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 NET INCOME FOR THE SECOND QUARTER OF FISCAL 2004 -
RESTATEMENT OF FISCAL 2000 THROUGH THE FIRST QUARTER OF 2004
EDGEWATER, NJ, August 10, 2004 -Hanover Direct, Inc. today announced net income
for the 13- and 26- weeks ended June 26, 2004 of $0.6 million and $1.0 million,
respectively. This represents the third consecutive quarter that the Company has
recorded net income.
During the second quarter of 2004, the Company identified a revenue recognition
cut-off issue that resulted in revenue being recorded in advance of the actual
shipment of merchandise to the customer. The practice was stopped immediately
and the Company implemented procedures to ensure that this issue does not recur.
The restated amounts for all periods affected dating back to fiscal 2000, while
not material, are included in the Form 10-Q and this press release filed today.
For the 13- weeks ended June 26, 2004, the Company reported net income
applicable to common shareholders of $0.6 million or $0.00 per share compared
with a net loss of $3.6 million, or $0.02 per share, for the comparable period
in 2003. These amounts were calculated after deducting Series B Participating
Preferred Stock dividends and accretion of $4.3 million for the 13- weeks ended
June 28, 2003.
Net revenues decreased $9.4 million (8.9%) for the 13-week period ended June 26,
2004 to $96.5 million from $105.9 million for the comparable period in 2003.
This decrease resulted primarily from lower inventory levels caused by the
Company's reduced liquidity that resulted from lower borrowing availability and
tighter vendor credit at that time. Also, related declines in initial product
fill rates and higher backorders and cancellations as well as reduced
circulation in Domestications contributed to the sales decline. As previously
announced, on July 8, 2004, the Company closed and funded a $20 million Term
Loan Facility with Chelsey Finance, LLC and amended its existing senior credit
facility with Congress increasing the Company's liquidity by approximately $25
million in the aggregate. These transactions were consummated to address the
liquidity issuing facing the Company. The Company's Internet sales continued to
grow, despite the negative impact of low inventory levels, comprising 31.1% of
combined Internet and catalog revenues for the 13- weeks ended June 26, 2004
compared with 27.5% for the comparable period in 2003. Internet sales have
increased by approximately $0.8 million, or 2.9%, to $28.3 million for the
13-week period ended June 26, 2004 from $27.5 million for the comparable period
in 2003.
"It was a difficult quarter reflecting the impact that our tight liquidity
position had on all of our businesses" stated Wayne Garten, the Company's
President and Chief Executive Officer. Mr. Garten added "On the positive side,
the Company still was able to report its third consecutive profitable quarter
primarily as a result of The Company Store's continued strong performance. In
addition, our new financing arrangements provide the Company with adequate
liquidity to support its business."
The Company reported net income applicable to common shareholders of $1.0
million, or $0.00 per share, for the 26- weeks ended June 26, 2004 compared with
a net loss applicable to common shareholders of $7.2 million, or $0.05 per
share, for the comparable period in 2003. These amounts were calculated after
deducting Series B Participating Preferred Stock dividends and accretion of $7.9
million for the 26- weeks ended June 28, 2003. The weighted average number of
shares used in the calculation for basic and diluted net income per common share
was 220,173,633 and 220,455,326, respectively, for the 26-week period ended June
26, 2004. The weighted average number of shares used in the calculation for both
basic and diluted net loss per common share was 138,315,800 for the 26-week
period ended June 28, 2003. The increase in weighted average shares was
primarily the result of the Recapitalization Agreement with Chelsey Direct, LLC
consummated on November 30, 2003.
