Hanover Direct Reports Fiscal 2000 Net Loss of $(80.8) Million; Expands Strategic Realignment Program During 1st Quarter 2001; Retains Newmark Retail Financial Advisors LLC To Explore Asset Sales

Apr 03, 2001, 01:00 ET from Hanover Direct, Inc.

    WEEHAWKEN, N.J., April 3 /PRNewswire/ -- Hanover Direct, Inc. (Amex:   HNV)
 today announced results for the fiscal year ended December 30, 2000.
     Hanover Direct, Inc. reported a net loss of $80.8 million or $(.40) per
 common share for the fiscal year ending December 30, 2000 compared with a net
 loss of $16.3 million or ($.08) per common share for fiscal 1999.  Compared to
 the comparable period in 1999, the $64.5 million increase in net loss was
 primarily due to: i.) higher distribution and systems development costs
 primarily related to the expansion of the Company's business to business
 ("B-to-B") e-commerce transaction services operation; ii.) the recording of
 special charges in the fourth quarter of 2000 in connection with the Company's
 strategic business realignment program announced on January 5, 2001; iii.) the
 impact of the write-down of inventory associated with the decision made in the
 fourth quarter of 2000 to discontinue three catalog brands; iv.) higher
 general and administrative expenses; and v.) higher interest expense.
     Net revenues increased $53.2 million or 9.7 % to $603.0 million for fiscal
 year 2000 from $549.9 million for fiscal year 1999. Approximately
 $52.5 million of this increase is attributable to revenues generated from the
 Company's core brands, which amounted to $547.0 million, an increase of 10.6%
 over the comparable period in 1999.  This increase is attributable to higher
 demand across most merchandise categories aided by an increase in circulation
 of catalogs offering these core brands which increased from 214 million
 catalogs in 1999 to 251 million in 2000.  Net revenues from discontinued
 brands in fiscal year 2000 amounted to $18.4 million which represents a
 $15.0 million decrease from 1999 which also included two additional brands
 which had been discontinued or repositioned earlier in that year.  This
 decrease in net revenues, however, was offset by an increase of approximately
 the same amount in net revenues generated by the Company's B-to-B e-commerce
 transaction services operation which increased by 101.3% to $30 million for
 fiscal year 2000.
     In December 2000, the Company developed a strategic realignment plan for
 the business.  The plan directs the Company's resources primarily towards
 growth in Hanover Brands while at the same time reducing costs in all areas of
 the business and eliminating investment activities that had not generated
 sufficient revenue to produce profitable returns.  As a result of actions
 needed to execute this plan, the Company recorded a special charge of
 $19.1 million in fiscal year 2000 to cover costs related to severance,
 facility exit costs and fixed-asset write-offs.
     At December 30, 2000, the Company had $1.7 million in cash and cash
 equivalents compared with $2.8 million at December 25, 1999.  Working capital
 and current ratios at December 30, 2000 were $16.8 million and 1.15 to 1
 versus $18.0 million and 1.19 to 1 at December 25, 1999.  Total cumulative
 borrowings, including financing under capital lease obligations, as of
 December 30, 2000, aggregated $39.0 million, $35.3 million of which is
 classified as long-term.  Remaining availability under the Congress Revolving
 Credit Facility as of December 30, 2000 was $44.4 million ($46.1 million
 including cash on hand).  Capital commitments at December 30, 2000 totaled
 approximately $0.6 million principally for the Lawson human resources/payroll
 system, fixtures and equipment for the Company's warehouse and fulfillment
 facility in Maumelle, Arkansas, IT hardware and software and an upgrade of the
 Kronos payroll reporting system.  Management believes that the Company has
 sufficient liquidity and availability under its credit agreements to fund its
 planned operations through at least December 29, 2001.  Achievement of the
 cost saving and other objectives of the Company's strategic business
 realignment plan is critical to the maintenance of adequate liquidity.
     In the first quarter of 2001, the Company took further actions in support
 of the strategic realignment plan and: 1) retained Newmark Retail Financial
 Advisors LLC to seek qualified purchasers for its Gump's By Mail and Gump's
 San Francisco business, its Brawn of California business, including the
 International Male and Undergear brands, and its 277,500 square foot warehouse
 and fulfillment facility located in Hanover, Pennsylvania; 2) eliminated
 approximately 24 FTE positions principally in Hanover Brands and the Company's
 IT operations;  3) planned the exit of a portion of its leased principal
 executive offices in Weehawken, New Jersey and a leased storage facility later
 in the year; 4) executed an agreement for a new discount buyers club to
 consumers with MemberWorks Incorporated; and 5) instituted initiatives
 directed at achieving costs savings in package shipping costs and
 telemarketing and customer service.
     As a result of these actions and the announced intention to direct
 resources primarily towards growth in its core brands, The Company Store,
 Domestications, Improvements and Silhouettes, the Company's business to
 business revenues in fiscal 2001 and beyond will be materially reduced.
 Therefore, commencing in fiscal year 2001, pursuant to SFAS 131, the Company
 will report results for the consolidated operations of Hanover Direct, Inc. as
 one business segment.
     A conference call with the management of Hanover Direct, Inc. to review
 the fiscal 2000 results discussed herein will be held on Tuesday, April 3,
 2001 at 11 a.m. Eastern Standard Time.  If you would like to participate in
 the call, please call 212-896-6052 between 10:50 a.m. and 10:55 a.m. Eastern
 Standard Time.  A re-play of the conference will be available immediately
 following the call until 11:59 p.m. Eastern Standard Time on April 4, 2001 and
 can be accessed by calling 800-633-8284 (domestic) and 858-812-6440
 (International), Access#: 18422750.
 
