EXHIBIT 99.1
(HANOVER DIRECT LOGO)
FOR IMMEDIATE RELEASE
CONTACT: Hanover Direct, Inc The MWW Group
Charles Blue Rich Tauberman
S.V.P. & Chief Financial Officer Tel: (201) 507-9500
Tel: (201) 272-3389
HANOVER DIRECT REPORTS IMPROVEMENT IN FISCAL 2003 RESULTS FROM OPERATIONS OF
$ 6.5 MILLION OVER PRIOR YEAR AND THE RESTATEMENT OF ITS 2002 10-K
EDGEWATER, NJ, April 9, 2004 -Hanover Direct, Inc. today announced operating
results for the 52- weeks ended December 27, 2003.
The Company reported income from operations of $6.1 million for the year ended
December 27, 2003 compared with a $0.4 million loss for the year ended December
28, 2002. The improvement in income from operations was achieved through
reductions in special charges, general and administrative expenses and
depreciation and amortization.
The Company reported that Internet sales continue to demonstrate strong growth
over the prior year, reaching 27.9% of total revenues for the 52- week period
ended December 27, 2003. Internet net revenues for the 52- week period ended
December 27, 2003 were $108.6 million, or 24.2% above the comparable fiscal
period in 2002. Total net revenues for the 52- weeks ended December 27, 2003
were $414.8 million, a decrease of $42.8 million (9.4%), from the comparable
period in 2002. The decrease was due to a number of factors, including
softness in the economy and demand for the Company's products during the first
six months of the 2003 year. In addition, the Company's strategy of reducing
unprofitable circulation also contributed to the decrease throughout the year.
The Company reported a net loss of $15.4 million or $0.16 per share for the
year ended December 27, 2003, compared with a net loss of $9.1 million or $0.18
per share for the comparable period in the 2002 fiscal year. The per share
amounts were calculated after deducting preferred dividends and accretion of
$7.9 million and $15.6 million in fiscal years 2003 and 2002, respectively.
The weighted average number of shares of common stock outstanding was
144,387,672 and 138,280,196 for the fiscal years ended December 27, 2003 and
December 28, 2002, respectively. The increase in weighted average number of
shares was a result of the Chelsey Recapitalization consummated on November 30,
2003.
The $6.3 million increase in net loss was primarily due to:
(i) a $7.6 million deferred Federal income tax provision incurred during 2003
to increase the valuation allowance and fully reserve the remaining net
deferred tax asset. Due to a number of factors, including the continued
softness in the demand for the Company's products, management lowered its
projections of future taxable income. As a result of lower projections of
future taxable income, the future utilization of the Company's net operating
losses were no longer "more-likely-than-not" to be achieved;
(ii) $7.2 million of additional interest expense incurred on the Series B
Preferred Stock as a result of the implementation of FAS 150. Effective June
29, 2003, FAS 150 required the Company to reclassify its Series B Preferred
Stock as a liability and reflect the accretion of the preferred stock balance
as interest expense;
(iii) a $3.6 million decrease due to loss of variable contribution associated
with declines in net revenues;
(iv) a $3.3 million increase due to a favorable summary judgment ruling at the
District Court level in the Kaul litigation, resulting in a reversal of a
substantial portion of the loss reserve related to this litigation;
(v) a $3.1 million increase due to the reduction of special charges recorded;
(vi) a $2.8 million increase due to continued reductions in cost of sales and
operating expenses, general and administrative expenses and a decrease in
depreciation and amortization;
(vii) an increase of $1.3 million due to the recognition of the deferred gain
related to the June 29, 2001 sale of the Company's Improvements business; and
(viii) a $1.6 million benefit due to the implementation of the Company's
revised vacation and sick benefit policy.
The Company filed an amendment to the Annual Report on Form 10-K for the year
ended December 28, 2002 as well as an amendment to the Quarterly Report on Form
10-Q for the quarter ended September 27, 2003. The Company has re-examined the
provisions of the Congress Credit Facility and, based on EITF Issue No. 95-22,
"Balance Sheet
Classification of Borrowings Outstanding under Revolving Credit Agreements that
Include Both a Subjective Acceleration Clause and a Lock-Box Arrangement", and
certain provisions in the credit agreement, the Company is required to
reclassify its revolving credit facility from long-term to short-term debt,
though the existing revolving loan facility does not mature until January 31,
2007. As a result, the Company has reclassified $8.8 million as of December
28, 2002 and $13.2 million as of September 27, 2003 from Long-term debt to
Short-term debt and capital lease obligations that is classified as Current
liabilities.