Net revenues decreased $15.5 million (7.5%) for the 26-week period ended June
26, 2004 to $191.9 million from $207.4 million for the comparable period in
2003. This decrease resulted from lower inventory levels caused by the Company's
reduced borrowing availability, tighter vendor credit and a decline in initial
product fill rates and increases in backorders and cancellations. As planned,
there was a continued reduction in circulation for the Domestications brand in
order to limit the investment in catalog production costs and working capital
necessary to maintain its inventory. The Company's Internet sales continued to
grow, despite the negative impact of low inventory levels, comprising 31.6% of
combined Internet and catalog revenues for the 26- weeks ended June 26, 2004
compared with 27.1% for the comparable period in 2003. Internet sales have
increased by approximately $3.9 million, or 7.3%, to $57.0 million for the
26-week period ended June 26, 2004 from $53.1 million for the comparable fiscal
period in 2003.
The Hanover Direct, Inc. 2004 Annual Meeting of Stockholders has been scheduled
for Thursday, August 12, 2004 at 9:30 a.m., local time. The meeting will be held
at the Sheraton Meadowlands Hotel and Conference Center, 2 Meadowlands Plaza,
East Rutherford, New Jersey. The record date for voting at the annual meeting is
July 9, 2004.
FORWARD LOOKING STATEMENTS
The matters discussed in this news release may include forward looking
statements (within the meaning of the Private Securities Litigation Reform Act
of 1995) by officers of the Company. Important factors that could cause actual
results to differ materially from those in such forward looking statements
include, without limitation, the matters discussed in the Management's
Discussion and Analysis section of the Company's most recent quarterly report on
Form 10-Q and other filings with the Securities and Exchange Commission under
the caption "Cautionary Statements." In particular, these factors, many of which
are beyond the Company's control, include, but are not limited to, (i) a general
deterioration in economic conditions in the United States, (ii) competition,
(iii) legal developments including the results of certain litigation pending
against the Company, (iv) the effectiveness of efforts to reduce costs and sell
certain assets, (v) the maintenance of adequate liquidity and compliance with
its debt agreements, and (vi) the achievement of its business plan.
We undertake no obligation to publicly update any forward looking statement
whether as a result of new information, future events or otherwise. You are
advised, however, to consult any further disclosures we make on related subjects
in our Forms 10-Q, 8-K, 10-K or any other reports filed with the Securities and
Exchange Commission.
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)
(UNAUDITED)
DECEMBER 27,
JUNE 26, 2003
2004 AS RESTATED
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 392 $ 2,282
Accounts receivable, net of allowance for doubtful accounts of
$1,035 and $1,105, respectively 13,332 13,802
Inventories 36,974 41,794
Prepaid catalog costs 15,780 11,945
Other current assets 3,132 3,951
--------- ---------
Total Current Assets 69,610 73,774
--------- ---------
PROPERTY AND EQUIPMENT, AT COST:
Land 4,361 4,361
Buildings and building improvements 18,212 18,210
Leasehold improvements 10,108 10,108
Furniture, fixtures and equipment 53,519 53,212
--------- ---------
86,200 85,891
Accumulated depreciation and amortization (60,129) (58,113)
--------- ---------
Property and equipment, net 26,071 27,778
--------- ---------
Goodwill 9,278 9,278
Deferred tax assets 2,213 2,213
Other assets 1,642 1,575
--------- ---------
Total Assets $ 108,814 $ 114,618
========= =========
Continued on next page.