     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.  Hanover Brands, Inc. is comprised of the
 Company's catalog and e-commerce web site portfolio of home fashions, apparel
 and gift brands, including Domestications, The Company Store, Company Kids,
 Encore, Improvements, Silhouettes, International Male, Undergear, 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.  erizon, Inc. is comprised of Keystone Internet Services, Inc.
 (http://www.keystoneinternet.com), the Company's third party fulfillment
 operation, and also provides the logistical, IT and fulfillment needs of the
 Hanover Brands, Inc.  Information on Hanover Direct, including each of its
 subsidiaries, can be accessed on the Internet at http://www.hanoverdirect.com.
 
     Forward-Looking Statements
     The following statement constitutes a forward-looking statement within the
 meaning of the Private Securities Litigation Reform Act of 1995.
     "Management believes that the Company has sufficient liquidity and
 availability under its credit agreements to fund its planned operations
 through at least December 29, 2001."
 
     Cautionary Statements
     The following material identifies important factors that could cause
 actual results to differ materially from those expressed in the
 forward-looking statement identified above and in any other forward looking
 statements contained elsewhere herein:
     The current general deterioration in economic conditions in the United
 States leading to reduced consumer confidence, reduced disposable income and
 increased competitive activity and the business failure of companies in the
 retail, catalog and direct marketing industries.  Such economic conditions
 leading to a reduction in consumer spending generally and in home fashions
 specifically, and leading to a reduction in consumer spending specifically
 with reference to other types of merchandise the Company offers in its
 catalogs or over the Internet, or which are offered by the Company's third
 party fulfillment clients.
     Customer response to the Company's merchandise offerings and circulation
 changes; effects of shifting patterns of e-commerce versus catalog purchases;
 costs associated with printing and mailing catalogs and fulfilling orders;
 dependence on customers' seasonal buying patterns; and fluctuations in foreign
 currency exchange rates.
     The ability of the Company to achieve projected levels of sales and
 reducing costs commensurately. Increase in postage, printing and paper prices
 and/or the inability of the Company to reduce expenses generally as required
 and/or increase prices of the Company's merchandise.
     The failure of the Internet generally to achieve the projections for it
 with respect to growth of e-commerce or otherwise, and the failure of the
 Company to increase Internet sales.  The imposition of regulatory, tax or
 other requirements with respect to Internet sales.  Actual or perceived
 technological difficulties or security issues with respect to conducting
 e-commerce over the Internet generally or through the Company's websites or
 those of its third-party fulfillment clients specifically.
     The ability of the Company to attract and retain management and employees
 generally and specifically with the requisite experience in e-commerce,
 Internet and direct marketing businesses.  The ability of employees of the
 Company who have been promoted as a result of the Company's recently announced
 restructuring plan to perform the responsibilities of their new positions.
     The current general deterioration in economic conditions in the United
 States leading to key vendors and suppliers reducing or withdrawing trade
 credit to companies in the retail and catalog and direct marketing industries.
 The risk that key vendors or suppliers may reduce or withdraw trade credit to
 the Company, convert the Company to a cash basis or otherwise change credit
 terms, or require the Company to provide letters of credit or cash deposits to
 support its purchase of inventory, increasing the Company's cost of capital
 and impacting the Company's ability to obtain merchandise in a timely manner.
 Vendors may begin to withhold shipments of merchandise to the Company.  The
 ability of the Company to find alternative vendors and suppliers on
 competitive terms if existing vendors or suppliers cease doing business with
 the Company.
     The inability of the Company to timely obtain and distribute merchandise,
 leading to an increase in backorders and cancellations.
     Defaults under the Congress Credit Facility, or inadequacy of available
 borrowings thereunder, may reduce or impair the Company's ability to obtain
 letters of credit or other credit to support its purchase of inventory and
 support normal operations, impacting the Company's ability to obtain, market
 and sell merchandise in a timely manner.
     The ability of the Company to continue to make borrowings under the
 Congress Credit Facility is subject to the Company's continued compliance with
 certain financial and other covenants contained therein, including net worth,
 net working capital, capital expenditure and EBITDA covenants.  Borrowings
 under the Congress Credit Facility are also subject to limitations based upon
 specified percentages of eligible receivables and eligible inventory, and the
 requirement that the Company maintain $3.0 million of excess credit
 availability at all times.  The enforcement by Congress of such covenants and
 limitations.
     The Company has a history of operating losses.  Continuation of the
 operating losses, and the incurrence of costs associated with the Company's
 recently announced restructuring plan, may result in the Company failing to
 comply with certain financial and other covenants contained in the Congress
 Credit Facility, including net worth, net working capital, capital expenditure
 and EBITDA covenants.
     The ability of the Company to complete the Company's recently announced
 restructuring program, within the time periods anticipated by the Company.
 The ability of the Company to realize the aggregate cost savings anticipated
 in connection with the restructuring plan, or within the time periods
 anticipated therefor.  The aggregate costs of effecting the restructuring plan
 may be greater than the amounts anticipated by the Company.
     The ability of the Company to transfer third party fulfillment operations
 conducted at the fulfillment centers located in Maumelle, Arkansas and Kindig
 Lane, Hanover, Pennsylvania to other facilities in a timely manner while
 satisfying its contractual obligations to provide fulfillment services for
 third party clients and itself.
     The ability of the Company to dispose of assets related to its third party
 fulfillment business, to the extent not transferred to other facilities.
     The initiation by the Company of additional cost-cutting and restructuring
 initiatives, the costs associated therewith, and the ability of the Company to
 timely realize any savings anticipated in connection therewith.
     The ability of the Company to maintain insurance coverages required in
 order to operate its businesses and as required by the Congress Credit
 Facility.
     The inability of the Company to access the capital markets due to market
 conditions generally, including a lowering of the market valuation of
 companies in the direct marketing and retail businesses, and the Company's
 business situation specifically.
     The Company's dependence up to August 24, 2000 on Richemont and its
 affiliates for financial support and the fact that they are not under any
 obligation ever to provide any additional support in the future.
     The ability of the Company to achieve the cost saving and other objectives
 of its strategic business realignment 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.
 
