##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended April 3, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 000-20201
 HAMPSHIRE GROUP, LIMITED
 (Exact name of registrant as specified in its charter)
 Delaware
    
    06-0967107(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)114 W. 41st Street, New York, New York
    
    10036(Address of principal executive offices)
    
    (Zip Code)
 (212) 840-5666
(Registrants telephone number, including area code)
 þ o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if smaller reporting company)
 o þ




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##### 



HAMPSHIRE GROUP, LIMITED
 QUARTERLY REPORT ON FORM 10-Q
 For the Quarterly Period Ended April 3, 2010
 SAFE HARBOR STATEMENT
    
    iiPART I-FINANCIAL INFORMATION
    
    
    1Item 1. Financial Statements
    
    
    1Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    14Item 4T. Controls and Procedures
    
    
    14PART II-OTHER INFORMATION
    
    
    15Item 1. Legal Proceedings
    
    
    15Item 1A. Risk Factors
    
    
    15Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    15Item 5. Other Information
    
    
    15Item 6. Exhibits
    
    
    16Exhibit 10.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   i




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SAFE HARBOR STATEMENT
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
  Risk
Factors
    ii




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##### Table of Contents



PART I-FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements.
 Hampshire Group, Limited and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
 (In thousands, except par value and shares)
    
    April 3, 2010
    
    
    December 31, 2009Current assets:Cash and cash equivalents
    
    $
    40,524
    
    
    $
    33,365Accounts receivable, net
    
    
    9,309
    
    
    
    21,708Other receivables
    
    
    7,480
    
    
    
    7,663Inventories, net
    
    
    6,005
    
    
    
    8,137Other current assets
    
    
    2,610
    
    
    
    1,606Assets of discontinued operations
    
    
    29
    
    
    
    152Total current assets
    
    
    65,957
    
    
    
    72,631Fixed assets, net
    
    
    10,824
    
    
    
    11,283Other assets
    
    
    2,721
    
    
    
    3,015Total assets
    
    $
    79,502
    
    
    $
    86,929Current liabilities:Current portion of long-term debt
    
    $
    36
    
    
    $
    39Accounts payable
    
    
    4,424
    
    
    
    7,256Accrued expenses and other liabilities
    
    
    5,906
    
    
    
    5,557Liabilities of discontinued operations
    
    
    548
    
    
    
    572Total current liabilities
    
    
    10,914
    
    
    
    13,424Long-term debt less current portion
    
    
    70
    
    
    
    79Other long-term liabilities
    
    
    14,547
    
    
    
    14,577Total liabilities
    
    
    25,531
    
    
    
    28,080Commitments and contingencies (Note 5)Stockholders equity:Preferred stock, $0.10 par value, 1,000,000 shares authorized at April
3, 2010 and December 31, 2009, respectively; none issued
    
    
    
    
    
    
    Series A junior participating preferred stock, $0.10 par value, 10,000
shares authorized at April 3, 2010 and December 31, 2009, respectively;
none issued
    
    
    
    
    
    
    Common stock, $0.10 par value, 10,000,000 shares authorized; 8,243,784
shares issued at April 3, 2010 and December 31, 2009
    
    
    824
    
    
    
    824Additional paid-in capital
    
    
    30,095
    
    
    
    29,948Retained earnings
    
    
    37,226
    
    
    
    42,246Treasury stock, 1,928,424 and 1,927,119 shares at cost at April 3, 2010
and December 31, 2009, respectively
    
    
    (14,174
    )
    
    
    (14,169
    )Total stockholders equity
    
    
    53,971
    
    
    
    58,849Total liabilities and stockholders equity
    
    $
    79,502
    
    
    $
    86,929
   1




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##### Table of Contents



Hampshire Group, Limited and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
 Three Months Ended(In thousands, except per share data)
    
