<PAGE> 1
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, 1998 and 1997
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
<PAGE> 2
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 Hanover Direct, Inc. Savings and Retirement Plan, formerly The Horn & Hardart
Company Savings Plan, (the "Plan") as of December 31, 1998 and 1997, and the
related statement of changes in net assets available for benefits for the year
ended December 31, 1998. These financial statements and the schedules 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 generally accepted auditing
standards. 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, 1998 and 1997, and the changes in net assets available for benefits
for the year ended December 31, 1998, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes and reportable transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are 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. These supplemental
schedules have been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
New York, New York ARTHUR ANDERSEN LLP
June 11, 1999
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HANOVER DIRECT INC. SAVINGS AND RETIREMENT PLAN
(FORMERLY THE HORN & HARDART COMPANY SAVINGS PLAN)
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1998 AND 1997
U.S. $000'S
<TABLE>
<CAPTION>
1998
---------------------------------------------------------------------------------------
Stable Spectrum Spectrum New International Hanover
Value Income Growth Horizons Stock Direct, Inc.
Fund Fund Fund Fund Fund Stock Fund Total
---------- ---------- ---------- ---------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Fund Receivable $ 20,479 $ 9,659 $ 20,666 $ 19,302 $ 6,224 $ 1,644 $ 77,974
Plan Participant Loan Receivable 444,804 -- -- -- -- -- 444,804
Investment in Fund 4,174,530 2,415,327 7,488,010 1,951,442 722,093 -- 16,751,402
Investment in Hanover Direct , Inc.
Common Stock (at market) -- -- -- -- -- 693,128 693,128
---------- ---------- ---------- ---------- -------- -------- -----------
TOTAL ASSETS 4,639,813 2,424,986 7,508,676 1,970,744 728,317 694,772 17,967,308
LIABILITIES AND FUND BALANCE:
Contributions Payable to:
Hanover Direct, Inc. and
Subsidiaries (Forfeitures) 50,302 -- -- -- -- -- 50,302
---------- ---------- ---------- ---------- -------- -------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $4,589,511 $2,424,986 $7,508,676 $1,970,744 $728,317 $694,772 $17,917,006
========== ========== ========== ========== ======== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
1997
----------------------------------------------------------------------------------------
Stable Spectrum Spectrum New International Hanover
Value Income Growth Horizons Stock Direct, Inc.
Fund Fund Fund Fund Fund Stock Fund Total
---------- ---------- ---------- ---------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Fund Receivable $ 24,198 $ 9,908 $ 22,741 $ 18,736 $ 6,381 $ 1,131 $ 83,095
Plan Participant Loan Receivable 446,640 -- -- -- -- -- 446,640
Investment in Fund 4,016,561 2,182,790 6,846,725 1,423,975 490,074 -- 14,960,125
Investment in Hanover Direct , Inc.
Common Stock (at market) -- -- -- -- -- 622,060 622,060
---------- ---------- ---------- ---------- -------- -------- -----------
TOTAL ASSETS 4,487,399 2,192,698 6,869,466 1,442,711 496,455 623,191 16,111,920
LIABILITIES AND FUND BALANCE:
Contributions Payable to:
Hanover Direct, Inc. and
Subsidiaries (Forfeitures) 161,982 -- -- -- -- -- 161,982
---------- ---------- ---------- ---------- -------- -------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $4,325,417 $2,192,698 $6,869,466 $1,442,711 $496,455 $623,191 $15,949,938
========== ========== ========== ========== ======== ======== ===========
</TABLE>
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)
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1998
U.S. $000'S
<TABLE>
<CAPTION>
Stable Spectrum Spectrum New
Value Income Growth Horizons
Fund Fund Fund Fund
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
Interest/Dividend Income $ 235,000 $ 181,302 $ 641,305 $ 99,179
Change in Plan Participant Loan Receivable 9,281 1,359 (47,781) 18,530
Contributions:
Participants 640,081 206,738 498,997 444,538
Hanover Direct, Inc. and Subsidiaries (43,595) 58,609 137,076 119,074
(net of credited forfeitures of $156,805)
Interfund Transfers 128,711 30,903 (130,730) (13,744)
---------- ---------- ---------- ----------
TOTAL ADDITIONS 969,478 478,911 1,098,867 667,577
DECREASE IN NET ASSETS:
Disbursements, Withdrawals, Terminations and
Administrative Costs 845,998 207,106 710,686 144,643
Unallocated Forfeitures (140,614) 5,442 14,767 4,794
Net Change in Depreciation (Appreciation) on
Fund Investments -- 34,075 (265,796) (9,893)
---------- ---------- ---------- ----------
Total Deductions (Additions) 705,384 246,623 459,657 139,544