HANOVER DIRECT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
DECEMBER 27,
JUNE 26, 2003
2004 AS RESTATED
--------- ---------
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Short-term debt and capital lease obligations $ 12,232 $ 13,468
Accounts payable 39,678 41,834
Accrued liabilities 12,004 12,907
Customer prepayments and credits 5,839 5,485
Deferred tax liability 2,213 2,213
--------- ---------
Total Current Liabilities 71,966 75,907
--------- ---------
NON-CURRENT LIABILITIES:
Long-term debt 6,970 9,042
Series C Participating Preferred Stock, authorized, issued and
outstanding 564,819 shares; liquidation preference of $56,482 72,689 72,689
Other 3,692 4,609
--------- ---------
Total Non-current Liabilities 83,351 86,340
--------- ---------
Total Liabilities 155,317 162,247
--------- ---------
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 302,554 302,432
Accumulated deficit (493,908) (494,912)
--------- ---------
(43,157) (44,283)
--------- ---------
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 (46,503) (47,629)
--------- ---------
Total Liabilities and Shareholders' Deficiency $ 108,814 $ 114,618
========= =========
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 26- WEEKS ENDED
--------------------------- --------------------------
JUNE 28, JUNE 28,
JUNE 26, 2003 JUNE 26, 2003
2004 AS RESTATED 2004 AS RESTATED
--------- --------- --------- ---------
NET REVENUES $ 96,482 $ 105,883 $ 191,857 $ 207,412
--------- --------- --------- ---------
OPERATING COSTS AND EXPENSES:
Cost of sales and operating expenses 58,009 66,291 117,294 131,398
Special charges 43 211 11 488
Selling expenses 25,754 26,922 49,029 51,100
General and administrative expenses 10,419 9,491 20,786 20,746
Depreciation and amortization 1,004 1,138 2,016 2,321
--------- --------- --------- ---------
95,229 104,053 189,136 206,053
--------- --------- --------- ---------
INCOME FROM OPERATIONS 1,253 1,830 2,721 1,359
Gain on sale of Improvements -- -- -- 1,911
--------- --------- --------- ---------
INCOME BEFORE INTEREST AND INCOME TAXES 1,253 1,830 2,721 3,270
Interest expense, net 790 1,120 1,712 2,568
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 463 710 1,009 702
(Benefit) provision for Federal income taxes (62) -- 1 --
(Benefit) provision for state income taxes (38) (5) 4 10
--------- --------- --------- ---------
NET INCOME AND COMPREHENSIVE INCOME 563 715 1,004 692
Preferred stock dividends -- 4,290 -- 7,922
Earnings applicable to Preferred Stock 1 -- 2 --
--------- --------- --------- ---------
NET INCOME (LOSS) APPLICABLE TO COMMON
SHAREHOLDERS $ 562 $ (3,575) $ 1,002 $ (7,230)
========= ========= ========= =========
NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss) per common share - basic and diluted $ 0.00 $ (0.02) $ 0.00 $ (0.05)
========= ========= ========= =========
Weighted average common shares outstanding -
basic (thousands) 220,174 138,316 220,174 138,316
========= ========= ========= =========
Weighted average common shares outstanding -
diluted (thousands) 220,174 138,316 220,455 138,316
========= ========= ========= =========
HANOVER DIRECT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
FOR THE 26- WEEKS ENDED
-------------------------
AS RESTATED
JUNE 26, JUNE 28,
2004 2003
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,004 $ 692
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation and amortization, including deferred fees 2,158 2,966
Provision for doubtful accounts 268 298
Special charges 11 488
Gain on the sale of Improvements -- (1,911)
Gain on the sale of property and equipment -- (2)
Compensation expense related to stock options 122 341
Changes in assets and liabilities:
Accounts receivable 202 2,114
Inventories 4,820 3,418
Prepaid catalog costs (3,835) (1,844)
Accounts payable (2,156) (1,703)
Accrued liabilities (914) (11,082)
Customer prepayments and credits 354 2,396
Other, net (530) (1,087)
-------- --------
Net cash provided (used) by operating activities 1,504 (4,916)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (308) (1,202)
Proceeds from the 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 (308) 711
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) borrowings under Congress revolving loan facility (1,050) 6,453
Payments under Congress Tranche A term loan facility (996) (994)
Payments under Congress Tranche B term loan facility (900) (900)
Payments of long-term debt and capital lease obligations (362) (6)
Payment of debt issuance costs (125) (78)
Refund (payment) of estimated Richemont tax obligation on Series B Participating Preferred
Stock accretion 347 (347)
-------- --------
Net cash (used) provided by financing activities (3,086) 4,128
-------- --------
Net decrease in cash and cash equivalents (1,890) (77)
Cash and cash equivalents at the beginning of the year 2,282 785
-------- --------
Cash and cash equivalents at the end of the period $ 392 $ 708
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 1,332 $ 1,642
Income taxes $ 8 $ 663
Non-cash investing and financing activities:
Series B Participating Preferred Stock redemption price increase $ -- $ 7,575
RESTATEMENTS OF PRIOR PERIOD FINANCIAL STATEMENTS
During the second quarter of 2004, the Company identified a revenue
recognition cut-off issue that resulted in revenue being recorded in
advance of the actual shipment of merchandise to the customer. The
practice was stopped immediately and the Company implemented procedures to
ensure that this issue does not recur. The affected prior quarters' and
annual periods' results have been restated as set forth below.
