-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LUimi+WwZY5iK0dYINppqPu6nWtSiuho0QxURzYar93HdZAZXveA4zA8UfvSiPx0 7GurvdZppdimCXdOsfVXkw== 0000950123-98-004795.txt : 19980512 0000950123-98-004795.hdr.sgml : 19980512 ACCESSION NUMBER: 0000950123-98-004795 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980328 FILED AS OF DATE: 19980511 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANOVER DIRECT INC CENTRAL INDEX KEY: 0000320333 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 138053260 STATE OF INCORPORATION: NV FISCAL YEAR END: 1227 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08056 FILM NUMBER: 98615686 BUSINESS ADDRESS: STREET 1: 1500 HARBOR BLVD CITY: WEEHAWKEN STATE: NJ ZIP: 07087 BUSINESS PHONE: 2018653800 MAIL ADDRESS: STREET 1: 1500 HARBOR BLVD CITY: WEEHAWKEN STATE: NJ ZIP: 07087 FORMER COMPANY: FORMER CONFORMED NAME: HORN & HARDART CO /NV/ DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended MARCH 28, 1998 Commission file number 1-12082 HANOVER DIRECT, INC. (Exact name of registrant as specified in its charter) DELAWARE 13-0853260 (State of incorporation) (IRS Employer Identification No.) 1500 HARBOR BOULEVARD, WEEHAWKEN, NEW JERSEY 07087 (Address of principal executive offices) (Zip Code) (201) 863-7300 (Telephone number) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES /X/ NO / / Common stock, par value $.66 2/3 per share: 203,899,156 shares outstanding as of May 4,1998. 2 HANOVER DIRECT, INC. FORM 10-Q MARCH 28, 1998 INDEX
Page ---- Part I - Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets - December 27, 1997 and March 28, 1998................................................ 3 Condensed Consolidated Statements of Income (Loss) - thirteen weeks ended March 29, 1997 and March 28, 1998................................................... 5 Condensed Consolidated Statements of Cash Flows - thirteen weeks ended March 29, 1997 and March 28, 1998................................................... 6 Notes to Condensed Consolidated Financial Statements - thirteen weeks ended March 29, 1997 and March 28, 1998............................................. 7 Item 2. Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations............................................................ 11 Item 3. Quantitative and Qualitative Disclosures About Market Risk..................... 13 Part II - Other Information Item 6. Exhibits and Reports on Form 8-K............................................... 14 Signatures............................................................................. 15
3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS HANOVER DIRECT, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 27, 1997 AND MARCH 28, 1998 (UNAUDITED) (IN THOUSANDS)
DECEMBER 27, MARCH 28, 1997 1998 --------- --------- ASSETS Current Assets: Cash and cash equivalents $ 14,758 $ 2,208 Accounts receivable, net 17,684 16,106 Accounts receivables under financing agreement 21,918 19,747 Inventories 64,330 66,884 Prepaid catalog costs 20,684 27,158 Deferred tax asset, net 3,300 3,300 Other current assets 3,083 3,645 --------- --------- Total Current Assets 145,757 139,048 --------- --------- Property and equipment, at cost: Land 4,909 4,754 Buildings and building improvements 16,486 16,486 Leasehold improvements 9,040 9,065 Furniture, fixtures and equipment 47,210 47,668 Construction in progress 4,519 6,708 --------- --------- 82,164 84,681 Accumulated depreciation and amortization (29,712) (31,786) --------- --------- Net Property and Equipment 52,452 52,895 Goodwill, net 17,412 17,282 Deferred tax asset, net 11,700 11,700 Other assets, net 2,978 3,404 --------- --------- Total Assets $ 230,299 $ 224,329 ========= =========
See Notes to Condensed Consolidated Financial Statements. 4 HANOVER DIRECT, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) DECEMBER 27, 1997 AND MARCH 28, 1998 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
