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
March 28, 1997 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 May 8, 1997, 46,192,313 shares of the Registrant's Common Stock, $.01
par value, were outstanding.
FINGERHUT COMPANIES, INC.
FORM 10-Q
March 28, 1997
TABLE OF CONTENTS
Part I - Financial Information Page
Item 1. Financial Statements
Consolidated Statements of Operations (Unaudited) -
thirteen weeks ended March 28, 1997
and March 29, 1996.................................. 3
Consolidated Statements of Financial Position
(Unaudited) - March 28, 1997 and December 27, 1996.. 4
Consolidated Statements of Cash Flows (Unaudited) -
thirteen weeks ended March 28, 1997 and
March 29, 1996...................................... 5
Condensed Notes to Consolidated Financial
Statements (Unaudited).............................. 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition...................10
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K ....................19
Signatures....................................................20
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars, except share and per share data)
(Unaudited)
Thirteen Weeks Ended
March 28, March 29,
1997 1996
Revenues:
Net sales $ 289,537 $ 329,554
Finance income and other securitization
income, net 60,477 28,538
350,014 358,092
Costs and expenses:
Product cost 146,294 169,362
Administrative and selling expenses 157,037 156,837
Provision for uncollectible accounts 32,046 27,772
Interest expense, net 8,281 7,337
343,658 361,308
Earnings (loss) before income taxes
and minority interest 6,356 (3,216)
Provision for income taxes 2,368 (1,165)
Net earnings (loss) before minority
interest 3,988 (2,051)
Minority interest (1,427) -
Net earnings (loss) $ 2,561 $ (2,051)
Earnings (loss) per share $ .05 $ (.04)
Dividends $ .04 $ .04
Weighted average shares 48,624,211 46,159,097
See accompanying Condensed Notes to Consolidated Financial Statements.
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of dollars)
(Unaudited)
March 28, December 27,
1997 1996
ASSETS
Current assets:
Cash and cash equivalents $ 86,672 $ 61,003
Customer accounts receivable, net 614,118 596,560
Inventories, net 131,916 127,735
Promotional material 65,844 60,871
Deferred and other income taxes 161,208 166,879
Other 15,884 12,815
Total current assets 1,075,642 1,025,863
Property and equipment, net 278,605 285,182
Excess of cost over fair value of
net assets acquired, net 45,401 42,601
Customer lists, net 9,801 9,801
Other assets 15,719 26,251
$1,425,168 $1,389,698
LIABILITIES
Current liabilities:
Accounts payable $ 132,383 $ 164,557
Accrued payroll and employee benefits 40,437 46,723
Other accrued liabilities 63,462 78,239
Revolving credit facility 208,000 73,000
Other payables due to credit card
securitizations, net 49,764 36,619
Current portion of long-term debt 25,084 84
Current income taxes payable - 60,721
Total current liabilities 519,130 459,943
Long-term debt, less current portion 246,473 271,481
Deferred income taxes 21,000 21,744
Other non-current liabilities 7,680 7,692
794,283 760,860
Minority interest 24,864 23,437
STOCKHOLDERS' EQUITY
Preferred stock - -
Common stock 462 462
Additional paid-in capital 288,748 288,793
Unearned compensation (1,345) (1,856)
Earnings reinvested 318,156 318,002
Total stockholders' equity 606,021 605,401
$1,425,168 $1,389,698
See accompanying Condensed Notes to Consolidated Financial Statements.
