SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K/A1
AMENDMENT NO. 1 TO
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
Independent Auditors' Consent
Plan Administrator
Hanover Direct, Inc. Savings and Retirement Plan:
We consent to the incorporation by reference in the registration statements (No.
333-03871 and 2-94286) on Form S-8 of Hanover Direct, Inc. Savings and
Retirement Plan of our report dated August 27, 2002, with respect to the
statement of net assets available for benefits of the Hanover Direct, Inc.
Savings and Retirement Plan as of December 31, 2001, and the related statement
of changes in net assets available for benefits for the year ended December
31, 2001, and the related supplemental schedule H, line 4(i)-schedule of assets
(held for investment purposes) as of December 31, 2001, which report appears in
the December 31, 2001, annual report of the Hanover Direct, Inc. Savings and
Retirement Plan on Form 11-K/A1.
/s/ KPMG LLP
New York, New York
August 27, 2002
INDEPENDENT AUDITORS' REPORT
Plan Administrator
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, 2001 and the related statement of changes in net assets
available for benefits for the year then ended and the supplemental
schedule H, line 4(i) - schedule of assets (held at end of year) as of December
31, 2001. 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 audits. The accompanying statement of net assets
available for benefits of the Plan as of December 31, 2000 was audited by
other auditors whose report dated June 21, 2001 expressed an unqualified
opinion.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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, 2001 and its changes in net assets available for benefits
for the year then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
New York, New York
August 27, 2002
HANOVER DIRECT INC. SAVINGS AND RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2001 AND 2000
DECEMBER 31,
------------
2001 2000
---- ----
ASSETS
INVESTMENTS
Plan participant loans receivable $ 624,948 $ 671,528
Mutual Funds at fair value 15,652,586 16,809,406
Common and Collective Trust Fund at fair value 4,892,937 4,998,681
Investment in Hanover Direct, Inc.
Common Stock (at market) 305,850 297,849
----------- -----------
TOTAL INVESTMENTS 21,476,321 22,777,464
Cash 2,176 --
Contributions receivable -- 12,393
----------- -----------
TOTAL ASSETS 21,478,497 22,789,857
LIABILITIES AND FUND BALANCE
Accrued Payables -- 136,850
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $21,478,497 $22,653,007
=========== ===========
The accompanying notes are an integral part of this statement.
HANOVER DIRECT INC. SAVINGS AND RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2001
PLAN
TOTAL
-----
ADDITIONS:
Net depreciation in fair value of investments $ (1,459,001)
Dividend income 674,471
Interest from participant loans 46,164
------------
NET INVESTMENT LOSS (738,366)
Contributions:
Participants 2,431,013
Hanover Direct, Inc. and subsidiaries 550,018
------------
TOTAL ADDITIONS 2,242,665
------------
DEDUCTIONS:
Benefits paid to participants 3,402,023
Administrative expenses 15,152
------------
TOTAL DEDUCTIONS 3,417,175
------------
Net decrease (1,174,510)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of the year 22,653,007
------------
End of the year $ 21,478,497
============
The accompanying notes are an integral part of this statement.
HANOVER DIRECT, INC. SAVINGS AND RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
1. DESCRIPTION OF THE 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 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 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, 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 $170,000. 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. 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 contributions. Nonvested forfeitures were $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.
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 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
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 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.
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 Company's financial position or result of operations.
3. INVESTMENTS
The Plan's participants are given the option to invest in seven mutual funds and
a common and collective trust fund, 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.
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, 2001 and
2000 were as follows:
2001 2000
---- ----
Spectrum Growth Fund $5,371,035 $6,717,439
Stable Value Fund 4,892,937 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:
Mutual Funds $(1,444,706)
Common Stock (14,295)
------------
$(1,459,001)
============
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 becomes 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 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.
In December 2000, the Company developed a plan to strategically realign its
business and direct the Company's resources primarily towards a loss reduction
and return to profitability. During 2001, as a result of the continued actions
needed to execute the plan, the Company eliminated various positions throughout
the Company. This downsizing may result in a partial termination of the Plan; if
so, all participants affected by the partial termination would become 100%
vested in employer contributions.
6. RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by T. Rowe Price. T.
Rowe Price 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 $15,152 for the year ended December 31, 2001. At
the participants' instruction, contributions may be invested in common stock of
the Company, a party-in-interest. As of December 31, 2001 and 2000, the Hanover
Direct, Inc. Stock Fund held 826,621 and 794,263 shares, respectively, at
corresponding market values of $305,850 and $297,849.
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/ Edward M. Lambert
-------------------------------
Name: Edward M. Lambert
Title: Member of the Administrative
Committee
DATE: August 27, 2002
SCHEDULE I
HANOVER DIRECT, INC. SAVINGS AND RETIREMENT PLAN
SCHEDULE H, LINE 4(i) SCHEDULE OF ASSETS (HELD FOR INVESTMENT PURPOSES)
AS OF DECEMBER 31, 2001
NUMBER OF CURRENT
DESCRIPTION SHARES VALUE
*T. Rowe Price Stable Value Fund 4,892,937 $ 4,892,937
*T. Rowe Price Spectrum Income Fund 207,015 2,194,363
*T. Rowe Price Spectrum Growth Fund 381,737 5,371,035
*T. Rowe Price New Horizons Fund 121,237 2,743,586
*T. Rowe Price Mid-Cap Growth Fund 41,552 1,637,165
*T. Rowe Price International Stock Fund 63,631 699,302
*T. Rowe Price Equity Index 500 Fund 45,489 1,402,872
*T. Rowe Price Blue Chip Growth Fund 55,377 1,604,263
*Hanover Direct, Inc. Common Stock Fund 826,621 305,850
Participants' Loan Accounts (1) 624,948
-----------
$21,476,321
===========
* Represents party-in-interest. Hanover Direct, Inc. Common Stock par value
is $.6667 per share.
(1) 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. There were 231 loans outstanding bearing an average interest rate
of 9.5%.