EXHIBIT 99.1
[HANOVER GRAPHIC]
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 PROFITABLE FIRST QUARTER
EDGEWATER, NJ, May 11, 2004 -Hanover Direct, Inc. today announced operating
results for the 13- week period ended March 27, 2004.
The Company reported net income applicable to common shareholders of $0.4
million for the 13- weeks ended March 27, 2004, an improvement of $3.9 million
over a reported loss of $3.5 million for the comparable period in 2003. The
improvement is primarily attributable to the elimination of the preferred stock
dividend accretion related to the Series B Participating Preferred Stock, which
was part of the Chelsey Recapitalization consummated on November 30, 2003.
Total net revenues for the 13- weeks ended March 27, 2004 were $95.3 million, a
decrease of $7.2 million (7.0%), from the comparable period in the prior year.
The decline was primarily attributable to a reduction in circulation for one of
the Company's brands in order to limit the investment in catalog production
costs and working capital necessary to maintain inventory for this brand. The
majority of this reduction occurred in the first quarter of 2004; however, it is
expected that there will be a continuation of this trend, albeit at a lower rate
of decline in sales, for the balance of 2004.
The Company reported a net income applicable to common shareholders of $0.4
million, or $0.00 per share, for the 13- weeks ended March 27, 2004, compared
with a net loss of $3.4 million, or $0.02 per share, for the comparable period
in the prior year. These amounts were calculated after deducting earnings
attributable to preferred stockholders of $1,000 and preferred dividends and
accretion of $3.6 million for the 13- weeks ended March 27, 2004 and March 29,
2003, respectively. The weighted average number of shares of common stock
outstanding was 220,173,633 and 138,315,800 for the 13-week
period ended March 27, 2004 and March 29, 2003, respectively. This increase in
weighted average shares was primarily a result of the Chelsey Recapitalization.
The $3.9 million increase in net income was primarily due to:
o A favorable impact of $3.6 million due to the Chelsey Recapitalization
and exchange of the Series B Participating Preferred Stock for the
Series C Participating Preferred Stock with Chelsey. During the 13-
weeks ended March 29, 2003 Preferred Stock dividends and accretion
were recorded relating to the Series B Participating Preferred Stock.
The Series C Participating Preferred Stock has been recorded at the
maximum amount of future cash payments; thus, the Company is currently
not required to record interest expense relating to the Series C
Participating Preferred Stock;
o A favorable impact of $1.8 million comprising continued reductions in
cost of sales and operating expenses and general and administrative
expenses and a decrease in depreciation and amortization;
o A favorable impact of $0.5 million due to reductions in interest
resulting from lower average borrowings and deferred amendment fees
which have become fully amortized relating to the Congress Credit
Facility; and
o A favorable impact of $0.3 million due to a reduction of special
charges recorded.
Partially offset by:
o An unfavorable impact of $1.9 million due to the non-recurring
deferred gain related to the June 29, 2001 sale of the Company's
Improvements business recognized during the 13- weeks ended March 29,
2003; and
o An unfavorable impact of $0.4 million due to reduction in variable
contribution associated with the decline in net revenues.
The Company reported that Internet sales continue to demonstrate growth over the
prior year reaching 32.2% of total Internet and catalog revenues for the 13-
week period ended March 27, 2004. Internet net revenues for the 13- weeks ended
March 27, 2004 were $28.6 million, or 12.1% above the comparable fiscal period
in 2003.
Due to recent changes in management, the Company is postponing the 2004 Annual
Meeting of Stockholders scheduled to be held on June 3, 2004 until later in the
summer. The Company intends to review the Fiscal 2004 first half operating
results at that time rather than at a conference call at this time.
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.
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HANOVER DIRECT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
MARCH 27, DECEMBER 27,
2004 2003
----------- ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ..................................................... $ 2,434 $ 2,282
Accounts receivable, net of allowance for doubtful accounts of
$1,069 and $1,105, respectively ............................................ 12,614 14,335
Inventories ................................................................... 37,646 41,576
Prepaid catalog costs ......................................................... 15,305 11,808
Other current assets .......................................................... 3,294 3,951
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Total Current Assets ....................................................... 71,293 73,952
-------- --------
PROPERTY AND EQUIPMENT, AT COST:
Land .......................................................................... 4,361 4,361
Buildings and building improvements ........................................... 18,210 18,210
Leasehold improvements ........................................................ 10,108 10,108
Furniture, fixtures and equipment ............................................. 53,331 53,212
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86,010 85,891
Accumulated depreciation and amortization ..................................... (59,125) (58,113)
-------- --------
Property and equipment, net ................................................ 26,885 27,778
-------- --------
Goodwill ............................................................................ 9,278 9,278
Deferred tax assets ................................................................. 2,213 2,213
Other assets ........................................................................ 1,742 1,575
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Total Assets ............................................................... $111,411 $114,796
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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)
MARCH 27, DECEMBER 27,
2004 2003
----------- ------------
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Short-term debt and capital lease obligations .............................. $ 15,135 $ 13,468
Accounts payable ........................................................... 38,499 41,880
Accrued liabilities ........................................................ 11,997 12,918
Customer prepayments and credits ........................................... 5,866 5,485
Deferred tax liability ..................................................... 2,213 2,213
-------- --------
Total Current Liabilities .............................................. 73,710 75,964
-------- --------
NON-CURRENT LIABILITIES:
Long-term debt ............................................................. 8,001 9,042
Series C Participating Preferred Stock, authorized, issued and
outstanding 564,819 shares; liquidation preference of $56,482 .......... 72,689 72,689