                    CONSOLIDATED STATEMENTS OF INCOME (LOSS)
          For the Years Ended December 30, 2000 and December 25, 1999
              (In thousands of dollars, except per share amounts)
 
                                                         2000           1999
     NET REVENUES                                    $603,014       $549,852
     OPERATING COSTS AND EXPENSES:
     Cost of sales and operating expenses             404,959        350,502
     Write-down of inventory of
      discontinued catalogs                             2,048        (1,932)
     Special charges (credit)                          19,126            144
     Selling expenses                                 153,462        136,584
     General and administrative expenses               84,881         68,928
     Depreciation and amortization                      9,090          9,382
                                                      673,566        563,608
     (LOSS) FROM OPERATIONS                          (70,552)        (8,446)
      (Gain) on sale of The Shopper's Edge                 --        (4,343)
      (Gain) on sale of Austad's                           --          (967)
     (LOSS) BEFORE INTEREST AND TAXES                (70,552)        (8,446)
     Interest expense, net                             10,083          7,338
      (Loss) before income taxes                     (80,635)       (15,785)
     Income tax provision                                 165            530
     NET (LOSS) AND COMPREHENSIVE (LOSS)             (80,800)       (16,314)
     Preferred stock dividends                          4,015            634
     NET (LOSS) APPLICABLE TO COMMON SHAREHOLDERS    (84,815)       (16,948)
     NET (LOSS) PER COMMON SHARE:
     Net (loss) per common share (basic and diluted)    (.40)          (.08)
     Weighted average common shares
      outstanding - basic and diluted (thousands)     213,252        210,719
 
                          CONSOLIDATED BALANCE SHEETS
                 As of December 30, 2000 and December 25, 1999
                (In thousands of dollars, except share amounts)
 
