Hanover Direct Reports Profitable First Quarter EDGEWATER, N.J.,
May 11 /PRNewswire-FirstCall/ -- 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 $3.5 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: -- 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; -- 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; -- 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 -- A
favorable impact of $0.3 million due to a reduction of special
charges recorded. Partially offset by: -- 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 -- 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
(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)
March 27, December 27, 2004 2003 (Unaudited) ASSETS CURRENT ASSETS:
$2,434 $2,282 Cash and cash equivalents 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 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 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 Total Assets $111,411 $114,796 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 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, March 29, 2004 2003 NET REVENUES $95,312 $102,474 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) NET
INCOME (LOSS) PER COMMON SHARE: Net income (loss) per common share
- basic and diluted $.00 $(.02) Weighted average common shares
outstanding - basic (thousands) 220,174 138,316 Weighted average
common shares outstanding - diluted (thousands) 220,666 138,316
HANOVER DIRECT, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (In thousands of dollars) (Unaudited) For
the 13- Weeks Ended March March 27, 29, 2004 2003 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 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) Net cash provided by financing
activities 848 3,938 Net increase in cash and cash equivalents 152
1,809 Cash and cash equivalents at the beginning of the year 2,282
785 Cash and cash equivalents at the end of the period $2,434
$2,594 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 DATASOURCE: Hanover Direct,
Inc. CONTACT: Charles Blue, S.V.P. & Chief Financial Officer,
Hanover Direct, Inc, +1-201-272-3389; or Rich Tauberman of MWW
Group, +1-201-507-9500, for Hanover Direct, Inc. Web site:
http://www.hanoverdirect.com/
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