DECEMBER 27, MARCH 28, 1997 1998 --------- --------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt and capital lease obligations $ 5,305 $ 5,137 Accounts payable 58,799 53,084 Accrued liabilities 30,259 23,748 Customer prepayments and credits 3,824 3,488 --------- --------- Total Current Liabilities 98,187 85,457 --------- --------- Non-current Liabilities: Long-term debt 32,668 45,605 Obligations under receivable financing 21,918 19,747 Capital lease obligations 67 38 Other 1,908 1,942 --------- --------- Total Noncurrent Liabilities 56,561 67,332 --------- --------- Total Liabilities 154,748 152,789 --------- --------- Commitments and Contingencies Shareholders' Equity: Series B Preferred Stock, convertible, $.01 par value, authorized and issued 634,900 shares 5,938 5,986 Common Stock, $.66 2/3 par value, authorized 225,000,000 shares; issued 204,441,538 and 204,486,852 shares at December 27, 1997 and March 28, 1998, respectively 136,294 136,324 Capital in excess of par value 285,165 285,773 Accumulated deficit (347,652) (352,349) --------- --------- 79,745 75,734 Less: Treasury stock, at cost (686,216 and 686,283 shares at December 27, 1997 and March 28, 1998, respectively) (968) (968) Notes receivable from sale of Common Stock (3,226) (3,226) --------- --------- Total Shareholders' Equity 75,551 71,540 --------- --------- Total Liabilities and Shareholders' Equity $ 230,299 $ 224,329 ========= =========
See Notes to Condensed Consolidated Financial Statements. 5 HANOVER DIRECT, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
13 WEEKS ENDED -------------- MARCH 29, MARCH 28, 1997 1998 ------------- ------------- Revenues $ 129,725 $ 124,535 ------------- ------------- Operating costs and expenses: Cost of sales and operating expenses 86,062 78,701 Selling expenses 33,590 33,988 General and administrative expenses 12,274 12,473 Depreciation and amortization 2,138 2,337 ------------- ------------- 134,064 127,499 ------------- ------------- Loss from operations (4,339) (2,964) ------------- ------------- Interest expense, net (2,034) (1,435) ------------- ------------- Loss before income taxes (6,373) (4,399) Income tax provision (248) (250) ------------- ------------- Net loss (6,621) (4,649) Preferred stock dividends and accretion (48) (122) ------------- ------------- Net loss applicable to common shareholders $ (6,669) $ (4,771) ============= ============= Comprehensive income $ (6,669) $ (4,771) ============= ============= Basic and diluted net loss per share $ (.05) $ (.02) ============= ============= Weighted average shares outstanding 144,647,898 203,788,774 ============= =============
6 HANOVER DIRECT, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
13 WEEKS ENDED -------------- MARCH 29, MARCH 28, 1997 1998 -------- -------- Cash flows from operating activities: Net loss $ (6,621) $ (4,649) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization, including deferred fees 2,634 2,745 Provisions for doubtful accounts 900 1,091 Compensation expense related to stock options 449 590 Other (15) -- Changes in assets and liabilities, net of acquisitions: Accounts receivable 12,562 487 Inventories 3,758 (2,554) Prepaid catalog costs (2,003) (6,474) Other current assets (224) (562) Accounts payable (19,930) (5,715) Accrued liabilities (1,718) (6,511) Customer prepayments and credits (1,011) (336) -------- -------- Net cash used by operating activities (11,219) (21,888) -------- -------- Cash flows from investing activities: Acquisitions of property (750) (2,517) Other, net 541 -- -------- -------- Net cash used by investing activities $ (209) $ (2,517) -------- -------- Cash flows from financing activities: Net borrowings under Credit Facility $ 8,769 $ 13,187 Payments of debt and capital lease obligations (645) (447) Proceeds from issuance of Common Stock -- 45 Payment of debt issuance costs (90) -- Other, net (269) (930) -------- -------- Net cash provided by financing activities 7,765 11,855 -------- -------- Net decrease in cash and cash equivalents (3,663) (12,550) Cash and cash equivalents at the beginning of the year 5,173 14,758 -------- -------- Cash and cash equivalents at the end of the period $ 1,510 $ 2,208 ======== ======== Supplemental cash flow disclosures: Interest paid $ 1,350 $ 998 ======== ======== Income taxes paid $ 401 $ 324 ======== ========