YEAR ENDED DECEMBER 30, 2000
---------------------------
AS
PREVIOUSLY
REPORTED AS RESTATED
--------- ---------
(IN THOUSANDS)
Accounts receivable, net $ 27,703 $ 27,357
Inventory $ 69,612 $ 69,731
Total Current Assets $ 128,446 $ 128,313
Accumulated Deficiency $(471,651) $(471,753)
Total Shareholders' Deficiency $ (24,452) $ (24,554)
Net revenues $ 603,014 $ 602,668
Loss before interest and income taxes $ (70,552) $ (70,652)
Net loss and comprehensive income loss $ (80,800) $ (80,900)
Net loss applicable to common shareholders $ (84,815) $ (84,915)
Net loss per share-basic and diluted $ (0.40) $ (0.40)
YEAR ENDED DECEMBER 29, 2001
---------------------------
AS
PREVIOUSLY
REPORTED AS RESTATED
--------- ---------
(IN THOUSANDS)
Net revenues $ 532,165 $ 532,519
Income before interest and income taxes $ 804 $ 906
Net loss and comprehensive income loss $ (5,845) $ (5,743)
Net loss applicable to common shareholders $ (16,590) $ (16,488)
Net loss per share-basic and diluted $ (0.08) $ (0.08)
YEAR ENDED DECEMBER 28, 2002
---------------------------
AS
PREVIOUSLY
REPORTED AS RESTATED
--------- ---------
(IN THOUSANDS)
Accounts receivable, net $ 16,945 $ 16,938
Inventory $ 53,131 $ 53,134
Total Current Assets $ 88,287 $ 88,285
Accumulated Deficiency $(486,627) $(486,628)
Total Shareholders' Deficiency $ (58,841) $ (58,842)
Net revenues $ 457,644 $ 457,638
Net loss per share-basic and diluted $ (0.18) $ (0.18)
QUARTER ENDED MARCH 29, 2003
---------------------------
AS
PREVIOUSLY
REPORTED AS RESTATED
--------- ---------
(IN THOUSANDS)
Accounts receivable, net $ 13,580 $ 12,652
Inventory $ 53,425 $ 53,787
Total Current Assets $ 90,837 $ 90,548
Accumulated Deficiency $(486,435) $(486,650)
Total Shareholders' Deficiency $ (62,103) $ (62,318)
Net revenues $ 102,474 $ 101,529
Income before interest and income taxes $ 1,655 $ 1,440
Net income (loss) and comprehensive income (loss) $ 192 $ (23)
Net loss applicable to common shareholders $ (3,440) $ (3,655)
Net loss per share-basic and diluted $ (0.02) $ (0.03)
QUARTER ENDED JUNE 28, 2003
---------------------------
AS
PREVIOUSLY
REPORTED AS RESTATED
--------- ---------
(IN THOUSANDS)
Accounts receivable, net $ 15,360 $ 14,526
Inventory $ 49,382 $ 49,716
Total Current Assets $ 84,667 $ 84,381
Accumulated Deficiency $(485,745) $(485,935)
Total Shareholders' Deficiency $ (65,540) $ (65,730)
Net revenues $ 105,765 $ 105,883
Income before interest and income taxes $ 1,805 $ 1,830
Net income and comprehensive income $ 690 $ 715
Net loss applicable to common shareholders $ (3,600) $ (3,575)
Net loss per share-basic and diluted $ (0.02) $ (0.02)
SIX MONTHS ENDED JUNE 28, 2003
---------------------------
AS
PREVIOUSLY
REPORTED AS RESTATED
--------- ---------
