sold as of September
3, 1993, FDC, Inc., a subsidiary of Figi's Inc. ("Figi's"), was sold as
of December 31, 1993 and the Company has signed a letter of intent to
sell the remaining assets of Figi's.
The consolidated financial statements as of April 1, 1994 and March
26, 1993, and for the thirteen weeks ended April 1, 1994 and March 26,
1993, included herein are unaudited and have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not
misleading. The interim financial statements reflect all adjustments
(consisting of normal recurring accruals) that are, in the opinion of
management, necessary for a fair statement of the results for the interim
periods. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes
thereto included in the Company's 1993 Annual Report to Shareholders and
incorporated by reference in the Company's annual report on Form 10-K
filed with the Securities and Exchange Commission. The results of
operations for the interim period should not be considered indicative of
the results to be expected for the entire year.
Reclassifications have been made to prior years' consolidated financial
statements whenever necessary to conform to the current year's
presentation.
2. Summary of significant accounting policies adopted in 1994
During the first quarter of 1994, the Company completed their study of
Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits" and determined there were no
significant adjustments required for the implementation of this
pronouncement.
3. Earnings per share of common stock and common stock equivalents
Earnings per share is computed by dividing net earnings by the weighted
average shares of common stock and common stock equivalents outstanding
during the periods. The dilutive effect of the potential exercise of
outstanding options to purchase shares of common stock was calculated
using the treasury stock method.
<PAGE>7
4. Sale of accounts receivable
The proceeds from the sale of accounts receivable were $767.0 million,
$589.0 million and $829.0 million as of April 1, 1994, March 26, 1993 and
December 31, 1993, respectively. The holdback was approximately $228.0
million, $141.0 million and $227.0 million as of April 1, 1994, March 26,
1993 and December 31, 1993, respectively.
5. Customer accounts receivable, net
Customer accounts receivable, net consisted of the following:
(In thousands of dollars) April 1, March 26, December 31,
1994 1993 1993
Due from customers $ 453,215 $ 435,192 $ 466,390
Reserve for uncollectible
accounts,net of anticipated
recoveries (70,738) (84,299) (70,011)
Reserve for returns
and exchanges (14,701) (13,028) (18,988)
Other reserves (19,354) (19,881) (19,135)
-------- -------- --------
Net collectible amount 348,422 317,984 358,256
Unearned finance income (24,198) (16,987) (24,713)
-------- -------- --------
Customer accounts
receivable, net $ 324,224 $ 300,997 $ 333,543
======== ======== ========
6. Revolving credit facility
Interest expense related to the revolving credit facility for the
thirteen-week periods ended April 1, 1994 and March 26, 1993 was $25
thousand and $0, respectively. The average outstanding balances during
such periods were $1.7 million and $0, respectively, and the average
annual interest rate for the 1994 period was 6.0%.
7. Stockholders' equity
During the thirteen-week period ended April 1, 1994, 138,300 shares of
common stock were issued related to the exercise of employee stock
options, bringing the total shares of common stock outstanding as of
April 1, 1994 to 46,286,748.
8. Subsequent event
On April 21, 1994, the Company declared a cash dividend in the amount of
$.04 per share, aggregating approximately $1.9 million, payable on
May 26, 1994, to the shareholders of record as of the close of business
on May 5, 1994.
On May 12, 1994, the Company announced that its Board of Directors
authorized the repurchase of up to 500,000 shares of the Company's common
stock that may be made from time to time at prevailing prices in the open
market or by block purchase and may be discontinued at any time. The
purchases will be made within certain restrictions relating to volume,
price and timing in order to minimize the impact of the purchase on the
market for the Comany's stock.