    April 3, 2010
    
    
    March 28, 2009Net sales
    
    $
    20,450
    
    
    $
    29,077Cost of goods sold
    
    
    16,212
    
    
    
    22,905Gross profit
    
    
    4,238
    
    
    
    6,172Selling, general, and administrative expenses
    
    
    8,559
    
    
    
    10,945Special costs
    
    
    541
    
    
    
    1,924Tender offer related costs
    
    
    
    
    
    
    1,007Loss from operations
    
    
    (4,862
    )
    
    
    (7,704
    )Other income (expense):Interest income
    
    
    18
    
    
    
    109Interest expense
    
    
    (108
    )
    
    
    (48
    )Other, net
    
    
    (24
    )
    
    
    (1
    )Loss from continuing operations before income taxes
    
    
    (4,976
    )
    
    
    (7,644
    )Income tax provision
    
    
    39
    
    
    
    96Loss from continuing operations
    
    
    (5,015
    )
    
    
    (7,740
    )Loss from discontinued operations, net of taxes
    
    
    (5
    )
    
    
    (25
    )Net loss
    
    $
    (5,020
    )
    
    $
    (7,765
    )Basic loss per share:Loss from continuing operations
    
    $
    (0.90
    )
    
    $
    (1.42
    )Loss from discontinued operations, net of taxes
    
    
    
    
    
    
    Net loss
    
    $
    (0.90
    )
    
    $
    (1.42
    )Diluted loss per share:Loss from continuing operations
    
    $
    (0.90
    )
    
    $
    (1.42
    )Loss from discontinued operations, net of taxes
    
    
    
    
    
    
    Net loss
    
    $
    (0.90
    )
    
    $
    (1.42
    )Weighted average number of shares outstanding:Basic weighted average number of common shares outstanding
    
    
    5,553
    
    
    
    5,469Diluted weighted average number of common shares
outstanding
    
    
    5,553
    
    
    
    5,469
   2




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##### Table of Contents



Hampshire Group, Limited and Subsidiaries
Unaudited Condensed Consolidated Statement of Stockholders Equity
 Additional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Retained
    
    
    Treasury Stock
    
    
    Stockholders(In thousands, except shares)
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Shares
    
    
    Amount
    
    
    EquityBalance at December 31, 2009
    
    
    8,243,784
    
    
    $
    824
    
    
    $
    29,948
    
    
    $
    42,246
    
    
    
    1,927,119
    
    
    $
    (14,169
    )
    
    $
    58,849Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,020
    )
    
    
    
    
    
    
    
    
    
    
    (5,020
    )Stock based compensation
    
    
    
    
    
    
    
    
    
    
    147
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    147Purchase of treasury shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,305
    
    
    
    (5
    )
    
    
    (5
    )Balance at April 3, 2010
    
    
    8,243,784
    
    
    $
    824
    
    
    $
    30,095
    
    
    $
    37,226
    
    
    
    1,928,424
    
    
    $
    (14,174
    )
    
    $
    53,971
   3




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##### Table of Contents



Hampshire Group, Limited and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
 Three Months Ended(In thousands)
    
    April 3, 2010
    
    
    March 28, 2009Cash flows from operating activities:Net loss
    
    $
    (5,020
    )
    
    $
    (7,765
    )Less: Loss from discontinued operations, net of taxes
    
    
    (5
    )
    
    
    (25
    )Loss from continuing operations
    
    
    (5,015
    )
    
    
    (7,740
    )Adjustments to reconcile loss from continuing operations to net
cash provided by (used in) operating activities:Depreciation and amortization
    
    
    618
    
    
    
    549Stock based compensation
    
    
    147
    
    
    
    Changes in operating assets and liabilities:Receivables, net
    
    
    12,459
    
    
    
    12,326Inventories, net
    
    
    2,132
    
    
    
    2,737Other assets
    
    
    (699
    )
    
    
    414Liabilities
    
    
    (2,506
    )
    
