SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
x ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
COMMISSION FILE NUMBER 1-12082
A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
HANOVER DIRECT, INC. SAVINGS AND RETIREMENT PLAN
C/O HANOVER DIRECT, INC.
1500 HARBOR BLVD.
WEEHAWKEN, NEW JERSEY 07086
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
HANOVER DIRECT, INC.
1500 HARBOR BLVD.
WEEHAWKEN, NEW JERSEY 07086
Report of Independent Registered Public Accounting Firm
To the Plan Administrator of the
Hanover Direct, Inc. Savings and Retirement Plan:
We have audited the accompanying statement of net assets available for benefits of the Hanover Direct, Inc. Savings and Retirement Plan (the Plan) as of December 31, 2004, and the related statement of changes in net assets available for benefits for the year then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2004, and the changes in net assets available for benefits for the year ended in conformity with accounting principles generally accepted in the United States.
Our audit was performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental Schedule H, line 4(i) – Schedule of Assets (Held at End of Year) as of December 31, 2004 is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ BDO Seidman, LLP
New York, New York
July 15, 2005
Report of Independent Registered Accounting Firm
To the Plan Administrator of
Hanover Direct, Inc. Savings and Retirement Plan:
We have audited the accompanying statement of net assets available for benefits of the Hanover Direct, Inc. Savings and Retirement Plan (the Plan) as of December 31, 2003 and the related statement of changes in net assets available for benefits for the year then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2003 and its changes in net assets available for benefits for the year then ended in conformity with U.S. generally accepted accounting principles.
/s/ KPMG, LLP
New York, New York
June 24, 2004
HANOVER DIRECT, INC. SAVINGS AND RETIREMENT PLAN | |||
Statements of Net Assets Available for Benefits | |||
December 31, 2004 and 2003 | |||
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| 2004 |
| 2003 |
Assets: |
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Investments (note 3): |
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Common and collective trust fund | $ 5,382,057 |
| $ 5,321,677 |
Mutual funds | 21,213,269 |
| 17,906,943 |
Investment in Hanover Direct, Inc. |
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Common stock | 144,931 |
| 214,505 |
Plan participant loans receivable | 539,663 |
| 501,706 |
Total investments | 27,279,920 |
| 23,944,831 |
Contribution Receivable | - |
| 449 |
Net assets available for benefits | 27,279,920 |
| 23,945,280 |
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See accompanying notes to financial statements.
HANOVER DIRECT, INC. SAVINGS AND RETIREMENT PLAN | |||
Statements of Changes in Net Assets Available for Benefits | |||
Years ended December 31, 2004 and 2003 | |||
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| 2004 Plan |
| 2003 Plan |
| Total |
| Total |
Additions: |
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Net appreciation in fair value of investments (note 3) | $ 2,138,299 |
| $ 4,115,844 |
Dividend income | 532,437 |
| 431,844 |
Interest from participant loans | 30,383 |
| 34,227 |
Net investment income | 2,701,119 |
| 4,581,915 |
Contributions: |
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Participants | 1,885,638 |
| 1,999,751 |
Hanover Direct, Inc. and subsidiaries | 441,835 |
| 510,255 |
Total additions | 5,028,592 |
| 7,091,921 |
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Deductions: |
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Benefits paid to participants | 1,691,302 |
| 2,141,459 |
Administrative expenses | 2,650 |
| 9,106 |
Total deductions | 1,693,952 |
| 2,150,565 |
Net increase | 3,334,640 |
| 4,941,356 |
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Net assets available for benefits: |
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Beginning of the year | 23,945,280 |
| 19,003,924 |
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End of the year | $ 27,279,920 |
| $ 23,945,280 |
See accompanying notes to financial statements.
HANOVER DIRECT, INC. SAVINGS AND RETIREMENT PLAN
Notes to Financial Statements
December 31, 2004 and 2003
(1) Description of Plan
The Hanover Direct, Inc. Savings and Retirement Plan (the “Plan”) commenced April 1, 1983. The following description of the Plan provides only general information. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.
Participation in the Plan is available to all Eligible Employees of Hanover Direct, Inc. and its subsidiaries (the “Company”) that have attained the age of 21 and have credit for at least six months of service (1,000 hours). Eligible Employee does not include anyone subject to a collective bargaining agreement, independent contractor, or a leased employee. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).