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
Thirteen Weeks Ended
March 28, March 29,
1997 1996
Cash flows from operating activities:
Net earnings (loss) $ 2,561 $ (2,051)
Adjustments to reconcile net earnings (loss) to
net cash used by operating activities:
Depreciation and amortization 13,120 12,076
Amortization of unearned compensation 511 1,285
Minority interest in earnings 1,427 -
Change in assets and liabilities:
Customer accounts receivable, net (17,558) (27,721)
Inventories, net (4,181) 2,951
Promotional material and other current assets (8,042) 4,554
Accounts payable (32,174) (41,208)
Accrued payroll and employee benefits (6,286) (9,221)
Accrued liabilities (14,777) (7,039)
Other payables due to credit card
securitizations, net 13,145 -
Current income taxes receivable/payable (70,605) (44,691)
Deferred income taxes 14,882 9,916
Other 6,069 3,603
Net cash used by operating activities (101,908) (97,546)
Cash flows from investing activities:
Additions to property and equipment (4,891) (23,549)
Net cash used by investing activities (4,891) (23,549)
Cash flows from financing activities:
Repayments of long-term debt (8) (8)
Revolving credit facility 135,000 94,000
Issuance of common stock 247 870
Repurchase of common stock (924) -
Cash dividends paid (1,847) (1,841)
Net cash provided by financing activities 132,468 93,021
Net increase (decrease) in cash and cash equivalents 25,669 (28,074)
Cash and cash equivalents at beginning of period 61,003 66,109
Cash and cash equivalents at end of period $ 86,672 $ 38,035
Supplemental noncash investing and financing activities:
Tax benefit from exercise of non-qualified
stock options $ 71 $ 257
Issuance of restricted stock $ - $ 4,978
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 10,007 $ 10,505
Cash paid during the period for income taxes $ 58,085 $ 33,688
Included in cash and cash equivalents were liquid investments with original
maturities of fifteen days or less.
See accompanying Condensed Notes to Consolidated Financial Statements.
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
1. Consolidated financial statements
The consolidated financial statements of Fingerhut Companies, Inc.
(the "Company") reflect the financial position and results of
operations of the Company and its wholly owned and majority owned
subsidiaries, after elimination of all material intercompany
transactions and balances. Minority interest represents minority
stockholders' 17 percent share of the equity in Metris Companies Inc.
("Metris").
The consolidated financial statements as of March 28, 1997 and March
29, 1996, and for the thirteen weeks ended March 28, 1997 and March
29, 1996, 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
1996 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.
During the current quarter, the Company implemented Statement of
Financial Accounting Standards No. 125 (FAS 125), "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities." FAS 125 did not have a material effect on the
consolidated financial statements.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128 (FAS 128), "Earnings Per Share." This Statement is
effective for financial statements issued for periods ending after
December 15, 1997 and supersedes APB Opinion No. 15, "Earnings Per
Share." The Statement replaces the presentation of primary EPS with
a presentation of basic EPS. It also requires dual presentation of
basic and diluted EPS on the face of the income statement as well as
requires companies to restate prior-period EPS for all periods in
which an income statement is presented.
The Company has reviewed this Statement and notes that it will affect
the computation and presentation of EPS. However, the Company has not
completed all of the detailed computations and analysis necessary to
determine the definitive impact on prior-period EPS as well as the
calculation of EPS going forward. The Company intends to adopt this
Statement prospectively, in the fourth quarter of 1997, as early
application is not permitted.
2. Reclassifications
Customer allowances, which were previously included in the
Consolidated Statements of Operations under the caption
"Administrative and selling expenses," have been reclassified as a
reduction of "Net sales" for all periods presented. This
reclassification totaled $5.3 million for the thirteen weeks ended
March 29, 1996.
Certain expenses, which were previously classified as "Discount on
sale of accounts receivable", have been reclassified as a reduction of
"Finance income and other securitization income, net." This
reclassification totaled $14.8 million for the thirteen weeks ended
March 29, 1996. In addition, that portion of the "Provision for
uncollectible accounts" relating to accounts receivable sold have been
reclassed and netted with "Finance income and other securitization
income, net." This reclassification totaled $28.6 million for the
thirteen weeks ended March 29, 1996. Lastly, collection costs
associated with the receivables sold were reclassified out of
"Administrative and selling expenses" and netted with "Finance income
and other securitization income, net." This reclassification totaled
$1.5 million for the thirteen weeks ended March 29, 1996. These
reclassifications, in addition to certain balance sheet
reclassifications, were made in order to present the accounting for
securitizations consistently between the Company's two segments.