See Notes to Condensed Consolidated Financial Statements. 7 HANOVER DIRECT, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRTEEN WEEKS ENDED MARCH 29, 1997 AND MARCH 28, 1998 (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and footnotes necessary for a fair presentation of financial condition, results of operations and cash flows in conformity with generally accepted accounting principles. Reference should be made to the annual financial statements, including the footnotes thereto, included in the Hanover Direct, Inc. (the "Company") Annual Report on Form 10-K for the fiscal year ended December 27, 1997. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all material adjustments, consisting of normal recurring accruals, necessary to present fairly the financial condition, results of operations and cash flows of the Company and its consolidated subsidiaries for the interim periods. Operating results for interim periods are not necessarily indicative of the results that may be expected for the entire year. Certain prior year amounts have been reclassified to conform with the current year presentation. 2. RETAINED EARNINGS RESTRICTIONS The Company is restricted from paying dividends at any time on its Common Stock or from acquiring its capital stock by certain debt covenants contained in agreements to which the Company is a party. 3. NET LOSS PER SHARE Net loss per share is computed using the weighted average number of common shares outstanding in accordance with the provisions of SFAS No. 128 "Earnings Per Share". The weighted average number of shares used in the calculation for both basic and diluted net loss per share at March 29, 1997 and March 28, 1998 was 144,647,898 and 203,788,774 shares, respectively. Due to the net loss for the thirteen weeks ended March 29, 1997 and March 28, 1998, warrants, stock options and convertible preferred stock are excluded from the calculation of net loss per share. 4. RESTRUCTURING Restructuring reserves primarily are comprised of severance and facility exit/relocation costs. The cost of employee severance includes termination benefits for line and supervisory personnel in fulfillment, telemarketing, MIS, merchandising and various levels of corporate and catalog management. Facility exit/relocation costs are primarily related to the Company's decision to sublet a portion of its Weehawken, NJ corporate facility and to consolidate its distribution centers in Roanoke, VA. As of March 28, 1998, the Company consolidated two of six catalogs from its Hanover, PA distribution center into its Roanoke, VA home fashion distribution center. The remaining four catalogs are expected to be relocated by the end of fiscal 1998. Reserves for restructuring costs approximated $5.4 million and $4.9 million at December 27, 1997 and March 28, 1998, respectively, and are included in accrued liabilities in the accompanying condensed consolidated balance sheets. 5. ADDITIONAL INVESTMENT In November 1997, the Company announced that SMALLCAP World Fund, Inc., a mutual fund and substantial investor in the Company, agreed to purchase 3.7 million shares of the Company's Common Stock at $1.41 per share, which represented fair market value, for an 8 aggregate purchase price of approximately $5.2 million in a private placement. This transaction was consummated on November 6, 1997. These shares are restricted but a Registration Statement with respect thereto was filed with the Securities and Exchange Commission under the Securities Act of 1933 on April 30, 1998 and declared effective on May 8, 1998. 6. RELATED PARTY TRANSACTIONS At March 28, 1998, current and former officers and executives of the Company owed the Company approximately $3.0 million, of which approximately $1.7 million relates to receivables, excluding accrued interest, under the Executive Equity Incentive Plan. These amounts due to the Company bear interest at rates ranging from 5.00% to 7.75% and are due from 1999 to 2002. An additional $1.0 million relates to a receivable, excluding accrued interest, under the Long-Term Incentive Plan for Rakesh K. Kaul. At March 28, 1998, NAR and Richemont owned approximately 46% and 20% of the Company's Common Stock, respectively. In April 1998, pursuant to the Joint Venture Agreement of NAR Group Limited among Richemont, Evansville Limited ("Evansville") and Mr. Quasha, dated June 13, 1997, Evansville and Mr. Quasha notified Richemont that they are exercising their right to cause NAR to sell and transfer to Richemont approximately 25 million shares of Common Stock of the Company. After giving effect to this transaction, Mr. Quasha and NAR will beneficially own approximately 33.3% of the Common Stock and Richemont will beneficially own approximately 66.5% of the Common Stock. 