     CURRENT ASSETS:                                     2000           1999
     Cash and cash equivalents                         $1,691         $2,849
     Accounts receivable, net of allowance
      for doubtful accounts of $5,668 in 2000
      and $3,300 in 1999                               27,703         29,287
     Inventories                                       69,612         54,816
     Prepaid catalog costs                             23,084         20,305
     Deferred tax asset, net                            3,300          3,300
     Other current assets                               3,056          2,935
        Total Current Assets                          128,446        113,492
     PROPERTY AND EQUIPMENT, AT COST:
     Land                                               4,724          4,634
     Buildings and building improvements               23,442         23,269
     Leasehold improvements                            12,624          94,91
     Furniture, fixtures and equipment                 59,773         53,863
     Construction in progress                             647          1,990
                                                      101,210         93,247
     Accumulated depreciation and amortization       (55,570)       (46,360)
     Property and equipment, net                       45,640         46,887
     Goodwill, net                                     15,816         16,336
     Deferred tax asset, net                           11,700         11,700
     Other assets                                       1,417          3,004
        Total Assets                                  203,019        191,419
     LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
     CURRENT LIABILITIES:
     Current portion of long-term debt and
      capital lease obligations                         3,718          3,257
     Accounts payable                                  67,858         63,549
     Accrued liabilities                               34,443         24,284
     Customer prepayment and credits                    5,592          4,412
        Total Current Liabilities                     111,611         95,502
     NON-CURRENT LIABILITIES:
     Long-term debt                                    35,318         39,578
     Other                                              8,914          2,474
        Total Non-current Liabilities                  44,232         42,052
        Total Liabilities                             155,843        137,554
     SERIES A CUMULATIVE PARTICIPATING
      PREFERRED STOCK
     Mandatory redeemable at $50 per share ($70,000),
      2,345,000 shares authorized, 1,475,498 shares
      issued at December 30, 2000 and
      none at December 25, 1999                        71,628             --
     SHAREHOLDER'S EQUITY (DEFICIT):
     Series B Convertible Additional Preferred Stock,
      $10 stated value, authorized, issued and
      outstanding: none at December 30, 2000 and 634,900
      shares at December 25, 1999                          --          6,318
     Common Stock, $.66 2/3 par value, authorized
      300,000,000 shares in 2000 and 1999; issued
      214,425,498 shares in 2000 and 211,519,511
      shares in 1999                                  142,951        141,013
     Capital in excess of par value                   307,595        301,088
     Accumulated deficit                            (471,651)      (390,763)
                                                     (21,105)         57,656
     Less:
     Treasury stock, at cost (729,167 shares in 2000
      and 652,552 shares in 1999)                     (2,223)        (1,829)
     Notes receivable from sale of Common Stock       (1,124)        (1,962)
                                                     (21,105)         57,656
     Less:
     Treasury stock, at cost (729,167 shares in 2000
      and 652,552 shares in 1999)                     (2,223)        (1,829)
     Notes receivable from sale of Common Stock       (1,124)        (1,962)
        Total Shareholders' Equity (Deficit)         (24,452)         53,865
        Total Liabilities and Shareholders' Equity    203,019        191,419
 
 
                      CONSOLIDATED STATEMENTS OF CASH FLOW
          For the Years Ended December 30, 2000 and December 25, 1999
                           (In thousands of dollars)
 
     CASH FLOWS FROM OPERATING ACTIVITIES:               2000           1999
     Net (loss)                                     $(80,800)      $(16,314)
     Adjustments to reconcile net (loss) to net cash (used) by operating
     activities:
     Depreciation and amortization, including
      deferred fees                                    11,271         11,951
     Provision for doubtful accounts                    4,947          2,817
     Special charges (credit)                          19,126            144
     Write-down of inventory of
      discontinued catalogs (recovery)                  2,048        (1,932)
     Gain on the sale of Austad's                          --          (967)
     Compensation expense related to stock options      5,175          2,890
     Changes in assets and liabilities                (3,363)        (8,639)
     Accounts receivables                            (16,844)          8,853
     Inventories                                      (2,779)        (4,288)
     Prepaid catalog costs                              4,309        (1,045)
     Accounts payable                                   2,119            710
     Accrued liabilities                                1,180          (279)
     Customer prepayments and credits                   1,803          (572)
     Other, net                                      (51,808)        (6,671)
     CASH FLOWS FROM INVESTING ACTIVITIES:
     Acquisitions of property and equipment          (14,581)        (4,830)
     Proceeds from term loan facility                      --          1,568
     Proceeds from investment                             988             --
     Net cash (used) by investing activities         (13,593)        (3,262)
     CASH FLOWS FROM FINANCING ACTIVITIES:
     Net borrowings under revolving credit facility    12,810          5,202
     Borrowings from term loan facility                 9,820             --
     Payments of long-term debt and
      capital lease obligations                      (24,130)        (2,745)
     Net proceeds from issuance of preferred stock     67,700             --
     Payment of debt issuance costs                   (2,770)        (2,701)
     Payment of Series B Convertible
      Additional Preferred Stock dividends              (920)             --
     Proceeds from issuance of stock options              847            936
     Proceeds from exercise of stock warrants              --             --
     Other, net                                         (886)          (117)
     Net cash provided by financing activities         64,243            575
     Net (decrease) in cash and cash equivalents      (1,158)        (9,358)
     Cash and cash equivalents at the
      beginning of the year                             2,849         12,207
     Cash and cash equivalents at the end of the year   1,691          2,849
 
 
       Reportable segment data were as follows (in thousands of dollars):
 
              Years Ended December 30, 2000, and December 25, 1999
 
                             Direct        B-to-B  Elimination  Consolidated
                           Commerce      Services       /Other
 
     Results for the
      fiscal year ended
      December 30, 2000:
     Revenue from
      external customers   $572,995       $30,008          $11      $603,014
     Inter-segment revenues      --       103,282    (103,282)            --
     Income/(loss) before
      interest & taxes        8,103      (57,908)     (20,747)      (70,552)
     Interest
      income/(expense)      (4,744)       (4,524)        (815)      (10,083)
     Income/(loss) before
      income taxes..          3,359      (62,432)     (21,562)      (80,635)
     Results for the fiscal
      year ended
      December 25, 1999:
     Revenue from external
      customers ...        $534,978       $14,874          $--      $549,852
     Inter-segment
      revenues                   --       102,923    (102,923)            --
     Income/(loss)
      before
      interest & taxes       10,445      (18,881)         (10)       (8,446)
     Interest
      income/(expense)      (1,971)       (5,313)         (54)       (7,338)
     Income/(loss) before
      income taxes            8,474      (24,194)         (64)      (15,784)
 
