-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, bQLfEH2yhyfJM4M1//L77vZkS+Gdv3Ro0/qp/+eDTe8bw1HCexE/cLrV9DsYBoXD agzne+4eeREmBpHS/QIDnQ== 0000740126-94-000003.txt : 19940519 0000740126-94-000003.hdr.sgml : 19940519 ACCESSION NUMBER: 0000740126-94-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19940401 FILED AS OF DATE: 19940516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FINGERHUT COMPANIES INC CENTRAL INDEX KEY: 0000740126 STANDARD INDUSTRIAL CLASSIFICATION: 5961 IRS NUMBER: 411396490 STATE OF INCORPORATION: MN FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08668 FILM NUMBER: 94528740 BUSINESS ADDRESS: STREET 1: 4400 BAKER RD CITY: MINNETONKA STATE: MN ZIP: 55343 BUSINESS PHONE: 6129323100 10-Q 1 FIRST QUARTER 10-Q 1994 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. 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 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. 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. 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. 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. 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. 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. 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. 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. 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 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) EX-10 2 EX-10.A(I) 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: EX-10 3 EX-10.B(I) 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: EX-11 4 EX-11 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. -----END PRIVACY-ENHANCED MESSAGE-----