7. LONG-TERM DEBT The Congress Facility was originally comprised of a revolving line of credit of up to $65 million with a three year term expiring in November 1998 ("Congress Revolving Credit Facility") and two year term loans aggregating $10 million with an original expiration term in November 1998 ("Revolving Term Notes"). The amount that can be borrowed under the Congress Facility is based on percentages of eligible inventory and accounts receivable. The Congress Facility is secured by all assets of the Company. On March 25, 1998, the Company amended its agreement with Congress to extend the credit facility and term notes until January 31, 2001. The Congress Facility places limitations on the incurrence of additional indebtedness. The Company is required to maintain minimum net worth and working capital throughout the term of the agreement. The Company was in compliance with such covenants at March 28, 1998. The rates of interest related to the Congress Revolving Credit Facility and Revolving Term Notes at March 27, 1998 were 9.75% and 10%, respectively. The face amount of unexpired documentary letters of credit at December 27, 1997 and March 28, 1998 was $3 million and $4 million, respectively. At March 28, 1998, availability under the Congress Facility was $31.2 million. 8. STOCK BASED COMPENSATION PLANS The Company accounts for its stock based compensation in accordance with the fair value provisions of SFAS No. 123. Total compensation expense recognized in the three months ended March 28, 1998 and March 29, 1997 was $590,000 and $449,000, respectively. There were no changes to any of the provisions or descriptions of any of the Company's stock option plans during the three months ended March 28, 1998. In March 1998, certain options were granted under the 1996 Stock Option Plans (Non Performance Based and Performance Based). The following summarizes the activity in these plans during the period: 9
Weighted Average 1996 Plan Non-Performance Based Shares Exercise Price --------- -------- Options outstanding, December 27, 1997 2,238,333 $ 1.10 Granted 407,500 $ 3.19 Exercised (27,432) $ 1.00 Forfeited (5,033) $ 1.00 --------- -------- Options outstanding, March 28, 1998 2,613,368 $ 1.43 --------- -------- Options exercisable, March 28, 1998 448,342 $ 0.97 --------- -------- Weighted average fair value of options granted $ 1.56
Summary information on options outstanding at March 28, 1998 is as follows:
Range of Number Outstanding Weighted Average Weighted Average Exercise Prices At March 28, 1998 Exercise Price Remaining Contractual Life --------------- ----------------- -------------- -------------------------- $ .69 to $1.00 1,573,368 $ 0.96 5.6 $ 1.43 to $1.75 632,500 $ 1.46 6.3 $3.19 407,500 $ 3.19 6.9 ---------------- ----------- ------- ----- $ .69 to $3.19 2,613,368 $ 1.43 6.0
Weighted Average 1996 Plan Performance Based Shares Exercise Price - --------------------------- ------ -------------- Options outstanding, December 27, 1997 2,212,916 $ 1.10 Granted 407,500 $ 3.19 Exercised (17,882) $ 1.00 Forfeited (6,283) $ 1.00 --------- ------- Options outstanding, March 28, 1998 2,596,251 $ 1.43 --------- ------- Options exercisable, March 28, 1998 400,022 $ 0.97 --------- ------- Weighted average fair value of options granted $ 1.56
Summary information on options outstanding at March 28, 1998 is as follows :
Range of Number Outstanding Weighted Average Weighted Average Exercise Prices At March 28, 1998 Exercise Price Remaining Contractual Life --------------- ----------------- -------------- -------------------------- $ .69 to $1.00 1,556,251 $0.96 5.6 $ .43 to $1.75 632,500 $1.46 6.3 $3.19 407,500 $3.19 6.9 -------------- ----------- ------- ----- $ .69 to $3.19 2,596,251 $1.43 6.0
10 The fair value of the options granted under the 1996 Stock Option Plan was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions for grants in the three months ended March 28, 1998: expected volatility of 55.77%; expected option life of four years; risk-free interest rate of 5.75%; and no expected dividend. Additionally, 333,333 options from the special grant of 1,000,000 options made to certain executives of the Company in March 1997 vested in March 1998. These options have a weighted-average exercise price of $1.00 per share. In March 1998, the Compensation Committee approved the vesting of 250,000 options granted under the CEO Performance Year Plan. These options have an exercise price of $1.16 per share. As of March 28,1998, there were 1,000,000 options outstanding with a weighted average exercise price of $1.16 per share, and 500,000 