##### 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 March 28, 2009
 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
(State or other jurisdiction of 
incorporation or organization)
    
    06-0967107
(I.R.S. Employer
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
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company þ
 Yes
o No
þ




---



##### 



HAMPSHIRE GROUP, LIMITED
 QUARTERLY REPORT ON FORM 10-Q
 For the Quarterly Period Ended March 28, 2009
 SAFE HARBOR STATEMENT
    
    iiPART I-FINANICIAL INFORMATION
    
    
    1Item 1. Financial Statements
    
    
    1Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    21Item 4. Controls and Procedures
    
    
    21PART II-OTHER INFORMATION
    
    
    22Item 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    22Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 6. Exhibits
    
    
    23Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   i




---



##### Table of Contents



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




---



##### Table of Contents



PART I-FINANICIAL INFORMATION
 
 Item 1. Financial Statements.
 Hampshire Group, Limited and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
 (In thousands, except par value and shares)
    
    March 28, 2009
    
    
    December 31, 2008Current assets:Cash and cash equivalents
    
    $
    40,626
    
    
    $
    35,098Accounts receivable, net
    
    
    16,514
    
    
    
    27,881Other receivables
    
    
    3,057
    
    
    
    4,007Inventories, net
    
    
    8,174
    
    
    
    10,911Other current assets
    
    
    3,146
    
    
    
    2,672Assets of discontinued operations
    
    
    263
    
    
    
    246Total current assets
    
    
    71,780
    
    
    
    80,815Fixed assets, net
    
    
    12,811
    
    
    
    13,207Other assets
    
    
    3,772
    
    
    
    4,684Total assets
    
    $
    88,363
    
    
    $
    98,706Current liabilities:Current portion of long-term debt
    
    $
    26
    
    
    $
    30Accounts payable
    
    
    6,636
    
    
    
    7,759Accrued expenses and other liabilities
    
    
    10,327
    
    
    
    11,137Liabilities of discontinued operations
    
    
    506
    
    
    
    503Total current liabilities
    
    
    17,495
    
    
    
    19,429Long-term debt less current portion
    
    
    
    
    
    
    3Other long-term liabilities
    
    
    13,836
    
    
    
    14,477Total liabilities
    
    
    31,331
    
    
    
    33,909Commitments and contingencies
    
    
    
    
    
    
    Stockholders equity:Preferred stock, $0.10 par value, 1,000,000 shares
authorized; none issued
    
    
    
    
    
    
    Series A junior participating preferred stock,
$0.10 par value, 10,000 shares authorized at March
28, 2009 and December 31, 2008; none issued
    
    
    
    
    
    
    Common stock, $0.10 par value, 10,000,000 shares
authorized; 8,243,784 shares issued at March 28,
2009 and December 31, 2008
    
    
    824
    
    
    
    824Additional paid-in capital
    
    
    36,079
    
    
    
    36,079Retained earnings
    
    
    40,527
    
    
    
    48,292Treasury stock, 2,774,619 shares at cost at March
28, 2009 and December 31, 2008
    
    
    (20,398
    )
    
    
    (20,398
    )Total stockholders equity
    
    
    57,032
    
    
    
    64,797Total liabilities and stockholders equity
    
    $
    88,363
    
    
    $
    98,706
   1




---



##### Table of Contents



Hampshire Group, Limited and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
 Three Months Ended(In thousands, except per share data)
    
    March 28, 2009
    
    
    March 29, 2008Net sales
    
    $
    29,077
    
    
    $
    39,763Cost of goods sold
    
    
    22,905
    
    
    
    30,428Gross profit
    
    
    6,172
    
    
    
    9,335Selling, general, and administrative expenses
    
    
    10,945
    
    
    
    14,706Special costs
    
    
    1,924
    
    
    
    478Tender offer related costs
    
    
    1,007
    
    
    
    Loss from operations
    
    
    (7,704
    )
    
    
    (5,849
    )Other income (expense):Interest income
    
    
    109
    
    
    
    457Interest expense
    
    
    (48
    )
    
    
    (38
    )Other, net
    
    
    (1
    )
    
    
    (25
    )Loss from continuing operations before income taxes
    
    
    (7,644
    )
    
    
    (5,455
    )Income tax provision (benefit)
    
    
    96
    
    
    
    (2,121
    )Loss from continuing operations
    
    
    (7,740
    )
    
    
    (3,334
    )Loss from discontinued operations, net of taxes
    
    
    (25
    )
    
