EXHIBIT 99.1
(HANOVER DIRECT LOGO)
FOR IMMEDIATE RELEASE
CONTACT: Hanover Direct, Inc The MWW Group
Charles E. Blue Rich Tauberman
Senior Vice President Tel: (201) 507-9500
Tel: (201) 272-3412
HANOVER DIRECT ANNOUNCES NINE MONTH OPERATING RESULTS FOR FISCAL 2003;
INTERNET SALES CONTINUE STRONG GROWTH; AND INCOME FROM
OPERATIONS IMPROVES BY $1.9 MILLION
EDGEWATER, NJ, November 10, 2003 - Hanover Direct, Inc. today announced
operating results for the 13- and 39- weeks ended September 27, 2003.
The Company reported that internet sales continue to demonstrate strong growth
over the prior year reaching 27.6% of total revenues for the 39-week period
ended September 27, 2003. Internet net revenues for the 13- and 39- week periods
ended September 27, 2003 were $26.2 million and $79.2 million, respectively, or
21.3% and 28.3% above comparable fiscal periods in 2002. Total net revenues for
the 13- and 39- weeks ended September 27, 2003 were $96.6 million and $304.9
million, respectively, a decrease of $9.4 million (8.9%) and $24.5 million
(7.4%), respectively, from the prior year 13- and 39- week results. The
decreases were due to a number of factors including softness in the market for
the Company's products and continued reductions in unprofitable circulation.
Hanover reported income from operations for the 39-weeks ended September 27,
2003 of $1.5 million, a $1.9 million improvement over a reported loss from
operations of $0.4 million for the comparable period in 2002. The improvement in
operating income was due to the continued reduction of general and
administrative expenses of $5.9 million and a decrease in special charges of
$1.0 million which were partially offset by the impact of the decline in total
net revenues. Hanover also reported a loss from operations for the 13- weeks
ended September 27, 2003 of $(0.1) million, an improvement of $2.8 million over
the comparable period in 2002.
The Company reported a net loss of $15.8 million for the 39- weeks ended
September 27, 2003 compared with a net loss of $4.2 million for the comparable
period in the year 2002. The $11.6 million increase in net loss was primarily
due to an $11.3 million deferred Federal income tax provision incurred to
establish a valuation allowance against the Company's remaining net deferred tax
asset. In addition, the increase in net loss was also due to the recording of
$4.5 million of additional interest expense incurred as a result of the
implementation of SFAS No. 150, "Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity" ("FAS 150") issued by the
Financial Accounting Standards Board. Effective June 29, 2003, because the
Company's Series B Participating Preferred Stock ("Preferred Stock") is
mandatorily redeemable, FAS 150 required the Company to reclassify its Preferred
Stock to liabilities and to prospectively reflect the accretion of the Preferred
Stock balance as interest expense rather than Preferred Stock dividends. These
charges were partially offset by continued reductions in
general and administrative expenses, a decrease in special charges and
depreciation and amortization, and the recording of the $1.9 million deferred
gain during the 39- weeks ended September 27, 2003 related to the June 29, 2001
sale of the Company's Improvements business. Net loss per common share was $0.17
for the 39- weeks ended September 27, 2003 and $0.11 for the 39- weeks ended
September 28, 2002. The per share amounts were calculated after deducting
preferred dividends and accretion of $7.9 million and $10.6 million for the 39-
weeks ended September 27, 2003 and September 28, 2002, respectively. In
addition, the per share amounts were calculated after deducting additional
preferred dividends and accretion of $4.5 million incurred as interest expense
after June 28, 2003. The weighted average number of shares of Common Stock
outstanding used in both the basic and diluted net loss per common share
calculation was 138,315,800 for the 39- weeks ended September 27, 2003 and
138,268,327 for the 39- weeks ended September 28, 2002.
The Company reported a net loss of $16.6 million for the 13- weeks ended
September 27, 2003 compared with a net loss of $4.2 million for the comparable
period in the year 2002. The $12.4 million increase in net loss is attributable
as explained above to the $11.3 million deferred Federal income tax provision
incurred to increase the valuation allowance and fully reserve the remaining net
deferred tax asset and the $4.5 million of increased interest expense due to the
implementation of FAS 150. These increases were partially offset by the
continued reductions in general and administrative expenses, special charges and
depreciation and amortization. Net loss per common share was $0.12 and $0.06 for
the 13- weeks ended September 27, 2003 and September 28, 2002, respectively. The
weighted average number of shares of Common Stock outstanding used in both the
basic and diluted net loss per common share calculation was 138,315,800 for both
the 13- weeks ended September 27, 2003 and September 28, 2002.