All prior-period financial information has been restated to conform
with the current period's presentation, and the reclassifications had
no effect on net earnings (loss).
3. Earnings (loss) per share
Earnings per share, for the current thirteen week period, was computed
by dividing net earnings by the weighted average shares of common
stock and common stock equivalents outstanding during the period. The
dilutive effect of the potential exercise of outstanding options to
purchase shares of common stock was calculated using the treasury
stock method.
Loss per share, for the prior-year period, was determined by dividing
net loss by the weighted average shares outstanding. Common stock
equivalents were not included in the determination of the loss per
share in the prior-year period as their effect was anti-dilutive.
4. Customer accounts receivable, net
Customer accounts receivable, net of amounts sold, consisted of the
following:
(In thousands of dollars) March 28, December 27,
1997 1996
Customer installment receivables $ 481,396 $ 560,931
Reserve for uncollectible accounts,
net of anticipated recoveries (97,847) (117,296)
Reserve for returns and exchanges (13,263) (13,319)
Other reserves (15,104) (19,820)
Net collectible amount 355,182 410,496
Unearned finance income (20,762) (23,969)
Customer installment receivables,
net 334,420 386,527
Credit card and other receivables, net 299,055 222,862
Reserve for uncollectible accounts,
net of anticipated recoveries (19,357) (12,829)
Credit card and other receivables,
net 279,698 210,033
Total Customer accounts receivable,
net $ 614,118 $ 596,560
Certain balance sheet reclassifications were made during the current
quarter in order to present the accounting for securitizations
consistently between the Company's two segments. As a result, certain
December 27, 1996 balance sheet items related to Metris' credit card
securitizations were reclassified. Specifically, $49.2 million was
reclassified from Credit card and other receivables, net to "Other
payables due to credit card securitizations, net" ($46.6 million),
"Other accrued liabilities"($2.5 million) and "Other" current assets
($.1 million).
5. Stockholders' equity
During the thirteen-week period ended March 28, 1997, 23,176 shares of
common stock were issued related to the exercise of employee stock
options and 9,957 shares of common stock were issued under the
Fingerhut Companies, Inc. Employee Stock Purchase Plan. The total
shares of common stock outstanding as of March 28, 1997 was
46,188,013.
6. Subsequent events
On April 17, 1997 the Company declared a cash dividend in the amount
of $.04 per share, aggregating approximately $1.8 million, payable on
May 15, 1997, to the shareholders of record as of the close of
business on May 1, 1997.
In April 1997, the Company issued 4,300 shares related to the exercise
of employee stock options and repurchased, at prevailing market
prices, 88,000 shares of its common stock for an aggregate of $1.2
million.
In April 1997, the Fingerhut Master Trust issued additional Series
1997-1 variable funding certificates, which increased the maximum
proceeds to $590.0 million. The Series 1997-1 certificates begin
amortizing in May 1998.
In May 1997, the Metris Master Trust issued Series 1997-1 certificates
to third parties with a principal amount of $794.8 million, generating
proceeds of $792.2 million of which $667.7 million was used to reduce
the Class A Variable Funding Certificate issued under Series 1995-1.
The Series 1997-1 certificates are scheduled to begin accumulating
principal collections in March 2001, however, the accumulation period
could potentially begin at a later date. The expected final payment
date of these certificates is in April 2002.