    
    (443
    )Net loss
    
    $
    (7,765
    )
    
    $
    (3,777
    )Basic loss per share:Loss from continuing operations
    
    $
    (1.42
    )
    
    $
    (0.42
    )Loss from discontinued operations, net of taxes
    
    
    
    
    
    
    (0.06
    )Net loss
    
    $
    (1.42
    )
    
    $
    (0.48
    )Diluted loss per share:Loss from continuing operations
    
    $
    (1.42
    )
    
    $
    (0.42
    )Loss from discontinued operations, net of taxes
    
    
    
    
    
    
    (0.06
    )Net loss
    
    $
    (1.42
    )
    
    $
    (0.48
    )Weighted average number of shares outstanding:Basic weighted average number of common shares outstanding
    
    
    5,469
    
    
    
    7,860Diluted weighted average number of common shares outstanding
    
    
    5,469
    
    
    
    7,860
   2




---



##### 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, 2008
    
    
    8,243,784
    
    
    $
    824
    
    
    $
    36,079
    
    
    $
    48,292
    
    
    
    2,774,619
    
    
    $
    (20,398
    )
    
    $
    64,797Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,765
    )
    
    
    
    
    
    
    
    
    
    
    (7,765
    )Balance at March 28, 2009
    
    
    8,243,784
    
    
    $
    824
    
    
    $
    36,079
    
    
    $
    40,527
    
    
    
    2,774,619
    
    
    $
    (20,398
    )
    
    $
    57,032
   3




---



##### Table of Contents



Hampshire Group, Limited and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
 Three Months Ended(In thousands)
    
    March 28, 2009
    
    
    March 29, 2008Cash flows from operating activities:Net loss
    
    $
    (7,765
    )
    
    $
    (3,777
    )Less: Loss from discontinued operations, net of taxes
    
    
    (25
    )
    
    
    (443
    )Loss from continuing operations
    
    
    (7,740
    )
    
    
    (3,334
    )Adjustments to reconcile loss from continuing operations to net
cash provided by (used in) operating activities:Depreciation and amortization
    
    
    549
    
    
    
    317Loss on sale or disposal of fixed assets
    
    
    
    
    
    
    93Deferred income tax provision
    
    
    
    
    
    
    1,985Excess tax benefits from share-based payment arrangements
    
    
    
    
    
    
    (85
    )Changes in operating assets and liabilities:Receivables, net
    
    
    12,326
    
    
    
    (334
    )Inventories, net
    
    
    2,737
    
    
    
    6,981Other assets
    
    
    414
    
    
    
    (150
    )Liabilities
    
    
    (2,586
    )
    
    
    (7,262
    )Net cash provided by (used in) continuing operating activities
    
    
    5,700
    
    
    
    (1,789
    )Net cash provided by (used in) discontinued operations
    
    
    (38
    )
    
    
    (1,695
    )Net cash provided by (used in) operating activities
    
    
    5,662
    
    
    
    (3,484
    )Cash flows from investing activities:Capital expenditures
    
    
    (127
    )
    
    
    (6,877
    )Net cash provided by (used in) continuing investing activities
    
    
    (127
    )
    
    
    (6,877
    )Net cash provided by (used in) discontinued operations
    
    
    
    
    
    
    (4
    )Net cash provided by (used in) investing activities
    
    
    (127
    )
    
    
    (6,881
    )Cash flows from financing activities:Repayment of long-term debt
    
    
    (7
    )
    
    
    (19
    )Excess tax benefits from share-based payment arrangements
    
    
    
    
    
    
    85Net cash provided by (used in) financing activities
    
    
    (7
    )
    
    
    66Net increase (decrease) in cash and cash equivalents
    
    
    5,528
    
    
    
    (10,299
    )Cash and cash equivalents at beginning of period
    
    
    35,098
    
    
    
    48,431Cash and cash equivalents at end of period
    
    $
    40,626
    
    
    $
    38,132
   4




---



##### Table of Contents



Note 1  Managements Liquidity and Financing Plan
     Restructuring and Cost Reduction Plan Subsequent Events
    5




---



##### Table of Contents



Note 2  Basis of Presentation
   Special
Costs
  Commitments and Contingencies.
   6




---



##### Table of Contents



Stock Options
  Recent Accounting Standards
 Fair Value Measurements
 Fair Value Measurements
      7




---



##### Table of Contents



Note 3  Inventories
  (In thousands)
    