A conference call with the management of Hanover Direct, Inc to review the
Fiscal Year 2003 operating results will be held on Tuesday, April 13, 2004 at
2:00 p.m. Eastern Daylight Time. If you would like to participate in the call,
please call 877-691-0878 (Domestic) and 973-582-2741 (International) between
1:50 p.m. and 1:55 p.m. Eastern Daylight Time. The call will begin promptly at
2:00 p.m. Eastern Daylight Time. A re-play of the conference will be available
from 5:00 p.m. Eastern Daylight Time on Tuesday, April 13, 2004 until 5:00 p.m.
Eastern Daylight Time on Wednesday, April 14, 2004 and can be accessed by
calling 877-519-4471 (Domestic) and 973-341-3080 (International) and entering
the Reservation No.: 4685907.
The Hanover Direct, Inc. 2004 Annual Shareholders Meeting has been scheduled
for Thursday, June 3, 2004. The meeting will be held at the Sheraton Suites on
Hudson, located at 500 Harbor Boulevard, Weehawken, NJ, and will commence at
9:30 a.m. Eastern Daylight Time. The record date for shareholders entitled to
vote at the Annual Meeting is the close of business on April 19, 2004.
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)
AS RESTATED
DECEMBER 27, DECEMBER 28,
2003 2002
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,282 $ 785
Accounts receivable, net 14,335 16,945
Inventories 41,576 53,131
Prepaid catalog costs 11,808 13,459
Other current assets 3,951 3,967
--------- ---------
Total Current Assets 73,952 88,287
--------- ---------
PROPERTY AND EQUIPMENT, AT COST:
Land 4,361 4,395
Buildings and building improvements 18,210 18,205
Leasehold improvements 10,108 9,915
Furniture, fixtures and equipment 53,212 56,094
--------- ---------
85,891 88,609
Accumulated depreciation and amortization (58,113) (59,376)
--------- ---------
Property and equipment, net 27,778 29,233
--------- ---------
Goodwill, net 9,278 9,278
Deferred tax assets 2,213 12,400
Other non-current assets 1,575 902
--------- ---------
Total Assets $ 114,796 $ 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)
AS RESTATED
DECEMBER 27, DECEMBER 28,
2003 2002
--------- ---------
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Short-term debt and capital lease obligations $ 13,468 $ 12,621
Accounts payable 41,880 42,873
Accrued liabilities 12,918 26,351
Customer prepayments and credits 5,485 4,722
Deferred tax liabilities 2,213 1,100
--------- ---------
Total Current Liabilities 75,964 87,667
--------- ---------
NON-CURRENT LIABILITIES:
Long-term debt 9,042 12,508
Series C Participating Preferred Stock, authorized, issued and
outstanding 564,819 shares at December 27, 2003; liquidation
preference of $56,482 at December 27, 2003 72,689 --
Other 4,609 6,387
--------- ---------
Total Non-current Liabilities 86,340 18,895
--------- ---------
Total Liabilities 162,304 106,562
--------- ---------
SERIES B PARTICIPATING PREFERRED STOCK, authorized, issued
and outstanding 1,622,111 shares at December 28, 2002 -- 92,379
SHAREHOLDERS' DEFICIENCY:
Common Stock, $.66 2/3 par value, authorized 300,000,000 shares;
222,294,562 shares issued and outstanding at December 27, 2003 and
140,336,729 shares issued and outstanding at December 28, 2002 148,197 93,625
Capital in excess of par value 302,432 337,507
Accumulated deficit (494,791) (486,627)
--------- ---------
(44,162) (55,495)
--------- ---------
Less:
Treasury stock, at cost (2,120,929 shares at December 27, 2003 and
December 28, 2002) (2,996) (2,996)
Notes receivable from sale of Common Stock (350) (350)
--------- ---------
Total Shareholders' Deficiency (47,508) (58,841)
--------- ---------
Total Liabilities and Shareholders' Deficiency $ 114,796 $ 140,100
========= =========
HANOVER DIRECT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (IN
THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
FOR THE 13- WEEKS ENDED FOR THE 52- WEEKS ENDED
----------------------- -----------------------
DECEMBER 27, DECEMBER 28, DECEMBER 27, DECEMBER 28,
2003 2002 2003 2002
--------- --------- --------- ---------
NET REVENUES $ 110,002 $ 128,251 $ 414,874 $ 457,644
--------- --------- --------- ---------
OPERATING COSTS AND EXPENSES:
Cost of sales and operating expenses 66,757 80,152 261,118 290,531
Special charges 627 2,702 1,308 4,398