options exercisable, with a weighted average exercise price of $1.16 per share, pursuant to this plan. There was no other activity in any other stock option plan of the Company during the three months ended March 28, 1998. At the May 7, 1998 annual meeting of shareholders, the target price established under the Company's Stock Option Agreement dated August 23, 1996 with Rakesh K. Kaul forming a part of the Long-Term Incentive Plan for the CEO was amended. The target closing price of the Common Stock which would trigger the option was changed from $7.00 to $4.50 per share during a 91-day period ending on or before March 7, 2002. This provision relates to the option expiring March 7, 2006 to purchase 2,000,000 shares of Common Stock of the Company. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth, for the fiscal periods indicated, the percentage relationship to revenues of certain items in the Company's Condensed Consolidated Statements of Income (Loss).
13 Weeks Ended -------------- 1997 1998 ------ ------ Revenues 100.0% 100.0% Cost of sales and operating expenses 66.3 63.2 Selling expenses 25.9 27.3 General and administrative expenses 9.5 10.0 Depreciation and amortization 1.7 1.9 Loss from operations (3.4) (2.4) Interest expense, net (1.6) (1.2) Net loss (5.1)% (3.7)%
RESULTS OF OPERATIONS THIRTEEN-WEEKS ENDED MARCH 28, 1998 COMPARED WITH THIRTEEN-WEEKS ENDED MARCH 29, 1997 Net Loss. The Company reported a net loss of ($4.6) million or $(.02) per share for the thirteen-weeks ended March 28, 1998 compared with a net loss of $(6.6) million or $(.05) per share for the same period last year. The per share amounts were calculated based on weighted average shares outstanding of 203,788,774 and 144,647,898 for the current year and prior period, respectively. This increase in weighted average shares was due to a $50 million rights offering completed in June 1997. The net loss for the thirteen-weeks ended March 28, 1998 was primarily the result of the seasonality of the Company's business and an increase in catalog costs for circulation to prospective new customers. The seasonality of the Company's business is such that the sales volumes achieved in the first quarter of the year are not sufficient to cover its fixed costs for such period. Compared to the comparable period last year, the decrease in net loss was primarily due to: (i) an improved merchandise in-stock position, (ii) improved gross margins, (iii) a reduction in postage costs associated with shipping products to customers and (iv) a reduction in distribution costs. Revenues. Revenues decreased 4.0% for the thirteen-week period ended March 28, 1998 to $124.5 million from $129.7 million for the same period in 1997. Revenues from continuing catalogs increased by 1.6%. The Company circulated 74.5 million catalogs during the 1998 period versus 71.3 million catalogs in the prior year period. Revenues from discontinued catalogs decreased to $.02 million for the thirteen-week period ended March 28, 1998 from $7.1 million for the corresponding period in 1997. Operating Costs and Expenses. Cost of sales and operating expenses decreased to 63.2% of revenues for the thirteen-week period ended March 28, 1998 compared to 66.3% of revenues for the same period in 1997. The improvement results from an increase in product margins which has been realized as a result of improved product sourcing and merchandise mix. The Company realized savings in outbound postage expense due to improved initial fill performance by most of the Company's catalogs. The Company also experienced an improvement in distribution costs which resulted from the consolidation of distribution activities into its distribution center in Roanoke, Virginia. Selling expenses increased to 27.3% of revenues in the first quarter of 1998 from 25.9% in the same period in 1997. This increase was primarily due to an increase in circulation to prospective customers. 