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, 2001 AND 2000
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.
115 RIVER ROAD
EDGEWATER, NEW JERSEY 07020
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
HANOVER DIRECT, INC.
115 RIVER ROAD
EDGEWATER, NEW JERSEY 07020
THIS FILING INCLUDES UNAUDITED FINANCIAL STATEMENTS FOR THE PLAN FOR THE FISCAL
YEAR ENDED DECEMBER 31, 2001 IN LIEU OF AUDITED FINANCIAL STATEMENTS BECAUSE THE
PLAN ELECTED NOT TO HAVE ARTHUR ANDERSEN LLP ISSUE A MANUALLY SIGNED AUDIT
REPORT IN RESPECT OF THOSE FINANCIAL STATEMENTS. SEE THE UNAUDITED FINANCIAL
STATEMENTS CONTAINED IN THIS FILING.
The Plan intends to provide audited financial statements for the fiscal year
ended December 31, 2001 by filing an Amendment to this Annual Report on Form
11-K, which will include such audited financial statements and the report of
KPMG LLP thereon, as soon as practicable and not later than August 28, 2002.
No auditor has opined that the Plan's unaudited financial statements for the
fiscal year ended December 31, 2001 present fairly, in all material respects,
the financial position, the results of operations, cash flows and the changes in
shareholders' equity of the Plan (and, in the case of a registered investment
company, the financial highlights) for each of the periods reported in
accordance with generally accepted accounting principles.
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, 2001 AND 2000
DECEMBER 31,
---------------------------
2001 2000
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ASSETS
Fund receivable $ -- $ 12,393
Plan participant loan receivable 624,948 671,528
Investment in fund 20,545,522 21,808,087
Investment in Hanover Direct Inc.
Common Stock (at market) 305,850 297,849
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TOTAL ASSETS 21,476,320 22,789,857
LIABILITIES AND FUND BALANCE
Contributions payable to:
Hanover Direct, Inc. and
subsidiaries (forfeitures) 7,621 136,850
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $21,468,699 $22,653,007
=========== ===========
The accompanying notes are an integral part of this statement.
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, 2001
PLAN
TOTAL
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ADDITIONS:
Dividend income $ 674,471
Interest income on participant loan balances 46,164
Contributions:
Participants 2,431,013
Hanover Direct, Inc. and subsidiaries 596,835
------------
TOTAL ADDITIONS 3,748,483
------------
DEDUCTIONS:
Net depreciation on fund investments $ 1,459,001
Disbursements, withdrawals, terminations and
administrative costs 3,311,918
Unallocated forfeitures 54,439
Change in Plan participant loan receivable 105,257
Interfund Transfers 2,176
------------
TOTAL DEDUCTIONS 4,932,791
------------
Net decrease (1,184,308)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of the year 22,653,007
------------
End of the year $ 21,468,699
============
The accompanying notes are an integral part of this statement.
HANOVER DIRECT, INC. SAVINGS AND RETIREMENT PLAN
(FORMERLY THE HORN & HARDART COMPANY SAVINGS PLAN)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
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).
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 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 2001 and 2000. The Company matches
one-third of these pretax contributions up to 6% of a 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 940 and 1,285 active participants in the Plan at December 31,
2001 and 2000, respectively.
According to the Plan, the maximum limitations on employee pre-tax
contributions for a non-HCE were $10,500 in 2001 and 2000. The maximum
limitations on employee pre-tax contributions for a HCE were $170,000 in 2001
and 2000.
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 $7,621 and $136,850 at
December 31, 2001 and 2000, respectively.
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 $624,948 and $671,528 at
December 31, 2001 and 2000, respectively, with interest rates ranging from 7% to
22.55%. Vested benefits payable to terminated employees amounted to $3,562,060
and $4,216,773 at December 31, 2001 and 2000, respectively.
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.
Direct administrative costs of the Plan that were borne by Hanover
Direct, Inc. were $40,718 and $50,193 in 2001 and 2000, respectively.
Participant Account
Each participant's account is credited with participant's and Company's
contributions 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 was filed with the Internal Revenue Service ("IRS") during 2002.
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 adopted 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 were there any embedded derivative
instrument as of December 31, 2001 or 2000 that must be recognized pursuant to
these statements. Accordingly, the impact of the adoption of these
pronouncements on December 31, 2000 did not have a material impact on the
Plan's financial position or result of operations.
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, 2001
and 2000, the Stock Fund held 826,621 and 794,263 shares, respectively, at
corresponding market values of $305,850 and $297,849.
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,
2001 and 2000 were as follows:
2001 2000
---------- ----------
Spectrum Growth Fund $5,371,035 $6,717,439
Stable Value Fund 4,885,316 4,895,185
New Horizons Fund 2,743,586 2,832,531
Spectrum Income Fund 2,194,363 2,211,046
Mid-Cap Growth Fund 1,637,165 1,351,208
Blue Chip Growth Fund 1,604,263 1,458,227
Equity Index 500 Fund 1,402,872 1,347,529
During 2001, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) depreciated in
value by $(1,459,001) as follows:
Mid-Cap Growth Fund $ 5,826
Hanover Direct Inc. Stock Fund (14,295)
Spectrum Income Fund (34,667)
New Horizons Fund (139,283)
Equity Index 500 Fund (184,011)
International Stock Fund (210,720)
Blue Chip Growth Fund (216,700)
Spectrum Growth Fund (665,151)
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$(1,459,001)
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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 $0 and $12,393 as of December 31, 2001 and 2000,
respectively.
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,
2001 consists of unrealized depreciation of $(1,156,697) and an aggregate
realized loss of $(302,304). The Plan sold investments during the 2001 Plan year
with aggregate costs of $5,352,235 resulting in aggregate proceeds of
$5,049,931. 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, 2001
and 2000. There were no loans, fixed income obligations or leases, which were
either in default or classified as uncollectible, at December 31, 2001 and 2000.
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
By: /s/ Brian C. Harriss
----------------------------
Name: Brian C. Harriss
Title: Member of the
Administrative Committee
DATE: July 15, 2002
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, 2001
NUMBER OF CURRENT
DESCRIPTION SHARES VALUE
Stable Value Fund 4,892,937 $ 4,892,937
Spectrum Income Fund 207,015 2,194,363
Spectrum Growth Fund 381,737 5,371,035
New Horizon Fund 121,237 2,743,586
7,621
Mid Cap Growth Fund 41,552 1,637,165
International Stock Fund 63,631 699,302
Equity Index 500 Fund 45,489 1,402,872
Blue Chip Growth Fund 55,377 1,604,263
Hanover Direct Inc. Stock Fund (1) 826,621 305,850
Participants' Loan Accounts (2) 624,948
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TOTAL ASSETS HELD FOR INVESTMENT PURPOSES $21,476,320
===========
(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.