 
 

SOURCE Hanover Direct, Inc.
    WEEHAWKEN, N.J., April 3 /PRNewswire/ -- Hanover Direct, Inc. (Amex:   HNV)
 today announced results for the fiscal year ended December 30, 2000.
     Hanover Direct, Inc. reported a net loss of $80.8 million or $(.40) per
 common share for the fiscal year ending December 30, 2000 compared with a net
 loss of $16.3 million or ($.08) per common share for fiscal 1999.  Compared to
 the comparable period in 1999, the $64.5 million increase in net loss was
 primarily due to: i.) higher distribution and systems development costs
 primarily related to the expansion of the Company's business to business
 ("B-to-B") e-commerce transaction services operation; ii.) the recording of
 special charges in the fourth quarter of 2000 in connection with the Company's
 strategic business realignment program announced on January 5, 2001; iii.) the
 impact of the write-down of inventory associated with the decision made in the
 fourth quarter of 2000 to discontinue three catalog brands; iv.) higher
 general and administrative expenses; and v.) higher interest expense.
     Net revenues increased $53.2 million or 9.7 % to $603.0 million for fiscal
 year 2000 from $549.9 million for fiscal year 1999. Approximately
 $52.5 million of this increase is attributable to revenues generated from the
 Company's core brands, which amounted to $547.0 million, an increase of 10.6%
 over the comparable period in 1999.  This increase is attributable to higher
 demand across most merchandise categories aided by an increase in circulation
 of catalogs offering these core brands which increased from 214 million
 catalogs in 1999 to 251 million in 2000.  Net revenues from discontinued
 brands in fiscal year 2000 amounted to $18.4 million which represents a
 $15.0 million decrease from 1999 which also included two additional brands
 which had been discontinued or repositioned earlier in that year.  This
 decrease in net revenues, however, was offset by an increase of approximately
 the same amount in net revenues generated by the Company's B-to-B e-commerce
 transaction services operation which increased by 101.3% to $30 million for
 fiscal year 2000.
     In December 2000, the Company developed a strategic realignment plan for
 the business.  The plan directs the Company's resources primarily towards
 growth in Hanover Brands while at the same time reducing costs in all areas of
 the business and eliminating investment activities that had not generated
 sufficient revenue to produce profitable returns.  As a result of actions
 needed to execute this plan, the Company recorded a special charge of
 $19.1 million in fiscal year 2000 to cover costs related to severance,
 facility exit costs and fixed-asset write-offs.
     At December 30, 2000, the Company had $1.7 million in cash and cash
 equivalents compared with $2.8 million at December 25, 1999.  Working capital
 and current ratios at December 30, 2000 were $16.8 million and 1.15 to 1
 versus $18.0 million and 1.19 to 1 at December 25, 1999.  Total cumulative
 borrowings, including financing under capital lease obligations, as of
 December 30, 2000, aggregated $39.0 million, $35.3 million of which is
 classified as long-term.  Remaining availability under the Congress Revolving
 Credit Facility as of December 30, 2000 was $44.4 million ($46.1 million
 including cash on hand).  Capital commitments at December 30, 2000 totaled
 approximately $0.6 million principally for the Lawson human resources/payroll
 system, fixtures and equipment for the Company's warehouse and fulfillment
 facility in Maumelle, Arkansas, IT hardware and software and an upgrade of the
 Kronos payroll reporting system.  Management believes that the Company has
 sufficient liquidity and availability under its credit agreements to fund its
 planned operations through at least December 29, 2001.  Achievement of the
 cost saving and other objectives of the Company's strategic business
 realignment plan is critical to the maintenance of adequate liquidity.
     In the first quarter of 2001, the Company took further actions in support
 of the strategic realignment plan and: 1) retained Newmark Retail Financial
 Advisors LLC to seek qualified purchasers for its Gump's By Mail and Gump's
 San Francisco business, its Brawn of California business, including the
 International Male and Undergear brands, and its 277,500 square foot warehouse
 and fulfillment facility located in Hanover, Pennsylvania; 2) eliminated
 approximately 24 FTE positions principally in Hanover Brands and the Company's
 IT operations;  3) planned the exit of a portion of its leased principal
 executive offices in Weehawken, New Jersey and a leased storage facility later
 in the year; 4) executed an agreement for a new discount buyers club to
 consumers with MemberWorks Incorporated; and 5) instituted initiatives
 directed at achieving costs savings in package shipping costs and
 telemarketing and customer service.
     As a result of these actions and the announced intention to direct
 resources primarily towards growth in its core brands, The Company Store,
 Domestications, Improvements and Silhouettes, the Company's business to
 business revenues in fiscal 2001 and beyond will be materially reduced.
 Therefore, commencing in fiscal year 2001, pursuant to SFAS 131, the Company
 will report results for the consolidated operations of Hanover Direct, Inc. as
 one business segment.
     A conference call with the management of Hanover Direct, Inc. to review
 the fiscal 2000 results discussed herein will be held on Tuesday, April 3,
 2001 at 11 a.m. Eastern Standard Time.  If you would like to participate in
 the call, please call 212-896-6052 between 10:50 a.m. and 10:55 a.m. Eastern
 Standard Time.  A re-play of the conference will be available immediately
 following the call until 11:59 p.m. Eastern Standard Time on April 4, 2001 and
 can be accessed by calling 800-633-8284 (domestic) and 858-812-6440
 (International), Access#: 18422750.
 
