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, N.J., Nov. 10
/PRNewswire-FirstCall/ -- 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
(http://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 http://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 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
DATASOURCE: Hanover Direct, Inc. CONTACT: Charles E. Blue, Senior
Vice President of Hanover Direct, Inc., +1-201-272-3412; or Rich
Tauberman of The MWW Group, +1-201-507-9500, for Hanover Direct,
Inc. Web site: http://www.hanoverdirect.com/
http://www.keystoneinternet.com/
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