A conference call with the management of Hanover Direct, Inc to review the
Fiscal 2003 third quarter operating results will be held on November 10, 2003 at
3:00 p.m. Eastern Standard Time. If you would like to participate in the call,
please call 877-691-0878 (Domestic) and 973-582-2741 (International) between
2:50 p.m. and 2:55 p.m. Eastern Standard Time. The call will begin promptly at
3:00 p.m. Eastern Standard Time. A re-play of the conference will be available
from 5:00 p.m. Eastern Standard Time on Monday, November 10, 2003 until 5:00
p.m. Eastern Standard Time on Tuesday, November 11, 2003 and can be accessed by
calling 877-519-4471 (Domestic) and 973-341-3080 (International) and entering
the Reservation No.: 4295209.
ABOUT HANOVER DIRECT, INC.
Hanover Direct, Inc. (AMEX: HNV) and its business units provide quality, branded
merchandise through a portfolio of catalogs and e-commerce platforms to
consumers, as well as a comprehensive range of Internet, e-commerce, and
fulfillment services to businesses. The Company's catalog and Internet portfolio
of home fashions, apparel and gift brands include Domestications, The Company
Store, Company Kids, Silhouettes, International Male, Scandia Down, and Gump's
By Mail. The Company owns Gump's, a retail store based in San Francisco. Each
brand can be accessed on the Internet individually by name. Keystone Internet
Services, LLC (www.keystoneinternet.com), the Company's third party fulfillment
operation, also provides the logistical, IT and fulfillment needs of the
Company's catalogs and web sites. Information on Hanover Direct, including each
of its subsidiaries, can be accessed on the Internet at www.hanoverdirect.com.
HANOVER DIRECT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
SEPTEMBER 27, DECEMBER 28,
2003 2002
---- ----
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 931 $ 785
Accounts receivable, net 12,539 16,945
Inventories 53,000 53,131
Prepaid catalog costs 15,770 13,459
Other current assets 3,834 3,967
--------- ---------
Total Current Assets 86,074 88,287
--------- ---------
PROPERTY AND EQUIPMENT, AT COST:
Land 4,361 4,395
Buildings and building improvements 18,210 18,205
Leasehold improvements 9,895 9,915
Furniture, fixtures and equipment 56,240 56,094
Construction in progress 471 --
--------- ---------
89,177 88,609
Accumulated depreciation and amortization (61,705) (59,376)
--------- ---------
Property and equipment, net 27,472 29,233
--------- ---------
Goodwill, net 9,278 9,278
Deferred tax assets 2,300 12,400
Other assets 253 902
--------- ---------
Total Assets $ 125,377 $ 140,100
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Continued on next page.
HANOVER DIRECT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
SEPTEMBER 27, DECEMBER 28,
2003 2002
---- ----
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations $ 10,831 $ 3,802
Accounts payable 40,522 42,873
Accrued liabilities 12,066 26,351
Customer prepayments and credits 6,705 4,722
Deferred tax liabilities 2,300 1,100
--------- ---------
Total Current Liabilities 72,424 78,848
--------- ---------
NON-CURRENT LIABILITIES:
Long-term debt 22,820 21,327
Series B Participating Preferred Stock, authorized, issued and
outstanding 1,622,111 shares at September 27, 2003; liquidation
preference of $112,964 at September 27, 2003 104,437 --
Other 7,748 6,387
--------- ---------
Total Non-current Liabilities 135,005 27,714
--------- ---------
Total Liabilities 207,429 106,562
--------- ---------
SERIES B PARTICIPATING PREFERRED STOCK, authorized, issued
and outstanding 1,622,111 shares at December 28, 2002; liquidation
preference was $92,379 at December 28, 2002 -- 92,379
SHAREHOLDERS' DEFICIENCY:
Common Stock, $.66 2/3 par value, authorized 300,000,000 shares;
140,436,729 shares issued at September 27, 2003 and December
28, 2002 93,625 93,625
Capital in excess of par value 325,923 337,507
Accumulated deficit (498,254) (486,627)
--------- ---------
(78,706) (55,495)
--------- ---------
Less:
Treasury stock, at cost (2,120,929 shares at September 27, 2003 and
December 28, 2002) (2,996) (2,996)
Notes receivable from sale of Common Stock (350) (350)
--------- ---------
Total Shareholders' Deficiency (82,052) (58,841)
--------- ---------
Total Liabilities and Shareholders' Deficiency $ 125,377 $ 140,100
========= =========
HANOVER DIRECT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
FOR THE 13- WEEKS ENDED FOR THE 39- WEEKS ENDED
----------------------- -----------------------
SEPTEMBER 27, SEPTEMBER 28, SEPTEMBER 27, SEPTEMBER 28,
2003 2002 2003 2002
---- ---- ---- ----
NET REVENUES $ 96,633 $ 106,030 $ 304,872 $ 329,393
--------- --------- --------- ---------
OPERATING COSTS AND EXPENSES:
Cost of sales and operating expenses 62,557 68,890 194,361 210,379
Special charges 193 1,463 681 1,696
Selling expenses 22,787 25,355 74,099 76,554
General and administrative expenses 10,092 11,834 30,857 36,806
Depreciation and amortization 1,068 1,393 3,389 4,376
--------- --------- --------- ---------
96,697 108,935 303,387 329,811
--------- --------- --------- ---------
(LOSS) INCOME FROM OPERATIONS (64) (2,905) 1,485 (418)
Gain on sale of Improvements -- -- 1,911 318
--------- --------- --------- ---------
(LOSS) INCOME BEFORE INTEREST AND
INCOME TAXES (64) (2,905) 3,396 (100)
Interest expense, net 5,274 1,277 7,842 4,016
--------- --------- --------- ---------
LOSS BEFORE INCOME TAXES (5,338) (4,182) (4,446) (4,116)
Provision for deferred federal income taxes 11,300 -- 11,300 --
Provision for state income taxes 7 30 17 90
--------- --------- --------- ---------
NET LOSS AND COMPREHENSIVE
LOSS (16,645) (4,212) (15,763) (4,206)
Preferred stock dividends and accretion -- 4,185 7,922 10,593
--------- --------- --------- ---------
NET LOSS APPLICABLE TO COMMON
SHAREHOLDERS $ (16,645) $ (8,397) $ (23,685) $ (14,799)
========= ========= ========= =========
NET LOSS PER COMMON SHARE:
Net loss per common share - basic and diluted $ (.12) $ (.06) $ (.17) $ (.11)
========= ========= ========= =========
Weighted average common shares outstanding -
basic (thousands) 138,316 138,316 138,316 138,268
========= ========= ========= =========
Weighted average common shares outstanding -
diluted (thousands) 138,316 138,316 138,316 138,268
========= ========= ========= =========
HANOVER DIRECT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
FOR THE 39- WEEKS ENDED
-----------------------
SEPTEMBER 27, SEPTEMBER 28,
2003 2002
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(15,763) $ (4,206)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization, including deferred fees 4,206 5,483
Compensation expense related to stock options 473 724
Deferred tax asset 11,300 --
Gain on the sale of Improvements (1,911) (318)
Interest expense related to Series B Participating Preferred Stock redemption price increase 4,482 --
Other, net 367
Changes in assets and liabilities:
Accounts receivable 4,125 3,863
Inventories 131 972
Prepaid catalog costs (2,311) (4,231)
Accounts payable (2,351) (860)
Accrued liabilities (14,285) (5,692)
Customer prepayments and credits 1,983 2,255
Other, net 1,570 (2,078)
-------- --------
Net cash used by operating activities (7,984) (4,088)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (1,715) (597)
Proceeds from sale of Improvements 2,000 318
Other, net (87) --
-------- --------
Net cash provided (used) by investing activities 198 (279)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under Congress facility 8,530 4,562
Other, net (598) (357)
-------- --------
Net cash provided by financing activities 7,932 4,205
-------- --------
Net increase (decrease) in cash and cash equivalents 146 (162)
Cash and cash equivalents at the beginning of the year 785 1,121
-------- --------
Cash and cash equivalents at the end of the period $ 931 $ 959
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 2,480 $ 2,451
Income taxes $ 665 $ 193
Non-cash investing and financing activities:
Series B Participating Preferred Stock redemption price increase $ 7,575 $ 10,593