Other ...................................................................... 4,097 4,609
-------- --------
Total Non-current Liabilities .......................................... 84,787 86,340
-------- --------
Total Liabilities ...................................................... 158,497 162,304
-------- --------
SHAREHOLDERS' DEFICIENCY:
Common Stock, $0.66 2/3 par value, authorized 300,000,000
shares; 222,294,562 shares issued and 220,173,633 shares outstanding ... 148,197 148,197
Capital in excess of par value ............................................. 302,436 302,432
Accumulated deficit ........................................................ (494,373) (494,791)
-------- --------
(43,740) (44,162)
-------- --------
Less:
Treasury stock, at cost (2,120,929 shares) ............................. (2,996) (2,996)
Notes receivable from sale of Common Stock ................................. (350) (350)
-------- --------
Total Shareholders' Deficiency ......................................... (47,086) (47,508)
-------- --------
Total Liabilities and Shareholders' Deficiency ......................... $111,411 $114,796
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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
------------------------------
MARCH 27, DECEMBER 27,
2004 2003
----------- ------------
(UNAUDITED)
NET REVENUES .................................................................... $ 95,312 $102,474
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OPERATING COSTS AND EXPENSES:
Cost of sales and operating expenses ....................................... 59,243 65,539
Special charges (income) ................................................... (31) 277
Selling expenses ........................................................... 23,276 24,453
General and administrative expenses ........................................ 10,367 11,278
Depreciation and amortization .............................................. 1,012 1,183
-------- --------
93,867 102,730
-------- --------
INCOME (LOSS) FROM OPERATIONS ................................................... 1,445 (256)
Gain on sale of Improvements ............................................... -- 1,911
-------- --------
INCOME BEFORE INTEREST AND INCOME TAXES ......................................... 1,445 1,655
Interest expense, net ...................................................... 922 1,448
-------- --------
INCOME BEFORE INCOME TAXES ...................................................... 523 207
Provision for Federal income taxes ......................................... 63 --
Provision for state income taxes ........................................... 42 15
-------- --------
NET INCOME AND COMPREHENSIVE INCOME ............................................. 418 192
Preferred stock dividends .................................................. -- 3,632
Earnings Applicable to Preferred Stock ..................................... 1 --
-------- --------
NET INCOME (LOSS) APPLICABLE TO COMMON
SHAREHOLDERS .............................................................. $ 417 $ (3,440)
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NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss) per common share - basic and diluted ..................... $ .00 $ (.02)
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Weighted average common shares outstanding -
basic (thousands) ........................................................ 220,174 138,316
======== ========
Weighted average common shares outstanding -
diluted (thousands) ...................................................... 220,666 138,316
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HANOVER DIRECT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
FOR THE 13-WEEKS ENDED
------------------------------
MARCH 27, DECEMBER 27,
2004 2003
----------- ------------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ....................................................................... $ 418 $ 192
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation and amortization, including deferred fees ...................... 1,077 1,680
Provision for doubtful accounts ............................................. 87 179
Special charges (income) .................................................... (31) 277
Gain on the sale of Improvements ............................................ -- (1,911)
Gain on the sale of property and equipment .................................. -- (2)
Compensation expense related to stock options ............................... 4 177
Changes in assets and liabilities:
Accounts receivable ......................................................... 1,634 3,186
Inventories ................................................................. 3,930 (294)
Prepaid catalog costs ....................................................... (3,497) (3,763)
Accounts payable ............................................................ (3,381) 1,708
Accrued liabilities ......................................................... (890) (6,648)
Customer prepayments and credits ............................................ 381 2,178
Other, net .................................................................. (309) (455)
-------- --------
Net cash used by operating activities ............................................ (577) (3,496)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment ...................................... (119) (546)
Proceeds from sale of Improvements .......................................... -- 2,000
Costs related to the early release of escrow funds .......................... -- (89)
Proceeds from disposal of property and equipment ............................ -- 2
-------- --------
Net cash (used) provided by investing activities ................................. (119) 1,367
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under Congress revolving loan facility ....................... 1,759 5,270
Payments under Congress Tranche A term loan facility ........................ (498) (497)
Payments under Congress Tranche B term loan facility ........................ (450) (450)
Payments of long-term debt and capital lease obligations .................... (185) (4)
Payment of debt issuance costs .............................................. (125) (34)
Refund (payment) of estimated Richemont tax obligation
on Series B Participating Preferred Stock accretion ....................... 347 (347)
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Net cash provided by financing activities ........................................ 848 3,938
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Net increase in cash and cash equivalents ........................................ 152 1,809
Cash and cash equivalents at the beginning of the year ........................... 2,282 785
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Cash and cash equivalents at the end of the period ............................... $ 2,434 $ 2,594
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest .................................................................... $ 733 $ 806
Income taxes ................................................................ $ 6 $ 196
Non-cash investing and financing activities:
Series B Participating Preferred Stock redemption price increase ............ $ -- $ 3,285