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
THIRTEEN WEEKS ENDED
MARCH 28, 1997 AND MARCH 29, 1996
DIRECT-TO-THE-CONSUMER MARKETING SEGMENT
STATEMENTS OF OPERATIONS
(In thousands of dollars, except per share data)
(Unaudited)
Thirteen Weeks Ended
March 28, March 29,
1997 1996
Revenues:
Net sales $ 290,156 $ 326,359
Finance income and other securitization
income, net 3,134 4,124
293,290 330,483
Costs and expenses:
Product cost 146,433 167,879
Administrative and selling expenses 124,872 143,056
Provision for uncollectible accounts 20,992 23,082
Interest expense, net 7,219 5,951
299,516 339,968
Loss before income taxes (6,226) (9,485)
Provision for income taxes (2,476) (3,579)
Net loss $ (3,750) $ (5,906)
Loss per share $ (.08) $ (.12)
Fingerhut Key Statistics:
Sales per mailing - existing customer list $ 2.95 $ 2.88
Cost per new customer $ 16.29 $ 14.99
Mailings (in 000's):
New customers 32,962 45,383
Existing customers 68,013 74,019
Active customer list (in 000's) 4,598 5,117
Contribution margin per existing customer $ 15 $ 13
Reserves for bad debt as a percent of
total managed receivables 17.1% 17.4%
Reserves for bad debt as a percent of
accounts 29 days plus delinquent 77% 76%
Segment Key Statistics:
Capital expenditures (in 000's) $ 3,086 $ 22,985
Depreciation (in 000's) $ 12,818 $ 11,999
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
THIRTEEN WEEKS ENDED
MARCH 28, 1997 AND MARCH 29, 1996
DIRECT-TO-THE-CONSUMER MARKETING SEGMENT
STATEMENTS OF OPERATIONS (Managed Basis*)
(In thousands of dollars, except per share data)
(Unaudited)
Thirteen Weeks Ended
March 28, March 29,
1997 1996
Revenues:
Net sales $ 290,156 $ 326,359
Finance income and other revenues 45,988 48,973
336,144 375,332
Costs and expenses:
Product cost 146,433 167,879
Administrative and selling expenses 126,482 144,523
Provision for uncollectible accounts 47,438 51,656
Discount on sale of accounts receivable 14,798 14,808
Interest expense, net 7,219 5,951
342,370 384,817
Loss before income taxes (6,226) (9,485)
Provision for income taxes (2,476) (3,579)
Net loss $ (3,750) $ (5,906)
Loss per share $ (.08) $ (.12)
* Presented in format consistent with prior periods.
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
THIRTEEN WEEKS ENDED
MARCH 28, 1997 AND MARCH 29, 1996
Results of Operations
Direct-to-the-Consumer Marketing Segment
Net sales for the current 13-week period were $290.2 million compared to
net sales of $326.4 million for the related period in 1996, a decrease of
11 percent. Fingerhut Corporation ("Fingerhut"), the Company's core
business in this segment, had first quarter net sales of $276.6 million
compared to $312.8 million in the same period in 1996, a decrease of 12
percent. Net sales from Fingerhut's new customer acquisition programs
decreased 27 percent to $51.2 million. The decrease was the result of
Fingerhut's strategy to move new customer mailings out of the first quarter
and into more productive quarters. As a result, mailings to new customers
decreased 27 percent from last year's first quarter. Net sales from
Fingerhut's existing customer list declined 7 percent to $225.4 million
primarily due to a reduction in mailings, partially offset by higher sales
per mailing.
Finance income and other securitization income, net for the first quarter
was $3.1 million, compared to $4.1 million for the comparable prior-year
period. The decline was primarily the result of lower net sales.
Product cost for the current 13-week period was 50.5 percent of net sales,
or $146.4 million, compared to 51.4 percent of net sales, or $167.9
million, during the comparable prior-year period. The decrease as a
percent of net sales was primarily the result of Fingerhut's cost-reduction
initiatives and ongoing programs to consolidate vendors and improve
margins.
Administrative and selling expenses for the current 13-week period were
$124.9 million, or 43.0 percent of net sales, compared to $143.1 million,
or 43.8 percent of net sales, in the comparable prior-year period. Higher
sales per mailing during the quarter, lower paper costs, as well as
Fingerhut's continued focus on cutting costs, contributed to the segment's
lower administrative and selling expenses as a percent of net sales.