<PAGE>8
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
THIRTEEN WEEKS ENDED
APRIL 1, 1994 AND MARCH 26, 1993
Results of Operations
Net sales for the current 13 week period were $324.7 million compared with net
sales of $341.0 million for the related period in 1993. Net sales for the
current period increased 6% from $306.9 million, when excluding COMB, FDC and
Figi's which the Company sold, or entered into a signed letter of intent to
sell, in 1993 (the "Sold Subsidiaries"). Fingerhut Corporation ("Fingerhut"),
the core business, had first quarter net sales of $304.4 million compared to
$275.4 million in the same period in 1993, an increase of 11%. Net sales from
Fingerhut's existing customer list increased 13% to $243.7 million primarily
as a result of additional mailings. As planned, net sales from Fingerhut's
new customer acquisition programs were $60.7 million, consistent with the
$60.6 million of net sales in the comparable period of 1993. Net sales from
USA Direct Incorporated ("USA Direct") were $18.7 million compared to $30.1
million for the same period in 1993, the result of different product
promotions with lower price points. In the first quarter of 1994, the Company
significantly expanded testing and screening of new products at a range of
price points. The new product screening programs will aid new product
introductions for USA Direct and better position these products for future
retail sales. USA Direct's first quarter sales were comparable to fourth
quarter 1993, reflecting branded product hits such as Susan Powter's "Stop the
insanity!", the Bissell Little Green Clean Machine and the Pump-N-Seal. The
Company recently announced the signing of a long-term cable agreement with
Time Warner Cable and Continental Cablevision to launch S The Shopping Network
in the fall of 1994.
Net finance income for the current 13 week period was $37.5 million compared
to $30.8 million for the related period in 1993. The improvement in finance
income was primarily due to increased sales from Fingerhut's existing
customers.
Product cost for the current 13 week period was $160.4 million, or 49.4% of
net sales, compared to $171.6 million, or 50.3% of net sales, during the
comparable prior year period. The decrease as a percent of net sales was
primarily attributable to the Sold Subsidiaries which had a higher product
cost as a percent of net sales.
Administrative and selling expenses for the current 13 week period were $133.8
million, or 41.2% of net sales, compared to $132.6 million, or 38.9% of net
sales, in the comparable prior year period. The increase as a percent of net
sales was due to planned higher depreciation costs and lower sales per
advertising dollar from Fingerhut's existing and new customers.
The provision for uncollectible accounts for the first quarter of 1994 was
$38.7 million, or 11.9% of net sales, compared with $43.1 million, or 12.7% of
net sales, for the same period in the prior year. The decrease as a percent
of net sales was due to lower levels of uncollectible accounts on sales from
Fingerhut's existing and new customer acquisition programs, partially offset
by the Sold Subsidiaries which had a lower provision for uncollectible
accounts as a percent of net sales. Tighter management of the credit granting
process, while maintaining the net sales levels of Fingerhut's new customer
acquisition programs, resulted in the addition of more quality customers at
reduced costs.
<PAGE>9
Discount on sale of accounts receivable for the 13 week period ended April 1,
1994 was $6.9 million compared to $3.5 million for the comparable period in
1993, resulting from an increase in sales from Fingerhut's existing customers
and, accordingly, in the amount of accounts receivable sold, and higher
commercial paper rates at the end of the current quarter.
Net interest expense for the current 13 week period was $7.0 million compared
to $9.7 million in the first quarter of 1993. The decrease was primarily
attributable to the expiration of $160 million of interest rate swap
agreements on June 30, 1993.
The effective tax rate for the first quarter of 1994 was 35.2% compared with
31.0% in the comparable prior year period. First quarter 1993's tax rate
reflected a favorable one-time cumulative effect due to the adoption of FAS
109. The current quarter tax rate was increased by one percentage point
compared to the prior year as a result of the Omnibus Budget Reconciliation
Act of 1993.
Liquidity and Capital Resources
The Company funds its operations through internally generated funds, the sale
of accounts receivable pursuant to the Receivables Transfer Agreement,
borrowings under the Revolving Credit Facility, issuance of long-term debt and
issuance of common stock.
The proceeds from the sale of accounts receivable under the Receivables
Transfer Agreement as of April 1, 1994 and December 31, 1993 were $767.0
million and $829.0 million, respectively, compared with $589.0 million as of
March 26, 1993 and $653.0 million as of December 25, 1992. On March 14, 1994,
the expiration date of the Receivables Transfer Agreement was extended to July
29, 1994. The Company believes a replacement of the Receivables Transfer
Agreement will be completed prior to the expiration date and on acceptable
terms.
The Revolving Credit Facility provides for aggregate commitments of $250.0
million, which includes the issuance of up to $125.0 million in letters of
credit. As of April 1, 1994 and March 26, 1993, the Company had no borrowings
under the Revolving Credit Facility but had outstanding letters of credit of
$34.4 million and $55.5 million, respectively. A total of $125.0 million of
the commitment matures in October 1994 and the remaining $125.0 million
matures in October 1997. The Company believes a replacement of the October
1994 maturity will be completed prior to the expiration date and on acceptable
terms.