12 During the period, the number of customers having made a purchase in the preceding 12 months increased from 4.2 million at December 27, 1998 to 4.6 million customers at March 28, 1998. General and administrative expenses were 10.0% of revenues for the first quarter of 1998 versus 9.5% for the comparable period in 1997. General and administrative costs reflected comparable year-to-year spending, despite a 4% decline in revenues as the Company repositioned its spending to support its growth initiatives. The total expense increased by $.2 million to $12.5 million for the thirteen week period ended March 28, 1998 versus the comparable period last year. Depreciation and amortization increased to 1.9% of revenues for the first quarter of 1998 versus 1.7% for the comparable period in 1997. The increase is primarily a result of fixed asset additions associated with the improvements being effected in the distribution center in Roanoke, Virginia. Loss from Operations. The Company recorded a loss from operations of $(3.0) million for the first quarter ended March 28, 1998 or (2.4%) of revenues, compared to a loss from operations of $(4.3) million for the same period in 1997 or (3.4%) of revenues. Interest Expense, Net. Interest expense, net decreased $.6 million in the first quarter of 1998 compared to the same period last year as a result of the Company's improved liquidity and reduced borrowing requirements. Income Taxes. The Company recorded a state tax provision of $.3 million in each of the thirteen-week periods ended March 28, 1998 and March 29, 1997. LIQUIDITY AND CAPITAL RESOURCES At March 28, 1998, the Company had $2.2 million in cash and cash equivalents, compared with $14.8 million at December 27, 1997. Working capital and current ratio were $53.6 million and 1.63 to 1 at March 28, 1998 versus $47.6 million and 1.48 to 1 at December 27, 1997. The $22 million of cash used in operations was targeted to improve the in-stock position of the Company's catalogs by increasing inventory levels, to improve vendor relations by decreasing accounts payable and accrued expenses, to fund a seasonal increase in catalog costs, to increase prospecting, and to fund first quarter operating losses. In December 1996, the Company finalized its agreement (the "Reimbursement Agreement") with Richemont Finance S.A. that provided the Company with up to approximately $28 million of letters of credit through Swiss Bank Corporation, New York Branch. The letters of credit were to expire on February 18, 1998. In November 1997, Richemont definitively agreed to extend its guarantee under the Reimbursement Agreement to March 30, 1999. As consideration for this transaction, the Company agreed to pay to Richemont a fee of 4% of the principal amount of the letters of credit aggregating $1,073,483. The extension required the approval of Congress and Swiss Bank, which approvals were obtained in February 1998, and was subject to certain other conditions. On February 18, 1998 the extension of the Richemont guarantee and the closing of this transaction were consummated. Accordingly, the expiration dates of the letters of credit were extended through March 30, 1999, and the letters of credit were amended to reflect the assignment of all obligations thereon from Swiss Bank, New York Branch to Swiss Bank, Stamford Branch. On March 25, 1998, the Congress Facility was amended to extend the facility expiration term until January 31, 2001. The Company believes that the 1997 Rights Offering completed in June 1997, together with the Credit Facility modifications, the extension of the letters of credit by Richemont and the Company's reduced operating losses, have eased vendor/credit concerns about the Company's viability. The Company's ability to continue to improve upon its prior year's performance and implement its business strategy is critical to maintaining adequate liquidity. 13 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. none. 14 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27 Financial Data Schedule (EDGAR filing only). (b) Reports on Form 8-K none. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HANOVER DIRECT, INC. Registrant By:/s/ Larry J. Svoboda ---------------------------- Larry J. Svoboda Senior Vice-President and Chief Financial Officer (on behalf of the Registrant and as principal financial officer) Date: May 11, 1997 EX-27 2 FINANCIAL DATA SCHEDULE
5 THE LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE HANOVER DIRECT, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1997 AND IS QUALIFIED IN IT ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAR-28-1997 MAR-28-1997 2,208 0 19,148 (3,042) 66,884 139,048 84,681 (31,786) 224,329 85,457 45,643 5,986 0 136,324 (70,770) 224,329 124,535 124,535 78,701 127,499 0 1,091 1,435 (4,399) 250 (4,649) 0 0 0 (4,649) (.02) (.02)
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