During the current quarter, the provisions relating to receivables sold
were reclassified to "Finance income and other securitization income, net."
The provision for uncollectible accounts on a "managed" basis for the
current 13-week period was 16.3 percent of net sales, compared to 15.8
percent of net sales for the first quarter of 1996. The Company
continues to focus on reducing bad debt through the tightening of its
credit criteria as well as the acceleration of collection programs.
Net interest expense for the current 13-week period was $7.2 million
compared to $6.0 million in the first quarter of 1996. The increase was
primarily due to higher borrowings under the Revolving Credit Facilities as
well as lower amounts of capitalized interest relating to fixed asset
projects.
The effective consolidated tax rate, which includes both the Direct-to-the-
Consumer Marketing and Financial Services Segments, for the first quarter
of 1997 was 37.3 percent compared to 36.2 percent in the comparable prior-
year period.
As a result of the items discussed above, the Direct-to-the-Consumer
Marketing Segment incurred a net loss for the 13-week period ended March
28, 1997 of $3.8 million, or $(.08) per share, compared to a first quarter
1996 net loss of $5.9 million, or $(.12) per share.
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
THIRTEEN WEEKS ENDED
MARCH 28, 1997 AND MARCH 29, 1996
METRIS COMPANIES INC.
STATEMENTS OF OPERATIONS
(In thousands of dollars, except per share data)
(Unaudited)
Thirteen Weeks Ended
March 31, March 31,
1997 1996
Revenues:
Net sales $ 1,068 $ 5,554
Finance income and other securitization
income, net 57,343 24,414
58,411 29,968
Costs and expenses:
Product cost 32 2,415
Administrative and selling expenses 33,681 15,208
Provision for uncollectible accounts 11,054 4,690
Interest expense, net 1,062 1,386
45,829 23,699
Earnings before income taxes and
minority interest 12,582 6,269
Provision for income taxes 4,844 2,414
Net earnings before minority interest $ 7,738 $ 3,855
Minority interest (1,427) -
Net earnings $ 6,311 $ 3,855
Earnings per share $ .13 $ .08
Key Statistics:
Managed net charge-off ratio 8.5% 5.8%
Period-end managed loans (in 000's) $1,816,653 $ 676,974
Total accounts (in 000's) 1,475 769
Managed loan loss reserves (in 000's) $ 116,809 $ 28,426
Managed delinquency ratio 6.0% 3.8%
Reserves as a percent of 30-day plus
delinquent receivables 107% 111%
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
THIRTEEN WEEKS ENDED
MARCH 28, 1997 AND MARCH 29, 1996
Financial Services Segment (Metris Companies Inc.)
Metris contributed net income for the quarter ended March 31, 1997 of $6.3
million, or $.13 per share, up from $3.9 million, or $.08 per share for the
first quarter of 1996. The 64 percent increase in net income is the result
of an increase in net interest income and other operating income partially
offset by increases in the provision for loan losses and other operating
expenses. These increases were largely attributable to the growth in
average managed loans from $610 million at March 31, 1996 to $1.7 billion
at March 31, 1997, an increase of 181 percent.
Liquidity and Capital Resources (Consolidated)
The Company funds its operations through internally generated funds, the
sale of accounts receivable pursuant to the Fingerhut Master Trust and the
Metris Master Trust, borrowings under the Company's Amended and Restated
Revolving Credit Facility and Metris' Revolving Credit Facility
(collectively, the "Revolving Credit Facilities") and the issuance of long-
term debt and common stock.