     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.  Hanover Brands, Inc. is comprised of the
 Company's catalog and e-commerce web site portfolio of home fashions, apparel
 and gift brands, including Domestications, The Company Store, Company Kids,
 Encore, Improvements, Silhouettes, International Male, Undergear, 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.  erizon, Inc. is comprised of Keystone Internet Services, Inc.
 (http://www.keystoneinternet.com), the Company's third party fulfillment
 operation, and also provides the logistical, IT and fulfillment needs of the
 Hanover Brands, Inc.  Information on Hanover Direct, including each of its
 subsidiaries, can be accessed on the Internet at http://www.hanoverdirect.com.
 
     Forward-Looking Statements
     The following statement constitutes a forward-looking statement within the
 meaning of the Private Securities Litigation Reform Act of 1995.
     "Management believes that the Company has sufficient liquidity and
 availability under its credit agreements to fund its planned operations
 through at least December 29, 2001."
 
     Cautionary Statements
     The following material identifies important factors that could cause
 actual results to differ materially from those expressed in the
 forward-looking statement identified above and in any other forward looking
 statements contained elsewhere herein:
     The current general deterioration in economic conditions in the United
 States leading to reduced consumer confidence, reduced disposable income and
 increased competitive activity and the business failure of companies in the
 retail, catalog and direct marketing industries.  Such economic conditions
 leading to a reduction in consumer spending generally and in home fashions
 specifically, and leading to a reduction in consumer spending specifically
 with reference to other types of merchandise the Company offers in its
 catalogs or over the Internet, or which are offered by the Company's third
 party fulfillment clients.
     Customer response to the Company's merchandise offerings and circulation
 changes; effects of shifting patterns of e-commerce versus catalog purchases;
 costs associated with printing and mailing catalogs and fulfilling orders;
 dependence on customers' seasonal buying patterns; and fluctuations in foreign
 currency exchange rates.
     The ability of the Company to achieve projected levels of sales and
 reducing costs commensurately. Increase in postage, printing and paper prices
 and/or the inability of the Company to reduce expenses generally as required
 and/or increase prices of the Company's merchandise.
     The failure of the Internet generally to achieve the projections for it
 with respect to growth of e-commerce or otherwise, and the failure of the
 Company to increase Internet sales.  The imposition of regulatory, tax or
 other requirements with respect to Internet sales.  Actual or perceived
 technological difficulties or security issues with respect to conducting
 e-commerce over the Internet generally or through the Company's websites or
 those of its third-party fulfillment clients specifically.
     The ability of the Company to attract and retain management and employees
 generally and specifically with the requisite experience in e-commerce,
 Internet and direct marketing businesses.  The ability of employees of the
 Company who have been promoted as a result of the Company's recently announced
 restructuring plan to perform the responsibilities of their new positions.
     The current general deterioration in economic conditions in the United
 States leading to key vendors and suppliers reducing or withdrawing trade
 credit to companies in the retail and catalog and direct marketing industries.
 The risk that key vendors or suppliers may reduce or withdraw trade credit to
 the Company, convert the Company to a cash basis or otherwise change credit
 terms, or require the Company to provide letters of credit or cash deposits to
 support its purchase of inventory, increasing the Company's cost of capital
 and impacting the Company's ability to obtain merchandise in a timely manner.
 Vendors may begin to withhold shipments of merchandise to the Company.  The
 ability of the Company to find alternative vendors and suppliers on
 competitive terms if existing vendors or suppliers cease doing business with
 the Company.
     The inability of the Company to timely obtain and distribute merchandise,
 leading to an increase in backorders and cancellations.
     Defaults under the Congress Credit Facility, or inadequacy of available
 borrowings thereunder, may reduce or impair the Company's ability to obtain
 letters of credit or other credit to support its purchase of inventory and
 support normal operations, impacting the Company's ability to obtain, market
 and sell merchandise in a timely manner.
     The ability of the Company to continue to make borrowings under the
 Congress Credit Facility is subject to the Company's continued compliance with
 certain financial and other covenants contained therein, including net worth,
 net working capital, capital expenditure and EBITDA covenants.  Borrowings
 under the Congress Credit Facility are also subject to limitations based upon
 specified percentages of eligible receivables and eligible inventory, and the
 requirement that the Company maintain $3.0 million of excess credit
 availability at all times.  The enforcement by Congress of such covenants and
 limitations.
     The Company has a history of operating losses.  Continuation of the
 operating losses, and the incurrence of costs associated with the Company's
 recently announced restructuring plan, may result in the Company failing to
 comply with certain financial and other covenants contained in the Congress
 Credit Facility, including net worth, net working capital, capital expenditure
 and EBITDA covenants.
     The ability of the Company to complete the Company's recently announced
 restructuring program, within the time periods anticipated by the Company.
 The ability of the Company to realize the aggregate cost savings anticipated
 in connection with the restructuring plan, or within the time periods
 anticipated therefor.  The aggregate costs of effecting the restructuring plan
 may be greater than the amounts anticipated by the Company.
     The ability of the Company to transfer third party fulfillment operations
 conducted at the fulfillment centers located in Maumelle, Arkansas and Kindig
 Lane, Hanover, Pennsylvania to other facilities in a timely manner while
 satisfying its contractual obligations to provide fulfillment services for
 third party clients and itself.
     The ability of the Company to dispose of assets related to its third party
 fulfillment business, to the extent not transferred to other facilities.
     The initiation by the Company of additional cost-cutting and restructuring
 initiatives, the costs associated therewith, and the ability of the Company to
 timely realize any savings anticipated in connection therewith.
     The ability of the Company to maintain insurance coverages required in
 order to operate its businesses and as required by the Congress Credit
 Facility.
     The inability of the Company to access the capital markets due to market
 conditions generally, including a lowering of the market valuation of
 companies in the direct marketing and retail businesses, and the Company's
 business situation specifically.
     The Company's dependence up to August 24, 2000 on Richemont and its
 affiliates for financial support and the fact that they are not under any
 obligation ever to provide any additional support in the future.
     The ability of the Company to achieve the cost saving and other objectives
 of its strategic business realignment 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.
 
