##### 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 September 27, 2008
 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)
 1924 Pearman Dairy Road, Anderson, South Carolina
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer
o
(Do not check if smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



HAMPSHIRE GROUP, LIMITED
 QUARTERLY REPORT ON FORM 10-Q
 For the Quarterly Period Ended September 27, 2008
 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
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 4. Controls and Procedures
    
    
    25PART IIOTHER INFORMATION
    
    
    26Item 1. Legal Proceedings
    
    
    26Item 1A. Risk Factors
    
    
    26Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27Item 6. Exhibits
    
    
    28Exhibit 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)
    
    September 27, 2008
    
    
    December 31, 2007Current assets:Cash and cash equivalents
    
    $
    437
    
    
    $
    48,431Accounts receivable, net
    
    
    57,908
    
    
    
    26,535Other receivables
    
    
    3,024
    
    
    
    7,384Inventories, net
    
    
    46,690
    
    
    
    17,462Deferred tax assets, net
    
    
    10,875
    
    
    
    9,485Other current assets
    
    
    2,589
    
    
    
    2,144Assets of discontinued operations
    
    
    170
    
    
    
    20,408Total current assets
    
    
    121,693
    
    
    
    131,849Fixed assets, net
    
    
    13,600
    
    
    
    8,060Goodwill
    
    
    8,162
    
    
    
    8,162Deferred tax assets, net
    
    
    5,151
    
    
    
    4,231Other assets
    
    
    4,732
    
    
    
    4,166Total assets
    
    $
    153,338
    
    
    $
    156,468Current liabilities:Current portion of long-term debt
    
    $
    29
    
    
    $
    41Borrowings under credit facility
    
    
    9,775
    
    
    
    Accounts payable
    
    
    26,921
    
    
    
    15,062Accrued expenses and other liabilities
    
    
    13,762
    
    
    
    14,871Liabilities of discontinued operations
    
    
    1,486
    
    
    
    6,418Total current liabilities
    
    
    51,973
    
    
    
    36,392Long-term debt less current portion
    
    
    11
    
    
    
    33Other long-term liabilities
    
    
    12,744
    
    
    
    13,499Total liabilities
    
    
    64,728
    
    
    
    49,924Commitments and contingencies (Note 5)
    
    
    
    
    
    
    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 and zero shares authorized at September 27, 2008 and December 31,
2007, respectively; none issued
    
    
    
    
    
    
    Common stock, $0.10 par value, 10,000,000 shares authorized; 8,243,784
shares issued at September 27, 2008 and December 31, 2007
    
    
    824
    
    
    
    824Additional paid-in capital
    
    
    36,079
    
    
    
    35,977Retained earnings
    
    
    72,105
    
    
    
    78,189Treasury stock, 2,774,619 and 384,279 shares at cost at September 27,
2008 and December 31, 2007
    
    
    (20,398
    )
    
    
    (8,446
    )Total stockholders equity
    
    
    88,610
    
    
    
    106,544Total liabilities and stockholders equity
    
    $
    153,338
    
    
    $
    156,468
   1




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##### Table of Contents



Hampshire Group, Limited and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
 Three Months Ended
    
    
    Nine Months Ended(In thousands, except per share data)
    
    September 27, 2008
    
    
    September 29, 2007
    
    
    September 27, 2008
    
    
    September 29, 2007Net sales
    
    $
    80,962
    
    
    $
    85,236
    
    
    $
    153,622
    
    
    $
    158,513Cost of goods sold
    
    
    63,003
    
    
    
    63,565
    
    
    
    117,343
    
    
    
    118,266Gross profit
    
    
    17,959
    
    
    
    21,671
    
    
    
    36,279
    
    
    
    40,247Selling, general, and administrative expenses
    
    
    14,545
    
    
    
    15,420
    
    
    
    43,058
    
    
    
    41,384Special costs
    
    
    1,360
    
    
    
    1,082
    
    
    
    2,328
    
    
    
    4,929Income (loss) from operations
    
    
    2,054
    
    
    
    5,169
    
    
    
    (9,107
    )
    
    
    (6,066
    )Other income (expense):Interest income
    
    
    106
    
    
    
    116
    
    
    
    872
    
    
    