The proceeds from the sale of Fingerhut accounts receivable were $1.142
billion and $1.280 billion at March 28, 1997 and December 27, 1996,
respectively. Net proceeds received from the sale of MasterCard
receivables were $1.522 billion at March 31, 1997 and $1.397 billion at
December 31, 1996, of which $20.0 million and $17.0 million, respectively,
was deposited in an investor reserve account held by the trustee of the
Metris Master Trust for the benefit of the Metris Master Trust's
certificateholders. In May 1997, the Metris Master Trust issued Series
1997-1 certificates to third parties with a principal amount of $794.8
million, generating proceeds of $792.2 million of which $667.7 million was
used to reduce the Class A Variable Funding Certificate issued under Series
1995-1. The Series 1997-1 certificates are scheduled to begin accumulating
principal collections in March 2001, however, the accumulation period could
potentially begin at a later date. The expected final payment date for
these certificates is in April 2002.
In December 1996, the Fingerhut Master Trust Series 1994-1 certificates
commenced controlled amortization, whereby collections on the securitized
receivables are now being used to pay down the principal portion of the
underlying certificates. In January 1997, the Company issued Series 1997-1
variable funding certificates to refinance approximately half of the
amortizing certificates. In April 1997, the Company issued additional
Series 1997-1 variable funding certificates, which increased the maximum
proceeds to $590.0 million. The monthly proceeds generated from Series
1997-1 will be sufficient to cover the monthly pay-down of the amortizing
1994-1 certificates. The Company believes the Fingerhut Master Trust will
be able to issue a new series of certificates to replace the remaining
portion of the amortizing certificates. The Company plans to support
future receivables growth through the sale and issuance of additional
certificates by the Master Trusts and through borrowings under the
Revolving Credit Facilities.
The Revolving Credit Facilities provide for aggregate commitments of up to
$500.0 million, of which $200.0 million represents the Company's credit
facility and $300.0 million represents Metris' credit facility. The
expiration date for both facilities is September 2001. As of March 28,
1997, outstanding revolving credit balances totaled $208.0 million and
outstanding letters of credit totaled $7.4 million. As of March 29, 1996,
outstanding revolving credit balances totaled $209.0 million and
outstanding letters of credit totaled $5.8 million. Additional outstanding
open letters of credit under a separate agreement aggregated $28.4 million
and $25.3 million at March 28, 1997 and March 29, 1996, respectively.
The Company had an aggregate amount of fixed rate notes outstanding of
$270.0 million as of March 28, 1997 and $245.0 million as of March 29,
1996. A total of $25.0 million of the notes mature in December 1997.
The Company used $101.9 million of cash for operations during the 13-week
period ended March 28, 1997, compared with $97.5 million for the related
period in 1996. This net $4.4 million increase in cash used for operations
resulted primarily from an increase in income taxes paid, partially offset
by the increase in net earnings and other miscellaneous items.
Net cash used by investing activities for the 13-week period ended March
28, 1997 was $4.9 million, compared to $23.5 million for the comparable
period in 1996. In January 1996, the owner of certain office and warehouse
facilities leased to the Company exercised its right to require the Company
to repurchase those facilities for approximately $14.1 million. Thus, the
decrease in capital spending year over year was due primarily to this prior-
year expenditure as well as the Company's overall reduction in capital
outlays.
The $39.4 million increase in net cash provided by financing activities was
due primarily to a $41.0 million increase in net borrowings under the
Revolving Credit Facilities.
During 1994, the Company's Board of Directors authorized the repurchase of
up to 2.5 million 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 are 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
common stock. During the current 13-week period, the Company repurchased
at prevailing market prices 65,000 shares of its common stock for an
aggregate of $.9 million. No purchases were made during the comparable
prior-year period. In April 1997, the Company repurchased at prevailing
market prices 88,000 shares of its common stock for an aggregate of
$1.2 million. Total purchases to date under this plan were 1,533,300
shares for an aggregate of $23.6 million.
On April 17, 1997, the Company declared a cash dividend in the amount of
$.04 per share, aggregating approximately $1.8 million, payable on May 15,
1997, to the shareholders of record as of the close of business on May 1,
1997.
In April 1997, the Company issued 4,300 shares related to the exercise of
employee stock options.