Selling expenses 25,444 28,685 99,543 105,239
General and administrative expenses 11,223 15,452 42,080 52,258
Depreciation and amortization 1,330 1,274 4,719 5,650
--------- --------- --------- ---------
105,381 128,265 408,768 458,076
--------- --------- --------- ---------
INCOME (LOSS) FROM OPERATIONS 4,621 (14) 6,106 (432)
Gain on sale of Improvements -- (252) (1,911) (570)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INTEREST AND INCOME TAXES 4,621 238 8,017 138
Interest expense, net 4,246 1,461 12,088 5,477
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 375 (1,223) (4,071) (5,339)
Provision for deferred Federal income taxes -- 3,700 11,300 3,700
Provision for state income taxes 11 1 28 91
--------- --------- --------- ---------
NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) 364 (4,924) (15,399) (9,130)
Preferred stock dividends and accretion -- 4,964 7,922 15,556
--------- --------- --------- ---------
NET INCOME (LOSS) APPLICABLE TO COMMON SHAREHOLDERS $ 364 $ (9,888) $ (23,321) $ (24,686)
========= ========= ========= =========
NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss) per common share - basic and diluted $ .00 $ (.07) $ (.16) $ (.18)
========= ========= ========= =========
Weighted average common shares outstanding -
basic and diluted (thousands) 162,603 138,316 144,388 138,280
========= ========= ========= =========
HANOVER DIRECT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
FOR THE 52- WEEKS
ENDED
DECEMBER 27, DECEMBER 28,
2003 2002
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (15,399) $ (9,130)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization, including deferred fees 5,715 7,203
Provision for doubtful accounts 378 304
Special charges 16 18
Deferred tax asset 11,300 3,700
Gain on the sale of Improvements (1,911) (570)
Gain on the sale of property and equipment (4) (167)
Interest expense related to Series B Participating Preferred Stock redemption price increase 7,235 --
Compensation expense related to stock options 1,141 1,332
Changes in assets and liabilities:
Accounts receivable 2,232 2,207
Inventories 11,555 6,092
Prepaid catalog costs 1,651 1,161
Accounts payable (993) (3,475)
Accrued liabilities (13,433) 1,219
Customer prepayments and credits 763 (421)
Other, net (2,173) (4,814)
--------- ---------
Net cash provided by operating activities 8,073 4,659
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (1,895) (639)
Proceeds from sale of Improvements 2,000 570
Costs related to the early release of escrow funds (89) --
Proceeds from disposal of property and equipment 78 169
--------- ---------
Net cash provided by investing activities 94 100
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under Congress revolving loan facility 179 (4,704)
Borrowings under Congress Tranche B term loan facility -- 3,500
Payments under Congress Tranche A term loan facility (1,991) (1,991)
Payments under Congress Tranche B term loan facility (1,800) (1,314)
Payments of capital lease obligations (466) (104)
Payments of debt issuance costs (910) (722)
Payment of Series C Participating Preferred Stock issuance costs (1,334)
Proceeds from issuance of common stock -- 25
Series B Participating Preferred Stock Transaction Cost Adjustment -- 215
Payment of estimated Richemont tax obligation on Series B Participating Preferred Stock accretion (347) --
Other, net (1)
--------- ---------
Net cash used by financing activities (6,670) (5,095)
--------- ---------
Net increase (decrease) in cash and cash equivalents 1,497 (336)
Cash and cash equivalents at the beginning of the year 785 1,121
--------- ---------
Cash and cash equivalents at the end of the period $ 2,282 $ 785
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Continued on next page.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 3,325 $ 3,405
Income taxes 705 193
Non-cash investing and financing activities:
Series B Participating Preferred Stock redemption price increase $ 7,575 $ 15,556
Redemption of Series B Participating Preferred Stock 107,536
Issuance of Series C Participating Preferred Stock 72,689
Gain on issuance of Series C Participating Preferred Stock 13,867
Tandem share expirations 55
Capital lease obligations 1,459 32