<PAGE>10
The Company had an aggregate amount of fixed rate notes outstanding of $245.0
million as of April 1, 1994 and $200.0 million as of March 26, 1993.
The Company used $32.8 million of cash for operations during the thirteen-week
period ended April 1, 1994, compared with $53.1 million for the related period
in 1993. This net $20.3 million decrease in cash used by operations resulted
from decreased working capital requirements. The most significant items
affecting working capital were changes in accounts receivable, inventory,
accounts payable and accrued payroll and employee benefits. The fluctuations
in cash flows from accounts receivable and inventory were primarily a result
of the 1993 activity of the Sold Subsidiaries. The change in accounts payable
from a $35.8 million use of cash in 1993 to a $7.5 million source of cash in
1994 resulted from the additional week of activity in fiscal 1993 and the
timing of purchases and disbursements. The change in accrued payroll and
employee benefits was a result of a shift in the timing of the current quarter-
end.
The $11.6 million in proceeds received from businesses divested at the end of
the prior year more than offset the Company's use of cash for property and
equipment of $8.1 for the thirteen week period ended April 1, 1994, which was
consistent with the comparable period in 1993.
In 1994, the Company has obligations to provide up to an additional $5.0
million of capital to Montgomery Ward Direct. At April 1, 1994, the Company's
aggregate capital investment in Montgomery Ward Direct was $5.0 million.
The Company leases certain office and warehouse facilities that the lessor has
the right to require the Company to purchase for approximately $15 million in
1994. The Company believes that the lessor will exercise this right in 1994.
During the first quarter of 1994, the Company signed long-term cable
agreements with Time Warner Cable and Continental Cablevision to launch S The
Shopping Network which will require initial capital investments through its
startup in the fall of 1994.
The Company believes it will have sufficient funds available to meet current
and anticipated commitments.
On April 21, 1994, the Company declared a cash dividend of $.04 per share, or
an aggregate of $1.9 million, payable on May 26, 1994, to the shareholders of
record as of the close of business on May 5, 1994.
On May 12, 1994, the Company announced that its Board of Directors authorized
the repurchase of up to 500,000 shares of the Company's common stock that may
be made from time to time at prevailing prices in the open market or by block
purchase and may be discontinued at any time. The purchases will be made
within certain restrictions relating to volume, price and timing in order to
minimize the impact of the purchase on the market for the Company's stock.
<PAGE>11
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of the shareholders of the Company was held on May 12,
1994. At the meeting, the shareholders elected Dudley C. Mecum (35,841,891
votes for, 200,366 votes withheld) to a three-year term as director; approved
adoption of the Fingerhut Companies, Inc. and Subsidiaries Annual Incentive
Bonus Plan (33,632,778 votes for, 1,972,037 votes against and 437,442 votes
abstaining); approved adoption of the Fingerhut Companies, Inc. Directors'
Retainer Stock Deferral Plan (34,704,980 votes for, 805,598 votes against and
531,679 votes abstaining); approved adoption of the Fingerhut Companies, Inc.
1994 Employee Stock Purchase Plan (35,058,034 votes for, 551,005 votes against
and 433,218 votes abstaining); and ratified the appointment of KPMG Peat
Marwick as the independent auditors of the Company (35,589,361 votes for,
418,448 votes against and 34,448 votes abstaining).
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.a(i) Amendment No. 1 to the Primary Transfer Agreement
dated as of March 31, 1994.
10.b(i) Amendment No. 1 to the Secondary Transfer Agreement
dated as of March 31, 1994.
11 Computation of Earnings per Share
(b) Reports on Form 8-K:
None
<PAGE>12
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.
FINGERHUT COMPANIES, INC.