    1,592Interest expense
    
    
    (24
    )
    
    
    (80
    )
    
    
    (100
    )
    
    
    (99
    )Other, net
    
    
    1,666
    
    
    
    (213
    )
    
    
    1,659
    
    
    
    (33
    )Income (loss) from continuing operations before income taxes
    
    
    3,802
    
    
    
    4,992
    
    
    
    (6,676
    )
    
    
    (4,606
    )Provision (benefit) for income taxes
    
    
    957
    
    
    
    1,025
    
    
    
    (3,066
    )
    
    
    (4,221
    )Income (loss) from continuing operations
    
    
    2,845
    
    
    
    3,967
    
    
    
    (3,610
    )
    
    
    (385
    )Income (loss) from discontinued operations, net of taxes
    
    
    (133
    )
    
    
    132
    
    
    
    (2,474
    )
    
    
    (1,537
    )Net income (loss)
    
    $
    2,712
    
    
    $
    4,099
    
    
    $
    (6,084
    )
    
    $
    (1,922
    )Basic income (loss) per share:Income (loss) from continuing operations
    
    $
    0.44
    
    
    $
    0.50
    
    
    $
    (0.49
    )
    
    $
    (0.05
    )Income (loss) from discontinued operations, net of taxes
    
    
    (0.02
    )
    
    
    0.02
    
    
    
    (0.33
    )
    
    
    (0.19
    )Net income (loss)
    
    $
    0.42
    
    
    $
    0.52
    
    
    $
    (0.82
    )
    
    $
    (0.24
    )Diluted income (loss) per share:Income (loss) from continuing operations
    
    $
    0.44
    
    
    $
    0.50
    
    
    $
    (0.49
    )
    
    $
    (0.05
    )Income (loss) from discontinued operations, net of taxes
    
    
    (0.02
    )
    
    
    0.02
    
    
    
    (0.33
    )
    
    
    (0.19
    )Net income (loss)
    
    $
    0.42
    
    
    $
    0.52
    
    
    $
    (0.82
    )
    
    $
    (0.24
    )Weighted average number of shares outstanding:Basic weighted average number of common shares outstanding
    
    
    6,441
    
    
    
    7,860
    
    
    
    7,383
    
    
    
    7,860Diluted weighted average number of common shares outstanding
    
    
    6,441
    
    
    
    7,860
    
    
    
    7,383
    
    
    
    7,860
   2




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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, 2007
    
    
    8,243,784
    
    
    $
    824
    
    
    $
    35,977
    
    
    $
    78,189
    
    
    
    384,279
    
    
    $
    (8,446
    )
    
    $
    106,544Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,084
    )
    
    
    
    
    
    
    
    
    
    
    (6,084
    )Tax benefits from
share-based payment
arrangements
    
    
    
    
    
    
    
    
    
    
    102
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102Treasury share purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,390,340
    
    
    
    (11,952
    )
    
    
    (11,952
    )Balance at September 27, 2008
    
    
    8,243,784
    
    
    $
    824
    
    
    $
    36,079
    
    
    $
    72,105
    
    
    
    2,774,619
    
    
    $
    (20,398
    )
    
    $
    88,610
   3




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Hampshire Group, Limited and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
 Nine Months Ended(In thousands)
    
    September 27, 2008
    
    
    September 29, 2007Cash flows from operating activities:Net loss
    
    $
    (6,084
    )
    
    $
    (1,922
    )Less: Loss from discontinued operations, net of taxes
    
    
    (2,474
    )
    
    
    (1,537
    )Loss from continuing operations
    
    
    (3,610
    )
    
    
    (385
    )Adjustments to reconcile loss from continuing operations to net
cash provided by (used in) operating activities:Depreciation and amortization
    
    
    1,352
    
    
    
    592Loss (gain) on sale or disposal of fixed assets
    
    
    179
    
    
    
    (55
    )Deferred income tax benefit
    
    
    (2,310
    )
    
    
    (614
    )Deferred compensation expense, net
    
    
    92
    
    
    
    Excess tax benefits from share-based payment arrangements
    
    
    (102
    )
    
    
    (230
    )Changes in operating assets and liabilities:Receivables, net
    
    
    (27,018
    )
    