                    CONSOLIDATED STATEMENTS OF INCOME (LOSS)
          For the Years Ended December 30, 2000 and December 25, 1999
              (In thousands of dollars, except per share amounts)
 
                                                         2000           1999
     NET REVENUES                                    $603,014       $549,852
     OPERATING COSTS AND EXPENSES:
     Cost of sales and operating expenses             404,959        350,502
     Write-down of inventory of
      discontinued catalogs                             2,048        (1,932)
     Special charges (credit)                          19,126            144
     Selling expenses                                 153,462        136,584
     General and administrative expenses               84,881         68,928
     Depreciation and amortization                      9,090          9,382
                                                      673,566        563,608
     (LOSS) FROM OPERATIONS                          (70,552)        (8,446)
      (Gain) on sale of The Shopper's Edge                 --        (4,343)
      (Gain) on sale of Austad's                           --          (967)
     (LOSS) BEFORE INTEREST AND TAXES                (70,552)        (8,446)
     Interest expense, net                             10,083          7,338
      (Loss) before income taxes                     (80,635)       (15,785)
     Income tax provision                                 165            530
     NET (LOSS) AND COMPREHENSIVE (LOSS)             (80,800)       (16,314)
     Preferred stock dividends                          4,015            634
     NET (LOSS) APPLICABLE TO COMMON SHAREHOLDERS    (84,815)       (16,948)
     NET (LOSS) PER COMMON SHARE:
     Net (loss) per common share (basic and diluted)    (.40)          (.08)
     Weighted average common shares
      outstanding - basic and diluted (thousands)     213,252        210,719
 
                          CONSOLIDATED BALANCE SHEETS
                 As of December 30, 2000 and December 25, 1999
                (In thousands of dollars, except share amounts)
 
     CURRENT ASSETS:                                     2000           1999
     Cash and cash equivalents                         $1,691         $2,849
     Accounts receivable, net of allowance
      for doubtful accounts of $5,668 in 2000
      and $3,300 in 1999                               27,703         29,287
     Inventories                                       69,612         54,816
     Prepaid catalog costs                             23,084         20,305
     Deferred tax asset, net                            3,300          3,300
     Other current assets                               3,056          2,935
        Total Current Assets                          128,446        113,492
     PROPERTY AND EQUIPMENT, AT COST:
     Land                                               4,724          4,634
     Buildings and building improvements               23,442         23,269
     Leasehold improvements                            12,624          94,91
     Furniture, fixtures and equipment                 59,773         53,863
     Construction in progress                             647          1,990
                                                      101,210         93,247
     Accumulated depreciation and amortization       (55,570)       (46,360)
     Property and equipment, net                       45,640         46,887
     Goodwill, net                                     15,816         16,336
     Deferred tax asset, net                           11,700         11,700
     Other assets                                       1,417          3,004
        Total Assets                                  203,019        191,419
     LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
     CURRENT LIABILITIES:
     Current portion of long-term debt and
      capital lease obligations                         3,718          3,257
     Accounts payable                                  67,858         63,549
     Accrued liabilities                               34,443         24,284
     Customer prepayment and credits                    5,592          4,412
        Total Current Liabilities                     111,611         95,502
     NON-CURRENT LIABILITIES:
     Long-term debt                                    35,318         39,578
     Other                                              8,914          2,474
        Total Non-current Liabilities                  44,232         42,052
        Total Liabilities                             155,843        137,554
     SERIES A CUMULATIVE PARTICIPATING
      PREFERRED STOCK
     Mandatory redeemable at $50 per share ($70,000),
      2,345,000 shares authorized, 1,475,498 shares
      issued at December 30, 2000 and
      none at December 25, 1999                        71,628             --
     SHAREHOLDER'S EQUITY (DEFICIT):
     Series B Convertible Additional Preferred Stock,
      $10 stated value, authorized, issued and
      outstanding: none at December 30, 2000 and 634,900
      shares at December 25, 1999                          --          6,318
     Common Stock, $.66 2/3 par value, authorized
      300,000,000 shares in 2000 and 1999; issued
      214,425,498 shares in 2000 and 211,519,511
      shares in 1999                                  142,951        141,013
     Capital in excess of par value                   307,595        301,088
     Accumulated deficit                            (471,651)      (390,763)
                                                     (21,105)         57,656
     Less:
     Treasury stock, at cost (729,167 shares in 2000
      and 652,552 shares in 1999)                     (2,223)        (1,829)
     Notes receivable from sale of Common Stock       (1,124)        (1,962)
                                                     (21,105)         57,656
     Less:
     Treasury stock, at cost (729,167 shares in 2000
      and 652,552 shares in 1999)                     (2,223)        (1,829)
     Notes receivable from sale of Common Stock       (1,124)        (1,962)
        Total Shareholders' Equity (Deficit)         (24,452)         53,865
        Total Liabilities and Shareholders' Equity    203,019        191,419
 