Date: May 16, 1994 By:
/s/ Daniel J. McAthie
Daniel J. McAthie
Senior Vice President,
Chief Financial Officer,
and Treasurer
(Principal Financial Officer)
Date: May 16, 1994 By:
/s/ Michael N. Albrecht
Michael N. Albrecht
Vice President, Corporate Controller
and Investor Relations
(Principal Accounting Officer)
AMENDMENT NO. 1
as of March 31, 1994
To the parties to the Primary
Transfer Agreement referred
to below
Ladies & Gentlemen:
We refer to the Second Amended and Restated
Receivables Transfer Agreement dated as of July 9, 1993 (the
"Primary Transfer Agreement") among the undersigned, a
Minnesota corporation, CIESCO L.P., a New York limited
partnership ("Ciesco"; formerly known as Commercial Industrial
Trade-receivables Investment Company), MATTERHORN CAPITAL
CORPORATION, a Delaware corporation ("Matterhorn"),
ENTERPRISE FUNDING CORPORATION, a Delaware corporation
("Enterprise"; each of Ciesco, Matterhorn and Enterprise
being, individually, an "Investor" and, collectively, the
"Investors"), CITIBANK, N.A., a national banking association
("Citibank"), and CITICORP NORTH AMERICA, INC., a Delaware
corporation ("CNA") (formerly known as Citicorp Industrial
Credit, Inc.), individually and as agent for the Investors
(the "Agent"). Unless otherwise defined herein, the terms
defined in the Primary Transfer Agreement shall be used
herein as therein defined.
It is hereby agreed by you and us that the Primary
Transfer Agreement is hereby amended as follows:
(a) The definition of Facility Termination Date in
Section 1.01 is amended in full to read as follows:
"'Facility Termination Date' means the earlier of
(a) July 29, 1994 and (b) the date of termination of
the Facility pursuant to Section 2.03 or Section
7.01."
(b) Section 2.03(c) is amended in full to read as
follows:
"(c) Anything herein to the contrary
notwithstanding, the unused portion of the Transfer
Limits of Ciesco, Citibank, CNA and their assignees
and of Matterhorn and the Matterhorn Assignees and of
Enterprise and the Enterprise Assignees shall
terminate in whole no later than the Facility
Termination Date."
On and after the Effective Date (defined below) of
this letter amendment, each reference in the Primary Transfer
Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import, and each reference to the
Primary Transfer Agreement or to any term, condition or
provision contained in the Primary Transfer Agreement in the
Certificate, any Assignment, the Secondary Transfer Agreement
or any instrument or document entered into pursuant hereto or
thereto or in connection herewith or therewith or
"thereunder", "thereof", "therein" or words of like import
shall mean and be a reference to the Primary Transfer
Agreement or such terms, as applicable, in each case as
amended or otherwise modified hereby and by Amendment No. 1
to the Secondary Transfer Agreement.
The Primary Transfer Agreement, the Certificate, all
Assignments, the Secondary Transfer Agreement and all
instruments and documents entered into pursuant hereto or
thereto or in connection herewith or therewith (each as
amended or otherwise modified hereby and by Amendment No. 1
to the Secondary Transfer Agreement) shall be and remain in
full force and effect and are hereby ratified and confirmed
in all respects. Each of the parties hereto hereby consents,
confirms and agrees as set forth in the Consent and Agreement
attached hereto to the same extent as if set forth in full
herein.
The execution, delivery and effectiveness of this
letter amendment shall not operate as a waiver of any right,
power or remedy of the Investors, Citibank, CNA or the Agent
under the Primary Transfer Agreement, the Certificate or any
Assignment, nor constitute a waiver of any provision of the
Primary Transfer Agreement, the Certificate or any Assignment,
except in each case as provided hereby or by Amendment No. 1
to the Secondary Transfer Agreement.
We agree to pay on demand all reasonable costs and
expenses of the Agent incurred in connection with the
preparation, negotiation, execution and delivery of this
letter amendment and the other instruments and documents to
be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the
Agent with respect thereto and with respect to advising the
Agent as to its rights and responsibilities hereunder and
thereunder. In addition, we agree to pay any and all stamp
and other taxes and fees payable or determined to be payable
in connection with the execution, delivery, filing or
recording of this letter amendment and the other instruments
and documents to be delivered hereunder, and we agree to save
each of the Agent, Investors, Citibank, CNA and their
respective Affiliates harmless from and against any and all
liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes or fees.