    
    (37,836
    )Inventories, net
    
    
    (29,229
    )
    
    
    (41,978
    )Other assets
    
    
    (567
    )
    
    
    3,168Liabilities
    
    
    12,554
    
    
    
    (5,887
    )Net cash provided by (used in) continuing operating activities
    
    
    (48,659
    )
    
    
    (83,225
    )Net cash provided by (used in) discontinued operations
    
    
    9,046
    
    
    
    (8,725
    )Net cash provided by (used in) operating activities
    
    
    (39,613
    )
    
    
    (91,950
    )Cash flows from investing activities:Capital expenditures
    
    
    (9,475
    )
    
    
    (1,140
    )Proceeds from sales of fixed assets
    
    
    
    
    
    
    127Net cash provided by (used in) continuing investing activities
    
    
    (9,475
    )
    
    
    (1,013
    )Net cash provided by (used in) discontinued operations
    
    
    3,724
    
    
    
    (404
    )Net cash provided by (used in) investing activities
    
    
    (5,751
    )
    
    
    (1,417
    )Cash flows from financing activities:Proceeds from credit facility
    
    
    16,325
    
    
    
    28,240Repayments of credit facility
    
    
    (6,550
    )
    
    
    (5,260
    )Purchase of treasury stock
    
    
    (11,952
    )
    
    
    Repayment of long-term debt
    
    
    (34
    )
    
    
    (53
    )Excess tax benefits from share-based payment arrangements
    
    
    102
    
    
    
    230Capitalized credit facility costs
    
    
    (521
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    (2,630
    )
    
    
    23,157Net increase (decrease) in cash and cash equivalents
    
    
    (47,994
    )
    
    
    (70,210
    )Cash and cash equivalents at beginning of period
    
    
    48,431
    
    
    
    70,210Cash and cash equivalents at end of period
    
    $
    437
    
    
    $
    
   4




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Note 1  Basis of Presentation
   Special Costs
   Commitments and Contingencies.
  Stock Options
  Presentation of Prior Years Data
   5




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Recent Accounting Standards
 Fair Value Measurements
     Note 2  Inventories
  (In thousands)
    
    September 27, 2008
    
    
    December 31, 2007Total finished goods at cost
    
    $
    48,962
    
    
    $
    19,889Less: reserves
    
    
    (2,272
    )
    
    
    (2,427
    )Inventories, net
    
    $
    46,690
    
    
    $
    17,462
 Note 3  Revolving Credit Facility
   6




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Dispositions and Discontinued
Operations
 Commitments and Contingencies
   7




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Note 4  Income (Loss) Per Share
  Numerator
    
    
    Denominator
    
    
    Per Share(In thousands, except per share data)
    
    Income (Loss)
    
    
    Shares
    
    
    AmountThree months ended September 27, 2008:Basic income from continuing operations
    
    $
    2,845
    
    
    
    6,441
    
    
    $
    0.44Effect of dilutive securities:Stock options
    
    
    
    
    
    
    
    
    
    
    Diluted income from continuing operations
    
    $
    2,845
    
    
    
    6,441
    
    
    $
    0.44Three months ended September 29, 2007:Basic income from continuing operations
    
    $
    3,967
    
    
    
    7,860
    
    
    $
    0.50Effect of dilutive securities:Stock options
    
    
    
    
    
    
    
    
    
    
    Diluted income from continuing operations
    
    $
    3,967
    
    
    
    7,860
    
    
    $
    0.50Nine months ended September 27, 2008:Basic loss from continuing operations
    
    $
    (3,610
    )
    
    
    7,383
    
    
    $
    (0.49
    )Effect of dilutive securities:Stock options
    
    
    
    
    
    
    
    
    
    
    Diluted loss from continuing operations
    
    $
    (3,610
    )
    
    
    7,383
    
    
    $
    (0.49
    )Nine months ended September 29, 2007:Basic loss from continuing operations
    
    $
    (385
    )
    
    
    7,860
    
    
    $
    (0.05
    )Effect of dilutive securities:Stock options
    
    
    
    
    
    
    
    
    
    
    Diluted loss from continuing operations
    
    $
    (385
    )
    