---------- ---------- ---------- ----------
Net Increase (Decrease) 264,094 232,288 639,210 528,033
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of the Year 4,325,417 2,192,698 6,869,466 1,442,711
---------- ---------- ---------- ----------
End of the Year $4,589,511 $2,424,986 $7,508,676 $1,970,744
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
International Hanover
Stock Direct, Inc. Plan
Fund Stock Fund Total
------------- ------------ -----------
<S> <C> <C> <C>
INCREASE IN NET ASSETS:
Interest/Dividend Income $ 26,474 $ -- $ 1,183,260
Change in Plan Participant Loan Receivable 4,035 1,976 (12,600)
Contributions:
Participants 159,249 31,081 1,980,684
Hanover Direct, Inc. and Subsidiaries 43,485 8,291 322,940
(net of credited forfeitures of $156,805)
Interfund Transfers (21,334) 6,194 --
-------- ------ -----------
TOTAL ADDITIONS 211,909 47,542 3,474,284
DECREASE IN NET ASSETS:
Disbursements, Withdrawals, Terminations and
Administrative Costs 39,301 62,101 2,009,835
Unallocated Forfeitures 2,610 1,321 (111,680)
Net Change in Depreciation (Appreciation) on
Fund Investments (61,864) (87,461) (390,939)
-------- ------- -----------
Total Deductions (Additions) (19,953) (24,039) 1,507,216
-------- ------- -----------
Net Increase (Decrease) 231,862 71,581 1,967,068
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of the Year 496,455 623,191 15,949,938
-------- ------- -----------
End of the Year $728,317 $694,772 $17,917,006
======== ======== ===========
</TABLE>
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 31,1998 and 1997
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.
Participation in the Plan is available to all eligible employees of Hanover
Direct, Inc. and its subsidiaries (the "Company") who have attained the age of
21, have credit for not less than one year of service (1,000 hours), and have
applied for participation in the Plan.
Participants whose annual base salary is under $80,000 may make pretax
contributions of up to 10% of his/her total annual compensation ("Employee
Contribution"). The Company matches one-third of these pretax contributions up
to 6% of his/her total annual compensation ("Employer Contribution"). The
participants have the right to elect that contributions (Employee and Employer)
be allocated to any combination of five funds administered by T. Rowe Price
Retirement Plan Services, Inc. ("TRP"). During 1998, the following five funds
were available: Stable Value Fund, Spectrum Income Fund, Spectrum Growth Fund,
New Horizons Fund and International Stock Fund. The Hanover Direct, Inc. Stock
Fund is also available to participants.
A participant whose total annual compensation is in excess of $80,000, or a
highly compensated employee ("HCE"), is limited to pretax contributions of 5% of
his/her total annual compensation up to a maximum compensation limit of
$160,000. The Company matches one-third of these contributions.
The maximum limitation on employee pretax contributions was $8,000 in both 1998
and 1997.
There were 1,223 and 1,112 participants in the Plan at December 31, 1998 and
1997, respectively.
A participant will become 100% vested in the account value of the Employer's
Contribution upon the earlier of: the completion of five calendar years of
vesting service, retirement or termination after reaching age 65, death while an
employee, or because of permanent disability. Participants are fully vested in
their Employee Contributions immediately. A participant may elect to withdraw
from his/her account an amount not to exceed his/her 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 $50,302 and
$161,982 at December 31, 1998 and 1997, respectively. The forfeitures of 1997
were utilized to reduce Employer Contributions during 1998.
Participants are allowed to take out loans of up to 50% of their individual
vested balance as of the most current Plan valuation. The minimum loan is $500
while the maximum is $50,000. The loans can be for a period between one to five
years in whole year increments, except when used to purchase a primary residence
which can have a period of up to 30 years. Loans bear a fixed rate of interest
of the prime rate plus one percent, determined at the time of loan issuance.
Each participant can have only one loan outstanding at any
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one time and the loan can be repaid before the end of the original term.
The Plan participant loan receivable amounted to $444,804 and $446,640 at
December 31, 1998 and 1997, respectively, with interest rates ranging from 7% to
10%. Vested benefits payable to terminated employees amounted to $694,956 and
$810,692 at December 31, 1998 and 1997, respectively.
The Plan is administered by the Administrative Committee (the "Committee") which
is comprised of three 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.
