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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d)
of the Securities Exchange Act of 1934
For the fiscal years ended DECEMBER 31, 2000 and 1999
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 BOULEVARD
WEEHAWKEN, NEW JERSEY 07087
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 BOULEVARD
WEEHAWKEN, NEW JERSEY 07087
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Administrative Committee of the
Hanover Direct, Inc. Savings and Retirement Plan:
We have audited the accompanying Statements of Net Assets Available for
Benefits of the Hanover Direct, Inc. Savings and Retirement Plan, formerly The
Horn & Hardart Company Savings Plan, (the "Plan") as of December 31, 2000 and
1999, and the related Statement of Changes in Net Assets Available for Benefits
for the year ended December 31, 2000. These financial statements and the
schedule referred to below are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the 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 the Plan's 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, 2000 and 1999, and the changes in net assets available
for benefits for the year ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental Schedule of Assets
Held for Investment at the end of the year 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 audits 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.
ARTHUR ANDERSEN LLP
New York, New York
June 21, 2001
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HANOVER DIRECT INC. SAVINGS AND RETIREMENT PLAN
(FORMERLY THE HORN AND HARDART COMPANY SAVINGS PLAN)
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2000 AND 1999
December 31,
----------------------------------
2000 1999
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ASSETS
Fund receivable $ 12,393 $ 240,713
Plan participant loan receivable 671,528 594,366
Investment in fund 21,808,087 20,181,051
Investment in Hanover Direct, Inc.
Common Stock (at market) 297,849 800,475
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Total Assets 22,789,857 21,816,605
LIABILITIES AND FUND BALANCE
Contributions payable to:
Hanover Direct, Inc. and
subsidiaries (forfeitures) 136,850 107,466
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Net Assets Available For Benefits $ 22,653,007 $ 21,709,139
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The accompanying notes are an integral part of this statement.
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HANOVER DIRECT INC. SAVINGS AND RETIREMENT PLAN
(FORMERLY THE HORN AND HARDART COMPANY SAVINGS PLAN)
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2000
Plan
Total
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ADDITIONS:
Net change in (depreciation) on fund investments $ (2,415,980)
Dividend income 1,752,952
Interest income on participant loan balances 39,972
Contributions:
Participants 2,872,196
Hanover Direct, Inc. and subsidiaries 640,249
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Total Additions 2,889,389
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DEDUCTIONS:
Disbursements, withdrawals, terminations and
administrative costs 1,894,800
Unallocated forfeitures 29,383
Change in plan participant loan receivable 21,338
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Total Deductions 1,945,521
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Net increase 943,868
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of the year 21,709,139
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End of the year $ 22,653,007
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The accompanying notes are an integral part of this statement.
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HANOVER DIRECT, INC. SAVINGS AND RETIREMENT PLAN
(FORMERLY THE HORN & HARDART COMPANY SAVINGS PLAN)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
1. DESCRIPTION OF THE PLAN
The Hanover Direct, Inc. Savings and Retirement Plan, formerly The Horn
& Hardart Company Savings Plan, (the "Plan") commenced April 1, 1983. The
following description of the Plan provides only general information.
Participants should refer to the Plan agreement 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). The
Plan is subject to the provisions of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA").
Participants whose annual base salary is under $85,000 may make pre-tax
contributions of up to 20% of their total annual compensation ("Employee
Contribution"), up to a maximum of $10,500 in 2000 and $10,000 in 1999. 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 eight 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 $85,000,
or a highly compensated employee ("HCE"), is limited to pre-tax contributions of
5% of their total annual compensation, up to a maximum compensation limit of
$170,000. The Company matches one-third of these contributions up to 6%.
There were 1,285 and 1,288 active participants in the Plan at December
31, 2000 and 1999, respectively.
According to the Plan, the maximum limitations on employee pre-tax
contributions for a non-HCE were $10,500 and $10,000 in 2000 and 1999,
respectively. The maximum limitations on employee pre-tax contributions for a
HCE were $170,000 and $160,000 in 2000 and 1999, respectively.
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. A participant may
elect to withdraw from their voluntary contribution account an amount not to
exceed the participant's vested account value. Forfeitures by reason of
termination, withdrawal or lapse of participation are used to reduce the
Company's contribution for that particular year. Forfeitures that can be used to
reduce future Employer Contributions amounted to $136,850 and $107,466 at
December 31, 2000 and 1999, respectively.
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Participants are allowed to take out loans ranging from a minimum of
$500 to a maximum of 50% of their individual vested account balance or $50,000,
whichever is less. 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.