If you agree to the terms and provisions hereof,
please evidence such agreement by executing a counterpart
hereof. Please return eight signed counterparts of this
letter amendment to Shearman & Sterling, 599 Lexington
Avenue, New York, New York, 10022-6069, Attention of William
Ortner. This letter amendment shall become effective as of
the date first above written (the "Effective Date") on the
date on or prior to March 31, 1994, on which the Agent shall
have received (i) counterparts of this letter amendment
executed by each of us, each Investor, Citibank and CNA, as
Agent, (ii) counterparts of the Consent and Agreement attached
hereto, executed by Fingerhut Companies, Inc., a Minnesota
corporation, and Chemical Bank, a New York banking
corporation, and (iii) all of the following documents, each
such document (unless otherwise indicated) being dated the
Effective Date and in form and substance satisfactory to the
Agent and Enterprise:
(a) Copies, certified as of the Effective Date, of
(i) the resolutions of the Board of Directors of the
undersigned approving this letter amendment and the
matters contemplated hereby, and (ii) all documents
evidencing other necessary corporate action and
governmental approvals, if any, with respect to this
letter amendment and the matters contemplated hereby and
thereby;
(b) A certificate of the Secretary or an Assistant
Secretary of the undersigned certifying the names and true
signatures of the officers of the undersigned
authorized to sign this letter amendment and the other
documents to be delivered hereunder;
(c) A favorable opinion of John K. Ellingboe, Esq.,
Senior Vice President and General Counsel of the
undersigned, as to the due execution and delivery
pursuant to due authorization by, and enforceability
against, the undersigned of this letter amendment and the
other documents to be delivered hereunder and such
other matters as the Agent or Enterprise may reasonably
request;
(d) A certificate of the undersigned signed by a
duly authorized officer of the undersigned stating that:
(i) The representations and warranties
contained in Section 4.01 of the Primary Transfer
Agreement are correct on and as of the date of such
certificate as though made on and as of such date, and
(ii) No event has occurred and is continuing, or
would result from this letter amendment, which
constitutes an Event of Termination or would
constitute an Event of Termination but for the
requirement that notice be given or time elapse or
both; and
(e) Amendment No. 1 to the Secondary Transfer
Agreement, substantially in the form of Exhibit A, duly
executed by the undersigned, Citibank and CNA,
individually and as Agent (and the conditions for
effectiveness of Amendment No. 1 to the Secondary
Transfer Agreement shall have been satisfied).
This letter amendment is subject to the provisions of Section
11.01 of the Primary Transfer Agreement.
This letter amendment may be executed in any number
of counterparts and by any combination of the parties hereto
in separate counterparts, each of which when so executed and
delivered shall be an original and all of which taken together
shall constitute one and the same letter amendment. Delivery
of an executed counterpart of a signature page to this letter
amendment by facsimile transmission shall be effective as
delivery of a manually executed counterpart of this letter
amendment.
This letter amendment shall be governed by and
construed in accordance with the laws of the State of New York.
Very truly yours,
FINGERHUT CORPORATION
By
Title:
Agreed as of the date
first above written:
CIESCO L.P. (formerly known as
Commercial Industrial Trade-
Receivables Investment Company)
By: Citicorp North America, Inc.
as Attorney-in-Fact
By
Title:
MATTERHORN CAPITAL CORPORATION
By: Union Bank of Switzerland,
New York Branch, as
Administrator and
Attorney-in-Fact
By
Title:
ENTERPRISE FUNDING CORPORATION
By
Title:
CITICORP NORTH AMERICA,
INC. (formerly known as
Citicorp Industrial Credit,
Inc.), Individually and as Agent
By
Title:
CITIBANK, N.A.
By
Title:
CONSENT AND AGREEMENT
FINGERHUT COMPANIES, INC., a Minnesota corporation,
and Chemical Bank, a New York banking corporation, as parties
to that certain Intercreditor Agreement (the "Intercreditor
Agreement") referred to in the Second Amended and Restated
Receivables Transfer Agreement, dated as of July 9, 1993,
(the "Primary Transfer Agreement"; terms defined in the
Primary Transfer Agreement being used herein as therein
defined) referred to in the foregoing Amendment No. 1
("Primary Amendment No. 1"), and each of the parties to the
Primary Amendment No. 1 by its signature thereon hereby:
(i) consent to Primary Amendment No. 1 and to
Amendment No. 1, dated as of March 31, 1994, to the
Secondary Transfer Agreement, ("Secondary Amendment No. 1"
and, together with Primary Amendment No. 1, the
"Amendments") and confirm and agree that the
Intercreditor Agreement is, and shall continue to be, in
full force and effect and is hereby ratified and
confirmed in all respects except that, on and after the
effective date of the Amendments, each reference in the
Intercreditor Agreement to a "Receivables Transfer
Agreement", "thereunder", "thereof" or words of like
import referring to the Primary Transfer Agreement or the
Secondary Transfer Agreement shall mean and be a
reference to the Primary Transfer Agreement or the
Secondary Transfer Agreement, as the case may be, as so
amended and as it may be amended, modified or supplemented
thereafter from time to time; and
(ii) agree that ENTERPRISE FUNDING CORPORATION, a
Delaware corporation ("Enterprise") is a successor,
transferee and assign of Ciesco and Matterhorn under the
Primary Transfer Agreement and thus the Intercreditor
Agreement is binding upon and inures to the benefit of
Enterprise pursuant to Section 11(b) of the Intercreditor
Agreement.
