Hanover Direct Reports Profitable First Quarter

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, [phone]; or Rich Tauberman of MWW Group, [phone], for

Hanover Direct, Inc.



Web site:  http://www.hanoverdirect.com/ 

Copyright