Plan participant loan receivables amounted to $671,528 and $594,366 at
December 31, 2000 and 1999, respectively, with interest rates ranging from 7% to
10%. Vested benefits payable to terminated employees amounted to $4,216,773 and
$3,959,248 at December 31, 2000 and 1999, respectively.
The Plan is administered by the Administrative Committee (the
"Committee"), which is comprised of four 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.
Direct administrative costs of the Plan that were borne by Hanover
Direct, Inc. were $50,193 and $34,594 in 2000 and 1999, respectively.
Participant Account
Each participant's account is credited with participants and Company's
contributins and Plan earnings. Participant's accounts are stated at market
value at the end of each business day.
The Plan was amended effective July 1, 1999. The amendment resulted in
changes to the Plan's eligibility period, enrollment period, contribution
maximum for non-HCE participants, maximum annual dollar limit, investment
changes, administrative fees, vesting schedule and investment options. The
amended Plan must be filed with the Internal Revenue Service ("IRS") no later
than December 31, 2001.
2. SIGNIFICANT ACCOUNTING POLICIES
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.
Investment Valuation and Income Recognition
Investments in the Company's Common Stock 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. Investments held by TRP in the Stable Value Fund, Spectrum
Income Fund, Spectrum Growth Fund, New Horizons Fund, Mid-Cap Growth Fund,
International Stock Fund, Equity Index 500 Fund, and the Blue Chip Growth Fund
are all stated at market value.
Basis of Accounting
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting principles.
Benefit payments are recorded when paid.
Accounting Pronouncements
The Company is required to adopt the provisions of SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," and its related
amendment in SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities, " as of December 31, 2000. These pronouncements
require companies to reflect the fair value of all derivative instruments,
including those embedded in other contracts, as assets or liabilities in a
company's financial statements. Changes in fair value of derivative instruments
is generally reflected in earnings, with the exception of certain hedging
transactions, for which the change in fair value may be accounted for as a
component of other comprehensive income, provided certain criteria are met as
specified in these pronouncements. The Company currently does not utilize
derivative instruments or engage in hedging transactions, nor is there any
embedded derivative instrument as of December 30, 2000 that must be
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recognized pursuant to these statements. Accordingly, the Company does not
expect the impact of the adoption of these pronouncements on December 31, 2000
to have a material impact on the Company's financial position or result of
operations.
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3. INVESTMENTS
The Plan's participants are given the option to invest in eight funds,
in addition to the Company's Stock Fund. These funds are as follows: the Stable
Value Fund is a common trust fund which invests in investment contracts selected
by TRP which are reported at their estimated fair value. The Spectrum Income
Fund seeks a high level of current income combined with moderate share price
fluctuation by investing primarily in domestic bond funds and two foreign bond
funds. It may allocate up to 25% of its assets to a stock fund. The Spectrum
Growth Fund seeks long-term capital appreciation and growth of income, with
current income as a secondary objective. It invests primarily in domestic stock
funds and also in a foreign stock fund. The New Horizons Fund provides long-term
capital growth by investing primarily in common stocks of small, rapidly growing
companies. The Mid-Cap Growth Fund provides long-term capital appreciation by
investing in companies with superior earnings growth potential that are no
longer considered new or emerging but may still be in the dynamic phase of their
life cycles. The International Stock Fund seeks to provide capital appreciation
through investments in well-established non-U.S. companies. The Equity Index 500
Fund seeks to match the total return of the Standard & Poor's(R) 500 Composite
Stock Index ("S&P 500"). The Blue Chip Growth Fund seeks to provide long-term
capital growth, with income as a secondary objective. It invests primarily in
common stocks of large and medium-sized blue chip companies that have the
potential for above-average growth in earnings and are well established in their
respective industries. Contributions to the Hanover Direct, Inc. Stock Fund were
invested in the common stock of the Company, a party in interest. As of December
31, 2000 and 1999, the Stock Fund held 794,263 and 220,821 shares, respectively,
at corresponding market values of $297,849 and $800,475.