(IN THOUSANDS)
Net revenues $ 208,239 $ 207,412
Income before interest and income taxes $ 3,460 $ 3,270
Net income and comprehensive income $ 882 $ 692
Net loss applicable to common shareholders $ (7,040) $ (7,230)
Net loss per share-basic and diluted $ (0.05) $ (0.05)
QUARTER ENDED SEPTEMBER 27, 2003
-------------------------
AS
PREVIOUSLY
REPORTED AS RESTATED
-------- --------
(IN THOUSANDS)
Net revenues $ 96,633 $ 97,466
Income (loss) before interest and income taxes $ (64) $ 126
Net loss and comprehensive loss $(16,645) $(16,455)
Net loss applicable to common shareholders $(16,645) $(16,455)
Net loss per share-basic and diluted $ (0.12) $ (0.12)
NINE MONTHS ENDED SEPTEMBER 27, 2003
-------------------------------
AS
PREVIOUSLY
REPORTED AS RESTATED
----------- -----------
(IN THOUSANDS)
Net revenues $ 304,872 $ 304,878
Net loss per share-basic and diluted $ (0.17) $ (0.17)
QUARTER ENDED DECEMBER 27, 2003
---------------------------
AS
PREVIOUSLY
REPORTED AS RESTATED
--------- ---------
(IN THOUSANDS)
Accounts receivable, net $ 14,335 $ 13,802
Inventory $ 41,576 $ 41,794
Total Current Assets $ 73,952 $ 73,774
Accumulated Deficiency $(494,791) $(494,912)
Total Shareholders' Deficiency $ (47,508) $ (47,629)
Net revenues $ 110,002 $ 109,469
Income before interest and income taxes $ 4,621 $ 4,500
Net income and comprehensive income $ 364 $ 243
Net income applicable to common shareholders $ 364 $ 243
Net income per share-basic and diluted $ 0.00 $ 0.00
YEAR ENDED DECEMBER 27, 2003
---------------------------
AS
PREVIOUSLY
REPORTED AS RESTATED
--------- ---------
(IN THOUSANDS)
Net revenues $ 414,874 $ 414,347
Income before interest and income taxes $ 8,017 $ 7,896
Net loss and comprehensive loss $ (15,399) $ (15,520)
Net loss applicable to common shareholders $ (23,321) $ (23,442)
Net loss per share-basic and diluted $ (0.16) $ (0.16)
QUARTER ENDED MARCH 27, 2004
---------------------------
AS
PREVIOUSLY
REPORTED AS RESTATED
--------- ---------
(IN THOUSANDS)
Accounts receivable, net $ 12,614 $ 12,145
Inventory $ 37,646 $ 37,835
Total Current Assets $ 71,293 $ 71,152
Accumulated Deficiency $(494,373) $(494,470)
Total Shareholders' Deficiency $ (47,086) $ (47,183)
Net revenues $ 95,312 $ 95,375
Income before interest and income taxes $ 1,445 $ 1,468
Net income and comprehensive income $ 418 $ 441
Net income applicable to common shareholders $ 417 $ 440
Net income per share-basic and diluted $ 0.00 $ 0.00
The restatements did not result in a change to the Company's cash flows
during the restated periods; however it did result in technical defaults
by the Company with its covenants under the Congress Credit Facility and
the Term Loan Facility. Congress and Chelsey Finance have waived such
defaults.