    March 28, 2009
    
    
    December 31, 2008Finished goods
    
    $
    9,492
    
    
    $
    13,118Raw materials and supplies
    
    
    39
    
    
    
    549,531
    
    
    
    13,172Less: reserves
    
    
    (1,357
    )
    
    
    (2,261
    )Inventories, net
    
    $
    8,174
    
    
    $
    10,911
 Note 4  Loss Per Share
  Numerator
    
    
    Denominator
    
    
    Per Share(In thousands, except per share data)
    
    Income (Loss)
    
    
    Shares
    
    
    AmountThree 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
    )Three months ended March 29, 2008:Basic loss from continuing operations
    
    $
    (3,334
    )
    
    
    7,860
    
    
    $
    (0.42
    )Effect of dilutive securities:None outstanding
    
    
    
    
    
    
    
    
    
    
    Diluted loss from continuing operations
    
    $
    (3,334
    )
    
    
    7,860
    
    
    $
    (0.42
    )
  Note 5  Commitments and Contingencies
   Basis of
Presentation)
   8




---



##### Table of Contents



Note 6  Taxes
    Note 7  Dispositions and Discontinued Operations
      Assets of discontinued operations Liabilities of
discontinued operations
  9




---



##### Table of Contents



(In thousands)
    
    March 28, 2009
    
    
    December 31, 2008Other receivables
    
    $
    171
    
    
    $
    161Other current assets
    
    
    14
    
    
    
    6Other assets
    
    
    78
    
    
    
    79Assets of discontinued operations
    
    $
    263
    
    
    $
    246Accounts payable
    
    $
    270
    
    
    $
    263Accrued expenses and other liabilities
    
    
    236
    
    
    
    240Liabilities of discontinued operations
    
    $
    506
    
    
    $
    503
  (In thousands)
    
    March 28, 2009
    
    
    March 29, 2008Net sales
    
    $
    
    
    
    $
    15,076Gross profit
    
    $
    
    
    
    $
    3,727Loss on discontinued operations before income
taxes
    
    $
    (25
    )
    
    $
    (762
    )Income tax benefit
    
    
    
    
    
    
    319Loss from discontinued operations, net of taxes
    
    $
    (25
    )
    
    $
    (443
    )
 Note 8  Restructuring and Cost Reduction Plan
   Quarter Ended March 28, 2009Personnel
    
    
    Other(In thousands)
    
    Reductions
    
    
    Costs
    
    
    TotalBeginning of period
    
    $
    72
    
    
    $
    
    
    
    $
    72Costs charged to expense
    
    
    
    
    
    
    
    
    
    
    Costs paid or settled
    
    
    (72
    )
    
    
    
    
    
    
    (72
    )End of period
    
    $
    
    
    
    $
    
    
    
    $
    
 Selling, general, and administrative expenses
 Subsequent Events
  10




---



##### Table of Contents



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)
    
    
    March 28, 2009Cash and cash
equivalents
    
    $
    40,626
    
    
    $
    
    
    
    $
    
    
    
    $
    40,626
  Note 10  Tender Offer
    11




---



##### Table of Contents



Tender
offer related costs
 Note 11  Subsequent Events
 Restructuring and Cost Reduction Plan
  12




---



##### 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
 
    
    Doubt about our ability to continue as a going concern including the non-compliance
with our credit facility;
    
    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;
    
    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;
    
    Chargebacks and margin support payments;
    
    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;
    
    Investigations by the SEC and the United States Attorney of the Southern District of
New York related to prior Audit Committee investigations;
    
    Potential future restatements of our prior financial statements;
    
    Our stockholders rights plan potentially adversely affects existing stockholders;
    
    Risks related to the current global credit crisis; and
    
    Ongoing and potential litigation.
   13




---



##### Table of Contents



OVERVIEW
        Tender Offer
     14




---



##### Table of Contents



Tender offer related costs
 Management and Board of Directors Changes
    Legal and Compliance Matters
     15




---



##### Table of Contents



Special Costs
  Legal and Compliance Matters.
  Dispositions, Discontinued Operations, and Related Matters
       16




---



##### Table of Contents



Assets of discontinued operations Liabilities of discontinued
operations
 (In thousands)
    
    March 28, 2009
    
    
    December 31, 2008Other receivables
    
    $
    171
    
    
    $
    161Other current assets
    
    
    14
    
    
    
    6Other assets
    
    
    78
    
    
    