Participants with an annual base salary under $90,000 may make pre-tax contributions of up to 20% of their total annual compensation (“Employee Contribution”), up to a maximum of $13,000 in 2004 and $12,000 in 2003, plus an additional $3,000 in 2004 and $2,000 in 2003 more for catch up contributions if they are 50 years old or over. The Company matches one-third of these pretax contributions up to 6% of participant’s total annual compensation (“Employer Contribution”). The participants have the right to allocate contributions (Employee and Employer) among any combination of fourteen funds administered by T. Rowe Price Retirement Plan Services, Inc. (“TRP”), as well as a Hanover Direct, Inc. Stock Fund.
A participant whose total annual compensation is in excess of $90,000 is a highly compensated employee (“HCE”), as defined by the Internal Revenue Code (“IRC”), and is limited to pre-tax contributions of 5% of their total annual compensation, up to a maximum compensation limit of $205,000 in 2004 and $200,000 in 2003. The Company matches one-third of these contributions up to 6% of a participant’s maximum compensation limit.
A participant will fully vest in the account value of the Employer’s Contribution upon the earlier of: the completion of three calendar years of vesting service, retirement or termination after reaching age 65, death while an employee, retirement due to permanent disability, or upon termination of the Plan by the Company. Employee contributions vest immediately. Forfeitures by reason of termination, withdrawal or lapse of participation are used to reduce the Employer’s Contributions. Nonvested forfeitures were $30,672 and $37,960 at December 31, 2004 and 2003, respectively. In 2004, employer contributions were not reduced from forfeited accounts.
Participants are allowed to take out loans ranging from a minimum of $500 up to the lesser of 50% of their individual vested account balance or $50,000. The loans can be for a period of up to five years and bear a fixed rate of interest of the prime rate plus one percent, determined at the time of the loan issuance. For a loan to purchase a primary residence, an individual must borrow a minimum of $2,500, and may take up to 30 years to repay the loan. Each participant can have only one loan outstanding at any one time and the loan can be repaid before the end of the original term.
The Plan is administered by the Administrative Committee (the “Committee”), which is comprised of five persons who serve at the sole discretion of the Company’s Board of Directors without compensation from the Plan. The Committee has general authority to control and manage the operation and administration of the Plan, including authority to appoint and remove trustees and to adopt rules interpreting or implementing the Plan.
Certain administrative costs of the Plan were borne by the Company.
Each participant’s account is credited with participants’ and Company’s contributions and Plan earnings. Participant accounts are stated at market value at the end of each business day.
(2) Significant Accounting Policies
Basis of Accounting
The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States.
Investment Valuation and Income Recognition
Company Stock and Mutual funds are stated at market value as determined by reference to published market data. Purchases and sales of securities are recorded on a trade date basis, and interest is recorded on the accrual basis. Realized gains and losses from security transactions are reported using the moving weighted average method. Dividend income is recorded on the ex-dividend date. The Stable Value Fund is stated at cost, which approximates market. Participants’ loans are valued at their outstanding balances, which approximate fair value.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Benefit Payments
Benefit payments are recorded when paid.
(3) Investments
The market value of the individual investments that represent 5% or more of the Plan’s total net assets available for benefits as of December 31, 2004 and 2003 were as follows:
| 2004 |
| 2003 | |
T. Rowe Price Spectrum Growth Fund |
| $ 5,543,790 |
| $ 4,872,681 |
T. Rowe Price Stable Value Fund |
| 5,382,057 |
| 5,321,677 |
T. Rowe Price New Horizons Fund |
| 3,496,506 |
| 2,999,873 |
T. Rowe Price Spectrum Income Fund |
| 3,073,700 |
| 2,745,939 |
T. Rowe Price Mid-Cap Growth Fund |
| 3,161,123 |
| 2,421,185 |
T. Rowe Price Blue Chip Growth Fund |
| 2,165,567 |
| 1,955,029 |
T. Rowe Price Equity Index 500 Fund |
| 2,250,081 |
| 1,834,333 |
During 2004 and 2003, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value by $2,138,299 and $4,115,844, respectively as follows:
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| 2004 |
| 2003 |
| Mutual Funds | $ 2,214,438 |
| $ 4,090,977 |
| Common Stock | (76,139) |
| 24,867 |
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| $ 2,138,299 |
| $ 4,115,844 |
(4) Plan Termination
The Plan may be terminated at any time at the Company’s sole discretion subject to the provisions of ERISA. Upon termination, contributions by the Company and participants cease and all Company contributions, which had been credited to each participant’s account, become fully vested. At this time, the Company has not expressed any intention to terminate the Plan.