The Company believes it will have sufficient funds available to meet
current and future commitments.
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
FORWARD LOOKING STATEMENTS
This quarterly report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
statements include statements regarding intent, belief or current
expectations of the Company and its management. Shareholders and
prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve a number of
risks and uncertainties that may cause the Company's actual results to
differ materially from the results discussed in the forward-looking
statements, including: general economic conditions affecting disposable
consumer income such as employment, business conditions, interest rates and
taxation; risks associated with unsecured credit transactions; interest
rate risks; seasonal variations in consumer purchasing activities;
increases in postal and paper costs; competition in the retail and direct
marketing industry; dependence on the securitization of accounts receivable
and credit card loans to fund operations; state and federal laws and
regulations related to advertising, offering and extending credit, charging
and collecting state sales/use taxes; product safety; and risks of doing
business with foreign suppliers. Each of these factors is more fully
discussed in Exhibit 99 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 27, 1996.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11 Computation of Earnings (Loss) per Share
27 Financial Data Schedule
(b) Reports on Form 8-K:
None.
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 12, 1997 By: /s/ Peter G. Michielutti
-------------------------
Peter G. Michielutti
Chief Financial Officer
(Principal Financial Officer)
Date: May 12, 1997 By: /s/ John C. Manning
---------------------
John C. Manning
Vice President, Finance
Date: May 12, 1997 By: /s/ Thomas C. Vogt
---------------------
Thomas C. Vogt
Corporate Controller
(Principal Accounting Officer)
Exhibit 11
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
Computation of Earnings (Loss) Per Share
(In thousands of dollars, except share and per share data)
Unaudited
Thirteen Weeks Ended
March 28, March 29,
1997 1996
Primary
Net earnings (loss) (a) $ 2,561 $ (2,051)
Weighted average shares of
common stock outstanding 46,169,024 46,159,097
Common stock equivalents 2,455,187 -
Weighted average shares of
common stock and common
stock equivalents (b) 48,624,211 46,159,097
Primary earnings (loss) per share
of common stock and common
stock equivalents (a/b) $ .05 $ (.04)
Fully diluted
Net earnings (loss) (c) $ 2,561 $ (2,051)
Weighted average shares of
common stock outstanding 46,169,024 46,159,097
Common stock equivalents 2,616,863 -
Weighted average shares of
common stock and common
stock equivalents (d) 48,785,887 46,159,097
Fully diluted earnings (loss) per
share of common stock and
common stock equivalents
(c/d) $ .05 $ (.04)
Common stock equivalents for primary earnings per share are
computed by the treasury stock method using the average market
price. The computation of primary loss per share for the prior-
year thirteen week period excluded common stock equivalents as
they are anti-dilutive.
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. The computation of fully diluted loss per
share for the prior-year thirteen week period excluded common
stock equivalents as they are anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of Fingerhut Companies, Inc. for the fiscal
quarter ended March 28, 1997 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-26-1997
<PERIOD-END> MAR-28-1997
<CASH> 86,672
<SECURITIES> 0
<RECEIVABLES> 780,451
<ALLOWANCES> 166,333
<INVENTORY> 131,916
<CURRENT-ASSETS> 1,075,642
<PP&E> 464,832
<DEPRECIATION> 186,227
<TOTAL-ASSETS> 1,425,168
<CURRENT-LIABILITIES> 519,130
<BONDS> 246,473
0
0
<COMMON> 462
<OTHER-SE> 605,559
<TOTAL-LIABILITY-AND-EQUITY> 1,425,168
<SALES> 289,537
<TOTAL-REVENUES> 350,014
<CGS> 146,294
<TOTAL-COSTS> 335,377
<OTHER-EXPENSES> 1,427
<LOSS-PROVISION> 32,046
<INTEREST-EXPENSE> 8,281
<INCOME-PRETAX> 4,929
<INCOME-TAX> 2,368
<INCOME-CONTINUING> 2,561
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,561
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