    
    (2,586
    )Net cash provided by (used in) continuing operating activities
    
    
    7,136
    
    
    
    5,700Net cash provided by (used in) discontinued operations
    
    
    78
    
    
    
    (38
    )Net cash provided by (used in) operating activities
    
    
    7,214
    
    
    
    5,662Cash flows from investing activities:Capital expenditures
    
    
    (38
    )
    
    
    (127
    )Net cash provided by (used in) continuing investing activities
    
    
    (38
    )
    
    
    (127
    )Net cash provided by (used in) discontinued operations
    
    
    
    
    
    
    Net cash provided by (used in) investing activities
    
    
    (38
    )
    
    
    (127
    )Cash flows from financing activities:Purchase of treasury stock
    
    
    (5
    )
    
    
    Repayment of long-term debt
    
    
    (12
    )
    
    
    (7
    )Net cash provided by (used in) financing activities
    
    
    (17
    )
    
    
    (7
    )Net increase (decrease) in cash and cash equivalents
    
    
    7,159
    
    
    
    5,528Cash and cash equivalents at beginning of period
    
    
    33,365
    
    
    
    35,098Cash and cash equivalents at end of period
    
    $
    40,524
    
    
    $
    40,626
   4




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Note 1  Basis of Presentation
   Credit Facility Commitments and Contingencies
 Special Costs
   Commitments and Contingencies.
   5




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Accounting Standards Updates
  Fair Value Measurements and Disclosures,
 Subsequent Events  Amendments to Certain
Recognition and Disclosure Requirements , Subsequent Events,
 Note 2  Credit Facility
     Note 3  Inventories
  (In thousands)
    
    April 3, 2010
    
    
    December 31, 2009Finished goods
    
    $
    6,135
    
    
    $
    8,340Raw materials and supplies
    
    
    37
    
    
    
    376,172
    
    
    
    8,377Less: reserves
    
    
    (167
    )
    
    
    (240
    )Inventories, net
    
    $
    6,005
    
    
    $
    8,137
  6




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Note 4  Loss Per Share
  Numerator
    
    
    Denominator
    
    
    Per Share(In thousands, except per share data)
    
    Income (Loss)
    
    
    Shares
    
    
    AmountThree months ended April 3, 2010:Basic loss from continuing operations
    
    $
    (5,015
    )
    
    
    5,553
    
    
    $
    (0.90
    )Effect of dilutive securities:Preferred rights
    
    
    
    
    
    
    
    
    
    
    Restricted stock
    
    
    
    
    
    
    
    
    
    
    Diluted loss from continuing operations
    
    $
    (5,015
    )
    
    
    5,553
    
    
    $
    (0.90
    )Three months ended March 28, 2009:Basic loss from continuing operations
    
    $
    (7,740
    )
    
    
    5,469
    
    
    $
    (1.42
    )Effect of dilutive securities:Preferred rights
    
    
    
    
    
    
    
    
    
    
    Diluted loss from continuing operations
    
    $
    (7,740
    )
    
    
    5,469
    
    
    $
    (1.42
    )
  Note 5  Commitments and Contingencies
       7




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##### Table of Contents



Note 6  Taxes
  Note 7  Dispositions and Discontinued Operations
  Assets of discontinued operations Liabilities of
discontinued operations
  (In thousands)
    
    April 3, 2010
    
    
    December 31, 2009Other receivables
    
    $
    29
    
    
    $
    152Assets of discontinued operations
    
    $
    29
    
    
    $
    152Accrued expenses and other liabilities
    
    $
    548
    
    
    $
    572Liabilities of discontinued operations
    
    $
    548
    
    
    $
    572
  (In thousands)
    
    April 3, 2010
    
    
    March 28, 2009Net sales
    
    $
    
    
    
    $
    Gross profit
    
    $
    
    
    
    $
    Loss on discontinued operations before
income taxes
    
    $
    (5
    )
    