    79Assets of discontinued operations
    
    $
    263
    
    
    $
    246Accounts payable
    
    $
    270
    
    
    $
    263Accrued expenses and other liabilities
    
    
    236
    
    
    
    240Liabilities of discontinued operations
    
    $
    506
    
    
    $
    503
  (In thousands)
    
    March 28, 2009
    
    
    March 29, 2008Net sales
    
    $
    
    
    
    $
    15,076Gross profit
    
    $
    
    
    
    $
    3,727Loss on discontinued operations before income
taxes
    
    $
    (25
    )
    
    $
    (762
    )Income tax benefit
    
    
    
    
    
    
    319Loss from discontinued operations, net of taxes
    
    $
    (25
    )
    
    $
    (443
    )
 Restructuring and Cost Reduction Plans
   Quarter Ended March 28, 2009Personnel
    
    
    Other(In thousands)
    
    Reductions
    
    
    Costs
    
    
    TotalBeginning of period
    
    $
    72
    
    
    $
    
    
    
    $
    72Costs charged to expense
    
    
    
    
    
    
    
    
    
    
    Costs paid or settled
    
    
    (72
    )
    
    
    
    
    
    
    (72
    )End of period
    
    $
    
    
    
    $
    
    
    
    $
    
 Selling, general, and administrative expenses
  17




---



##### Table of Contents



RESULTS OF CONTINUING OPERATIONS
 Quarterly Comparison  Three Months Ended March 28, 2009 and March 29, 2008
 Net Sales
  Quarterly Rate/VolumePercentage(Dollars in thousands)
    
    Dollars
    
    
    of 2007Net sales quarter ended March 29, 2008
    
    $
    39,763
    
    
    
    100.0
    %Volume
    
    
    (10,518
    )
    
    
    (26.5
    %)Average net selling prices
    
    
    (168
    )
    
    
    (0.4
    %)Net sales quarter ended March 28, 2009
    
    $
    29,077
    
    
    
    73.1
    %
  Gross Profit
  Selling, General, and Administrative Expenses
 Restructuring and Cost Reduction Plans
 Special Costs
   18




---



##### Table of Contents



Tender Offer Related Costs
 Tender Offer) Tender offer related costs
 Income Taxes
    LIQUIDITY AND CAPITAL RESOURCES
       19




---



##### Table of Contents



Restructuring and Cost Reduction Plan
     INFLATION
  OFF-BALANCE SHEET ARRANGEMENTS
  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  RECENT ACCOUNTING PRONOUNCEMENTS
 Fair Value Measurements
  20




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
 Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
   21




---



##### Table of Contents



PART II-OTHER INFORMATION
 
 Item 1. Legal Proceedings.
 Commitments and Contingencies Legal and Compliance Matters
  
 Item 1A. Risk Factors.
  Managements Discussion and Analysis of Financial Condition and Results of
Operations Tender Offer
  Costs associated with the settlement of outstanding or potential litigation could adversely
affect our business.
 Commitments and Contingencies Tender Offer Item 2. Managements
Discussion and Analysis of Financial Condition and Results of Operations, Tender Offer and Legal
and Compliance Matters
 
 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
    
    
    
    
    
    
    Shares Purchased
    
    
    that May Yet beNumber of
    
    
    Average
    
    
    as Part of Publicly
    
    
    Purchased UnderShares
    
    
    Price Paid
    
    
    Announced Plans
    
    
    Such Plans orPeriod
    
    Purchased
    
    
    per Share
    
    
    or Programs
    
    
    ProgramsJanuary 1  January 31, 2009
    
    
    
    
    
    $
    
    
    
    
    February 1   February 28, 2009
    
    
    
    
    
    
    
    
    
    
    March 1  March 28, 2009
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    1,036,490
   22




---



##### Table of Contents



Item 6. Exhibits.
 (a) The following exhibits are filed as part of this Report:
 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
  23




---



##### Table of Contents



SIGNATURES
  Hampshire Group, LimitedDate: May 18, 2009
    By:
    /s/ Richard A. MandellRichard A. MandellChief Executive Officer and President
(Principal Executive Officer)/s/ Jonathan W. NorwoodJonathan W. NorwoodVice President, Chief Financial
Officer, and Treasurer
(Principal Financial Officer)  24




---



##### Table of Contents



INDEX TO EXHIBITS
 EXHIBITNUMBER
    
    DESCRIPTION31.1
    
    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