FINGERHUT COMPANIES, INC.
By
Title:
CHEMICAL BANK
By
Name:
Title:
By
Name:
Title:
AMENDMENT NO. 1
as of March 31, 1994
To the parties to the Secondary
Transfer Agreement referred
to below
Ladies & Gentlemen:
We refer to the Second Amended and Restated
Receivables Transfer Agreement dated as of July 9, 1993, (the
"Secondary Transfer Agreement") among the undersigned, a
Minnesota corporation, CITIBANK, N.A., a national banking
association ("Citibank"), and CITICORP NORTH AMERICA, INC., a
Delaware corporation (formerly known as Citicorp Industrial
Credit, Inc.), individually ("CNA") and as agent for itself
and Citibank (the "Agent"). Unless otherwise defined herein,
the terms defined in the Secondary Transfer Agreement shall
be used herein as therein defined.
It is hereby agreed by you and us that the Secondary
Transfer Agreement is hereby amended as follows:
(a) The definition of Commitment Termination Date in
Section 1.01 is amended in full to read as follows:
"'Commitment Termination Date' means the earlier
of (a) July 29, 1994 and (b) the date of termination
of the Commitment pursuant to Section 2.03 or
Section 7.01."
(b) Section 2.03(c) is amended in full to read as
follows:
"(c) Commitment Termination Date. Anything
herein to the contrary notwithstanding, the unused
portion of the Commitment shall, in any event,
terminate in whole no later than the Commitment
Termination Date."
On and after the Effective Date (as defined below) of
this letter amendment, each reference in the Secondary
Transfer Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import, and each
reference to the Secondary Transfer Agreement or to any term,
condition or provision contained in the Secondary Transfer
Agreement in the Certificate, any Assignment, the Primary
Transfer Agreement or any instrument or document entered into
pursuant hereto or thereto or in connection herewith or therewith
or "thereunder", "thereof", "therein", or words of like import shall
mean and be a reference to the Secondary Transfer Agreement or such
terms, as applicable, in each case as amended or otherwise modified
hereby and by Amendment No. 1 to the Primary Transfer
Agreement.
The Secondary Transfer Agreement, the Certificate,
all Assignments, the Primary Transfer Agreement and all
instruments and documents entered into pursuant hereto or
thereto or in connection herewith or therewith (each as
amended or otherwise modified hereby and by Amendment No. 1
to the Primary Transfer Agreement) shall be and remain in full
force and effect and are hereby ratified and confirmed in all
respects.
The execution, delivery and effectiveness of this
letter amendment shall not operate as a waiver of any right,
power or remedy of Citibank, CNA or the Agent under the
Secondary Transfer Agreement, the Certificate or any
Assignment, nor constitute a waiver of any provision of the
Secondary Transfer Agreement, the Certificate or any
Assignment, except in each case as provided hereby or by the
Amendment No. 1 to the Primary Transfer Agreement.
We agree to pay on demand all reasonable costs and
expenses of the Agent incurred in connection with the
preparation, negotiation, execution and delivery of this
letter amendment and the other instruments and documents to
be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the
Agent with respect thereto and with respect to advising the
Agent as to its rights and responsibilities hereunder and
thereunder. In addition, we agree to pay any and all stamp
and other taxes and fees payable or determined to be payable
in connection with the execution, delivery, filing or
recording of this letter amendment and the other instruments
and documents to be delivered hereunder, and we agree to save
each of the Agent, Citibank and CNA and their respective
Affiliates harmless from and against any and all liabilities
with respect to or resulting from any delay in paying or
omission to pay such taxes or fees.