    $
    (25
    )Income tax benefit
    
    
    
    
    
    
    Loss from discontinued operations, net of taxes
    
    $
    (5
    )
    
    $
    (25
    )
  8




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Note 8  Restructuring Charges
   Three Months EndedApril 3, 2010
    
    
    March 28, 2009Personnel
    
    
    Other
    
    
    
    
    
    
    Personnel
    
    
    Other(In thousands)
    
    Reductions
    
    
    Costs
    
    
    Total
    
    
    Reductions
    
    
    Costs
    
    
    TotalBeginning of period
    
    $
    32
    
    
    $
    1,210
    
    
    $
    1,242
    
    
    $
    72
    
    
    $
    
    
    
    $
    72Costs charged to expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Costs paid or settled
    
    
    (32
    )
    
    
    (107
    )
    
    
    (139
    )
    
    
    (72
    )
    
    
    
    
    
    
    (72
    )End of period
    
    $
    
    
    
    $
    1,103
    
    
    $
    1,103
    
    
    $
    
    
    
    $
    
    
    
    $
    
 Note 9  Fair Value Measurements
  Level 1
 Level 2
 Level 3
  Fair Value Measurements at Reporting Date UsingQuoted Pricesin Active
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    Unobservable(In thousands)
    
    Assets
    
    
    Inputs
    
    
    InputsDescription
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    April 3, 2010Cash equivalents
    
    $
    11,187
    
    
    $
    
    
    
    $
    
    
    
    $
    11,187
  9




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Note 10  Tender Offer
     10




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
 The following discussion contains statements that are forward looking. These statements are based
on expectations and assumptions that are subject to risks and uncertainties. Actual results could
differ materially because of factors discussed elsewhere in this report. This discussion should be
read in conjunction with the discussion of forward-looking statements, the financial statements,
and the related notes and the other statistical information included in this report.
 DISCUSSION OF FORWARD-LOOKING STATEMENTS
 Risk
Factors Risk Factors
 
    
    A prolonged period of depressed consumer spending;
 
    
    Lack of an established public trading market for our common stock;
 
    
    Decreases in business from or the loss of any one of our key customers;
 
    
    Financial instability experienced by our customers;
 
    
    Chargebacks and margin support payments;
 
    
    Loss of or inability to renew certain licenses;
 
    
    Change in consumer preferences and fashion trends, which could negatively affect
acceptance of our products by retailers and consumers;
 
    
    Use of foreign suppliers for raw materials and manufacture of our products;
 
    
    Failure of our manufacturers to use acceptable ethical business practices;
 
    
    Failure to deliver quality products in a timely manner;
 
    
    Problems with our distribution system and our ability to deliver products;
 
    
    Labor disruptions at port, our suppliers, manufacturers, or distribution facilities;
 
    
    Failure, inadequacy, interruption, or security lapse of our information technology;
 
    
    Failure to compete successfully in a highly competitive and fragmented industry;
 
    
    Challenges integrating any business we may acquire;
 
    
    Unanticipated expenses beyond the amount reserved on our balance sheet or
unanticipated cash payments related to the ultimate resolution of income and other
possible tax liabilities;
 
    
    Loss of certain key personnel which could negatively impact our ability to manage
our business;
 
    
    Our stockholders rights plan potentially adversely affects existing stockholders;
and
 
    
    Risks related to the global economic, political and social conditions.
   11




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OVERVIEW
        RESULTS OF CONTINUING OPERATIONS
 Quarterly Comparison  Three Months Ended April 3, 2010 and March 28, 2009
 Net Sales
  Quarterly Rate/VolumePercentage(Dollars in thousands)
    
    Dollars
    
    
    of 2009Net sales quarter ended March 28, 2009
    
    $
    29,077
    
    
    
    100.0
    %Volume
    
    
    (6,761
    )
    
    
    (23.3
    %)Average net selling prices
    
    
    (1,866
    )
    