The market value of the individual investments that represent 5% or more
of the Plan's total net assets available for plan benefits as of December 31,
2000 and 1999 were as follows:
2000 1999
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Spectrum Growth Fund $6,717,439 $7,291,172
Stable Value Fund 4,895,185 4,728,347
New Horizons Fund 2,832,531 2,535,336
Spectrum Income Fund 2,211,046 2,076,353
Blue Chip Growth Fund 1,458,227 -
Mid-Cap Growth Fund 1,351,208 -
Equity Index 500 Fund 1,347,529 -
During 2000, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) depreciated in
value by $(2,415,980) as follows:
Spectrum Income Fund $ 13,813
Mid-Cap Growth Fund (27,255)
Blue Chip Growth Fund (118,021)
Equity Index 500 Fund (132,693)
International Stock Fund (254,744)
New Horizons Fund (397,346)
Spectrum Growth Fund (747,406)
Hanover Direct Inc. Stock Fund (752,328)
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$(2,415,980)
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4. FUND RECEIVABLE
The total contribution receivable consists of unallocated Employee and
Employer Contributions owed to the plan as of the Plan year-end. There were
contribution receivables of $12,393 and $240,713 as of December 31, 2000 and
1999, respectively. The unallocated Employee and Employer contributions owed to
the Plan for 2000 were received by the fund in January 2001.
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5. CONTRIBUTION PAYABLE
The contribution payable consists of unvested Employer Contributions
forfeited by terminated Plan participants as of the Plan year-end. These
forfeited amounts can be used to reduce the Company's contributions to
participants in the following Plan year.
6. NET APPRECIATION (DEPRECIATION) ON FUND INVESTMENTS
The net appreciation/(depreciation) of fund investments at December 31,
2000 consists of unrealized depreciation of $(2,382,100) and an aggregate
realized loss of $(33,880). The Plan sold investments during the 2000 Plan year
with aggregate costs of $3,523,773 resulting in aggregate proceeds of
$3,489,893. The realized gain/(loss) on the investments sold is the difference
between the market value at the beginning of the Plan year and the date of sale.
7. 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 becomes fully vested. At this time, the
Company has not expressed any intention to terminate the Plan.
8. TAX STATUS
The Plan has received a favorable determination letter from the Internal
Revenue Service stating that the Plan, as of October 6, 1994, is qualified under
Section 401(k) of the Internal Revenue Code and, accordingly, is exempt from
federal income taxes. Although the Plan has been amended since receiving the
determination letter, the Plan's administrator and the Plan's tax counsel
believe the Plan is designed and is currently being operated in compliance with
the applicable provision of the IRC. The Plan was amended and restated during
the year ended December 31, 1989 to reflect the impact of the Tax Reform Act of
1986 and the Technical and Miscellaneous Revenue Act of 1988.
9. OTHER INFORMATION
Other than the aforementioned contributions to the Hanover Direct, Inc.
Stock Fund which were invested in the Common Stock of the Company (Note 3),
there were no transactions with parties-in-interest, as defined by the Employee
Retirement Income Security Act of 1974, for the years ended December 31, 2000
and 1999. There were no loans, fixed income obligations or leases, which were
either in default or classified as uncollectible at December 31, 2000 and 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
members of the Administrative Committee 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
DATE: June 21, 2001 By: /s/ Brian C. Harriss
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Brian C. Harriss
Executive Vice President and
Chief Financial Officer
(On behalf of the members of the
Administrative Committee and as
principal financial officer)
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EXHIBIT 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 11-K, into Hanover Direct,
Inc.'s (formerly The Horn & Hardart Company) previously filed Registration
Statement (File. No. 2-94286).
New York, New York ARTHUR ANDERSEN LLP
June 21, 2001
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Schedule I
HANOVER DIRECT, INC. SAVINGS AND RETIREMENT PLAN
(FORMERLY THE HORN AND HARDART COMPANY SAVINGS PLAN)
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
FOR THE YEAR ENDED DECEMBER 31, 2000
Number of Current
Description Shares Value
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Stable Value Fund 4,998,681 $ 4,998,681
Spectrum Income Fund 205,208 2,210,087
Spectrum Growth Fund 427,230 6,716,058
New Horizon Fund 118,507 2,831,137
Mid Cap Growth Fund 33,919 1,349,637
International Stock Fund 61,956 899,605
Equity Index 500 Fund 37,921 1,346,213
Blue Chip Growth Fund 43,033 1,456,669
Hanover Direct, Inc. Common Stock Fund (1) 794,263 297,849
Participants' Loan Account (2) 671,528
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Total Assets Held for Investment Purposes $22,777,464
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(1) Represents party-in-interest. Common Stock par value is $.6667 per share.
(2) Terms of these loans generally range from 1 to 5 years (up to 30 years if
used to purchase a primary residence) and bear interest at prime plus one
percent.
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