(5) Tax Status
The Plan has received a favorable determination letter from the Internal Revenue Service stating that the Plan, as of June 5, 2002, is qualified under Section 401(a) of the IRC and, accordingly, is exempt from federal income taxes. The Plan’s administrator believes that the Plan conforms to ERISA requirements and continues to qualify as tax exempt under the Internal Revenue Code.
The Company identified certain operational omissions with respect to the Plan and has submitted an application to the IRS under the Voluntary Correction of Operational Failures Program (VCO). The Company will pay all costs, taxes and penalties associated with the VCO program. The Plan’s management and management of the Company expect that the final outcome of the VCO program will not have a material effect on the Plan’s financial statements. The Plan Administrator is still awaiting the outcome from the IRS as of July 15, 2005.
(6) Related Party Transactions
Certain Plan investments are shares of mutual funds managed by TRP. TRP is the trustee and the recordkeeper for the Plan and, therefore, these transactions qualify as party-in-interest transactions. Fees paid by the Plan for TRP’s services were $2,650 and $9,106 for the year ended December 31, 2004 and December 31, 2003, respectively. At the participants’ instruction, contributions may be invested in common stock of the Company, a party-in-interest. As of December 31, 2004 and 2003, the Hanover Direct, Inc. Stock Fund held 100,647 and 975,025 shares, respectively, at corresponding market values of $144,931 and $214,505.
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| Schedule I | |||||
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| HANOVER DIRECT, INC. SAVINGS AND RETIREMENT PLAN | ||||||||||
| Schedule H, Line 4(i) - Schedule of Assets (Held at End of Year) | ||||||||||
| December 31, 2004 | ||||||||||
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| Number of |
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| Current | ||||
| Description |
| shares |
| Cost |
| value | ||||
Common and Collective Trust Fund |
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| * T. Rowe Price Stable Value Fund |
| 5,382,057 |
| a |
| $ 5,382,057 | ||||
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Mutual Funds |
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| * T. Rowe Price Spectrum Income Fund |
| 254,235 |
| a |
| 3,073,700 | ||||
| * T. Rowe Price Spectrum Growth Fund |
| 328,618 |
| a |
| 5,543,790 | ||||
| * T. Rowe Price New Horizons Fund |
| 119,580 |
| a |
| 3,496,506 | ||||
| * T. Rowe Price Mid-Cap Growth Fund |
| 63,375 |
| a |
| 3,161,123 | ||||
| * T. Rowe Price International Stock Fund |
| 77,705 |
| a |
| 1,004,721 | ||||
| * T. Rowe Price Equity Index 500 Fund |
| 69,106 |
| a |
| 2,250,081 | ||||
| * T. Rowe Price Blue Chip Growth Fund |
| 70,038 |
| a |
| 2,165,567 | ||||
| * T. Rowe Price Retirement 2010 Fund |
| 8,234 |
| a |
| 115,610 | ||||
| * T. Rowe Price Retirement 2020 Fund |
| 6,773 |
| a |
| 100,845 | ||||
| * T. Rowe Price Retirement 2030 Fund |
| 10,364 |
| a |
| 160,638 | ||||
| * T. Rowe Price Retirement 2040 Fund |
| 840 |
| a |
| 13,080 | ||||
| * T. Rowe Price Retirement Income Fund |
| 3,083 |
| a |
| 37,803 | ||||
| * T. Rowe Price PIMCO Total Return Admin |
| 8,417 |
| a |
| 89,805 | ||||
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Common Stock |
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| * Hanover Direct, Inc. Common Stock Fund - par value is $.01 per share. | 100,647 |
| - |
| 144,931 | |||||
| Participants’ Loan Accounts - 5% to 9.5% |
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| 539,663 | ||||
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| $ 27,279,920 | ||||
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| * Represents party-in-interest. |
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| a- The cost of participant - directed investments is not required |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the members of the Administrative Committee of the Plan have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
| HANOVER DIRECT, INC. SAVINGS AND RETIREMENT PLAN
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By: /s/ Daniel J. Barsky | |
Name: Daniel J. Barsky Title: Chairman of the Administrative Committee | |
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August 9, 2005
Index To Exhibits
Exhibit
Number
23.1 | Consent of KPMG, LLP |
23.2 | Consent of BDO Seidman, LLP |