 
                      CONSOLIDATED STATEMENTS OF CASH FLOW
          For the Years Ended December 30, 2000 and December 25, 1999
                           (In thousands of dollars)
 
     CASH FLOWS FROM OPERATING ACTIVITIES:               2000           1999
     Net (loss)                                     $(80,800)      $(16,314)
     Adjustments to reconcile net (loss) to net cash (used) by operating
     activities:
     Depreciation and amortization, including
      deferred fees                                    11,271         11,951
     Provision for doubtful accounts                    4,947          2,817
     Special charges (credit)                          19,126            144
     Write-down of inventory of
      discontinued catalogs (recovery)                  2,048        (1,932)
     Gain on the sale of Austad's                          --          (967)
     Compensation expense related to stock options      5,175          2,890
     Changes in assets and liabilities                (3,363)        (8,639)
     Accounts receivables                            (16,844)          8,853
     Inventories                                      (2,779)        (4,288)
     Prepaid catalog costs                              4,309        (1,045)
     Accounts payable                                   2,119            710
     Accrued liabilities                                1,180          (279)
     Customer prepayments and credits                   1,803          (572)
     Other, net                                      (51,808)        (6,671)
     CASH FLOWS FROM INVESTING ACTIVITIES:
     Acquisitions of property and equipment          (14,581)        (4,830)
     Proceeds from term loan facility                      --          1,568
     Proceeds from investment                             988             --
     Net cash (used) by investing activities         (13,593)        (3,262)
     CASH FLOWS FROM FINANCING ACTIVITIES:
     Net borrowings under revolving credit facility    12,810          5,202
     Borrowings from term loan facility                 9,820             --
     Payments of long-term debt and
      capital lease obligations                      (24,130)        (2,745)
     Net proceeds from issuance of preferred stock     67,700             --
     Payment of debt issuance costs                   (2,770)        (2,701)
     Payment of Series B Convertible
      Additional Preferred Stock dividends              (920)             --
     Proceeds from issuance of stock options              847            936
     Proceeds from exercise of stock warrants              --             --
     Other, net                                         (886)          (117)
     Net cash provided by financing activities         64,243            575
     Net (decrease) in cash and cash equivalents      (1,158)        (9,358)
     Cash and cash equivalents at the
      beginning of the year                             2,849         12,207
     Cash and cash equivalents at the end of the year   1,691          2,849
 
 
       Reportable segment data were as follows (in thousands of dollars):
 
              Years Ended December 30, 2000, and December 25, 1999
 
                             Direct        B-to-B  Elimination  Consolidated
                           Commerce      Services       /Other
 
     Results for the
      fiscal year ended
      December 30, 2000:
     Revenue from
      external customers   $572,995       $30,008          $11      $603,014
     Inter-segment revenues      --       103,282    (103,282)            --
     Income/(loss) before
      interest & taxes        8,103      (57,908)     (20,747)      (70,552)
     Interest
      income/(expense)      (4,744)       (4,524)        (815)      (10,083)
     Income/(loss) before
      income taxes..          3,359      (62,432)     (21,562)      (80,635)
     Results for the fiscal
      year ended
      December 25, 1999:
     Revenue from external
      customers ...        $534,978       $14,874          $--      $549,852
     Inter-segment
      revenues                   --       102,923    (102,923)            --
     Income/(loss)
      before
      interest & taxes       10,445      (18,881)         (10)       (8,446)
     Interest
      income/(expense)      (1,971)       (5,313)         (54)       (7,338)
     Income/(loss) before
      income taxes            8,474      (24,194)         (64)      (15,784)
 
 
 SOURCE  Hanover Direct, Inc.