Administrative costs of the Plan that were borne by Hanover Direct, Inc. were
$7,141 and $10,174 in 1998 and 1997, respectively. Additionally, certain
administrative costs of the Plan are borne by participants of the Plan and
amounted to $50,517 and $33,360 in 1998 and 1997, respectively. These costs are
included in disbursements, withdrawals, terminations and administrative costs.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles 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 and
the reported amounts of revenues and expenses during the reporting period.
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. In 1998 and 1997, investments held by
TRP in the Stable Value Fund, Spectrum Income Fund, Spectrum Growth Fund, New
Horizons Fund, International Stock Fund and the Company's Stock Fund are stated
at market value.
Basis of Accounting
The accompanying financial statements have been prepared on the accrual basis of
accounting.
3. INVESTMENTS
The Plan's participants are given the option to invest in five 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 consistent with moderate share price
fluctuation by investing primarily in domestic and foreign bond funds. It may
allocate up to 25% of its assets to stock funds. The Spectrum Growth fund seeks
long-term capital appreciation and growth of income, with current income as a
secondary
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<PAGE> 7
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 International
Stock Fund seeks to provide capital appreciation through investment in
well-established non-US companies. 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, 1998 and 1997, the stock fund held 201,637
and 207,353 shares of Company common stock, respectively, at aggregate
corresponding market values of $693,128 and $622,060. All of the above-mentioned
investments exceed 5% of the Plan's net assets available for benefits as of
December 31, 1998 with the exception of the International Stock Fund and the
Hanover Direct, Inc. Stock Fund.
4. CONTRIBUTION RECEIVABLE
The total contribution receivable consists of unallocated Employee and Employer
Contributions owed to the Plan as of the Plan year-end. There were contributions
receivable of $77,974 and $83,095 as of December 31, 1998 and 1997,
respectively. The unallocated Employee and Employer contributions owed to the
Plan for 1998 were received by the fund in January 1999.
5. CONTRIBUTION PAYABLE
The December 31, 1998 and 1997 contribution payable consists of unvested
Employer Contributions forfeited by terminated Plan participants. Forfeited
amounts were used to reduce the Employer contributions to participants in 1998.
6. NET DEPRECIATION/ (APPRECIATION) ON FUND INVESTMENTS
The net depreciation/(appreciation) of fund investments at December 31, 1998
consists of unrealized appreciation of approximately $352,000 and an aggregate
realized gain of approximately $39,000. The Plan sold investments during the
1998 Plan year with approximate aggregate costs of $4.66 million, resulting in
aggregate proceeds of approximately $4.70 million. The realized gain/loss on the
investments sold is the difference between the market value at the beginning of
the Plan year (or on the purchase date if purchased during 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,
although the Company has not expressed any intention to do so currently. 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 immediately.
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. 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.
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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 Securities Act of 1974, for the years ended December 31, 1998 and 1997.
There were no loans, fixed income obligations or leases which were either in
default or classified as uncollectable at December 31, 1998 and 1997.
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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 28, 1999 By: Ralph Bulle
-------------------------
Ralph Bulle
Senior Vice President
Human Resources
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HANOVER DIRECT, INC. SAVINGS AND RETIREMENT PLAN
(FORMERLY THE HORN & HARDART COMPANY SAVINGS PLAN)
FORM 5500 ITEM 27a
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
CURRENT
DESCRIPTION COST VALUE
----------- -----------
<S> <C> <C>
Stable Value Portfolio-T Rowe Price Retirement
Plan Services Inc. $ 4,174,530 $ 4,174,530
Spectrum Income Portfolio-T Rowe Price Retirement
Plan Services Inc. 2,448,351 2,415,327
Spectrum Growth Portfolio-T Rowe Price Retirement
Plan Services Inc. 7,269,413 7,488,010
New Horizons Portfolio-T Rowe Price Retirement
Plan Services Inc. 1,931,885 1,951,442
International Stock Portfolio-T Rowe Price Retirement
Plan Services Inc. 665,579 722,093
Hanover Direct, Inc. Common Stock(1) 602,955 693,128
Plan Participant Loan Receivable(2) 444,804 444,804
----------- -----------
TOTAL ASSETS HELD FOR INVESTMENT PURPOSES $17,537,517 $17,889,334
=========== ===========
</TABLE>
(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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HANOVER DIRECTION, INC. SAVINGS AND RETIREMENT PLAN
(formerly The Horn & Hardart Company Savings Plan)
FORM 5500 - ITEM 27(d)
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
There were no reportable transactions in 1998.
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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 28, 1999