    
    (6.4
    %)Net sales quarter ended April 3, 2010
    
    $
    20,450
    
    
    
    70.3
    %
   12




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##### Table of Contents



Gross Profit
  Selling, General, and Administrative Expenses
 Restructuring Charges
 Special Costs
 Basis of Presentation Commitments
and Contingencies
 Tender Offer Related Costs
 Tender Offer
 Income Taxes
  Taxes
 LIQUIDITY AND CAPITAL RESOURCES
    13




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INFLATION
  OFF-BALANCE SHEET ARRANGEMENTS
  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
 Basis for Presentation
 
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4T.
    
    Controls and Procedures.
 Disclosure Controls and Procedures
    14




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PART II-OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings.
 Commitments and Contingencies
  
 Item 1A.
    
    Risk Factors.
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.
 ISSUER PURCHASES OF EQUITY SECURITIES
COMMON STOCK, $0.10 PAR VALUE
 MaximumTotal Number of
    
    
    Number of SharesTotal
    
    
    Average
    
    
    Shares Purchased
    
    
    that May Yet beNumber of
    
    
    Price
    
    
    as Part of Publicly
    
    
    Purchased UnderShares
    
    
    Paid per
    
    
    Announced Plans
    
    
    the Plans orPeriod
    
    Purchased
    
    
    Share
    
    
    or Programs
    
    
    ProgramsJanuary 1, 2010  January 30, 2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    847,500January 31, 2010   February 27, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    847,500February 28, 2010  April 3, 2010
    
    
    1,305
    *
    
    
    4.20
    
    
    
    1,305
    *
    
    
    846,195Total
    
    
    1,305
    
    
    $
    4.20
    
    
    
    1,305
    
    
    
    846,195
 *
    
    Represents shares turned in by employees of the Company to cover personal tax obligations on
shares of common stock that vested on March 31, 2010. The vested shares were awarded to certain
employees under The Hampshire Group, Limited 2009 Stock Incentive Plan, adopted on October 21,
2009 (the Plan), which allows employees to satisfy their applicable withholding tax
obligations by using shares of common stock that would otherwise be deliverable upon the vesting
of the restricted stock. 846,195 shares of the 847,500 shares that have been granted pursuant to
the Plan are currently outstanding. 
 Item 5.
    
    Other Information.
   15




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##### Table of Contents



Item 6.
    
    Exhibits.
 (a) The following exhibits are filed as part of this Report:
 10.1
    
    
    Amendment No. 1, dated May 7, 2010, to the Second Amended and Restated Credit
Agreement and Guaranty with HSBC Bank USA as agent, the Banks named therein and Hampshire
Group, Limited, dated August 7, 2009.31.1
    
    
    Certification of Principal Executive Officer pursuant to Item 601(b) (31) of
Regulation S-K as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Principal Financial Officer pursuant to Item 601(b) (31) of
Regulation S-K as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  16




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##### Table of Contents



SIGNATURES
  Hampshire Group, LimitedDate: May 12, 2010
    By:
    /s/ Heath L. GoldenHeath L. GoldenPresident and Chief Executive Officer

(Principal Executive Officer)/s/ Jonathan W. NorwoodJonathan W. NorwoodVice President, Chief Financial Officer, and Treasurer

(Principal Financial and Accounting Officer)  17




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##### Table of Contents



INDEX TO EXHIBITS
 EXHIBITNUMBER
    
    DESCRIPTION10.1
    
    
    Amendment No. 1, dated May 7, 2010, to the Second Amended and Restated Credit
Agreement and Guaranty with HSBC Bank USA as agent, the Banks named therein and Hampshire
Group, Limited, dated August 7, 2009.31.1
    
    
    Certification of Principal Executive Officer pursuant to Item 601(b) (31) of Regulation
S-K as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Principal Financial Officer pursuant to Item 601(b) (31) of Regulation
S-K as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002