If you agree to the terms and provisions hereof,
please evidence such agreement by executing a counterpart
hereof. Please return eight signed counterparts of this
letter amendment to Shearman & Sterling, 599 Lexington
Avenue, New York, New York, 10022-6069, Attention of William
Ortner. This letter amendment shall become effective as of
the date first above written (the "Effective Date") on the
date on or prior to March 31, 1994, on which the Agent shall
have received (i) counterparts of this letter amendment
executed by each of us, Citibank and CNA, individually and as
Agent, and (ii) all of the following documents, each such
document (unless otherwise indicated) being dated the
Effective Date and in form and substance satisfactory to the
Agent:
(a) Copies, certified as of the Effective Date, of
(i) the resolutions of the Board of Directors of the
undersigned approving this letter amendment and the
matters contemplated hereby, and (ii) all documents
evidencing other necessary corporate action and
governmental approvals, if any, with respect to this
letter amendment and the matters contemplated hereby and
thereby;
(b) A certificate of the Secretary or an Assistant
Secretary of the undersigned certifying the names and true
signatures of the officers of the undersigned
authorized to sign this letter amendment and the other
documents to be delivered hereunder;
(c) A favorable opinion of John K. Ellingboe, Esq.,
Vice President and General Counsel of the undersigned, as
to the due execution and delivery pursuant to due
authorization by, and enforceability against, the
undersigned of this letter amendment and the other
documents to be delivered hereunder and such other matters
as the Agent, Matterhorn or Enterprise may reasonably
request;
(d) A certificate of the undersigned signed by a
duly authorized officer of the undersigned stating that:
(i) The representations and warranties
contained in Section 4.01 of the Secondary Transfer
Agreement are correct on and as of the date of such
certificate as though made on and as of such date,
and
(ii) No event has occurred and is continuing, or
would result from this letter amendment, which
constitutes an Event of Termination or would
constitute an Event of Termination but for the
requirement that notice be given or time elapse or
both; and
(e) Amendment No. 1 to the Primary Transfer
Agreement, substantially in the form of Exhibit A, duly
executed by the undersigned, Ciesco, Citibank and CNA,
individually and as Agent (and the conditions for the
effectiveness of Amendment No. 1 to the Primary Transfer
Agreement shall have been satisfied).
This letter amendment is subject to the provisions of Section
11.01 of the Secondary Transfer Agreement.
This letter amendment may be executed in any number
of counterparts and by any combination of the parties hereto
in separate counterparts, each of which when so executed and
delivered shall be an original and all of which taken together
shall constitute one and the same letter amendment. Delivery
of an executed counterpart of a signature page to this letter
amendment by facsimile transmission shall be effective as
delivery of a manually executed counterpart of this letter
amendment.
This letter shall be governed by and construed in
accordance with the laws of the State of New York.
Very truly yours,
FINGERHUT CORPORATION
By
Title:
Agreed as of the date
first above written:
CITICORP NORTH AMERICA,
INC. (formerly known as
Citicorp Industrial Credit,
Inc.), Individually and as Agent
By
Title:
CITIBANK, N.A.
By
Title:
Accepted and Agreed:
MATTERHORN CAPITAL CORPORATION
By: Union Bank of Switzerland,
New York Branch, as
Administrator and
Attorney-in-Fact
By
Title:
ENTERPRISE FUNDING CORPORATION
By
Title:
Exhibit 11
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
Computation of Earnings Per Share
(In thousands of dollars, except per share data)
Unaudited
Thirteen Weeks Ended
April 1, March 26,
1994 1993
Primary
Net earnings (a) $ 9,973 $ 7,764
========== ==========
Weighted average shares of
common stock outstanding 46,230,124 45,893,064
Common stock equivalents 4,529,877 3,648,620
---------- ----------
Weighted average shares of
common stock and common
stock equivalents (b) 50,760,001 49,541,684
========== ==========
Primary earnings per share
of common stock and common
stock equivalents (a/b) $ .20 $ .16
========== ==========
Fully diluted
Net earnings (c) $ 9,973 $ 7,764
========== ==========
Weighted average shares of
common stock outstanding 46,230,124 45,893,064
Common stock equivalents 4,653,898 3,819,770
---------- ----------
Weighted average shares of
common stock and common
stock equivalents (d) 50,884,022 49,712,834
========== ==========
Fully diluted earnings per
share of common stock and
common stock equivalents(c/d) $ .20 $ .16
========== ==========
Common stock equivalents for primary earnings per share are computed by the
treasury stock method using the average market price.
Common stock equivalents for quarterly fully diluted earnings per share are
computed by the treasury stock method using the ending market price, average
market price for the last month or the average of the fully diluted monthly
amounts used in the quarter, whichever is higher.