    
    7,860
    
    
    $
    (0.05
    )
  Note 5  Commitments and Contingencies
      8




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Other, net Other income (expense)
   Note 6  Taxes
    9




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Note 7  Dispositions and Discontinued Operations
       
 (In thousands)
    
    September 27, 2008
    
    
    December 31, 2007Accounts receivable, net
    
    $
    
    
    
    $
    13,504Other receivables
    
    
    43
    
    
    
    264Inventories, net
    
    
    
    
    
    
    4,664Other current assets
    
    
    23
    
    
    
    377Fixed assets, net
    
    
    
    
    
    
    284Intangible assets, net
    
    
    
    
    
    
    1,270Other assets
    
    
    104
    
    
    
    45Assets of discontinued operations
    
    $
    170
    
    
    $
    20,408Accounts payable
    
    $
    996
    
    
    $
    3,166Accrued expenses and other liabilities
    
    
    214
    
    
    
    3,198Other long-term liabilities
    
    
    276
    
    
    
    54Liabilities of discontinued operations
    
    $
    1,486
    
    
    $
    6,418
  10




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Three Months Ended
    
    
    Nine Months Ended(In thousands)
    
    September 27, 2008
    
    
    September 29, 2007
    
    
    September 27, 2008
    
    
    September 29, 2007Net sales
    
    $
    
    
    
    $
    18,348
    
    
    $
    16,607
    
    
    $
    45,307Gross profit (loss)
    
    $
    
    
    
    $
    4,619
    
    
    $
    4,077
    
    
    $
    11,074Income (loss) on discontinued
operations before income taxes
    
    $
    (105
    )
    
    $
    239
    
    
    $
    (417
    )
    
    $
    (2,730
    )Loss on sale of business
    
    
    (28
    )
    
    
    
    
    
    
    (3,680
    )
    
    
    Provision (benefit) for income taxes
    
    
    
    
    
    
    107
    
    
    
    (1,623
    )
    
    
    (1,193
    )Income (loss) from discontinued
operations, net of taxes
    
    $
    (133
    )
    
    $
    132
    
    
    $
    (2,474
    )
    
    $
    (1,537
    )
 Note 8  Restructuring and Cost Reduction Plan
   Three Months Ended
    
    
    Nine Months Ended(In thousands)
    
    September 27, 2008
    
    
    September 27, 2008Personnel reductions
    
    $
    50
    
    
    $
    482Other costs
    
    
    46
    
    
    
    55Total
    
    $
    96
    
    
    $
    537
  Three Months Ended September 27, 2008Personnel
    
    
    Other(In thousands)
    
    Reductions
    
    
    Costs
    
    
    TotalBeginning of period
    
    $
    134
    
    
    $
    
    
    
    $
    134Costs charged to expense
    
    
    50
    
    
    
    46
    
    
    
    96Costs paid or settled
    
    
    (100
    )
    
    
    (21
    )
    
    
    (121
    )End of period
    
    $
    84
    
    
    $
    25
    
    
    $
    109
 Nine Months Ended September 27, 2008Personnel
    
    
    Other(In thousands)
    
    Reductions
    
    
    Costs
    
    
    TotalBeginning of period
    
    $
    
    
    
    $
    
    
    
    $
    Costs charged to expense
    
    
    482
    
    
    
    55
    
    
    
    537Costs paid or settled
    
    
    (398
    )
    
    
    (30
    )
    
    
    (428
    )End of period
    
    $
    84
    
    
    $
    25
    
    
    $
    109
  11




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Note 9  Fair Value Measurements
   Level 1
 Level 2
 Level 3
  Fair Value Measurements at Reporting Date UsingQuoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets
    
    
    Observable
    
    
    Unobservable(In thousands)
    
    for Identical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    September 27,Description
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    2008Cash and cash
equivalents
    
    $
    437
    
    
    $
    
    
    
    $
    
    
    
    $
    437
 Note 10  Stockholder Rights Plan
    12




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13




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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
 
    
    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;
 
    
    Future defaults under our credit facility;
 
    
    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 (U.S. Attorneys Office) related to prior managements actions; and
 
    
    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.
   14




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OVERVIEW
        Legal and Compliance Matters
     15




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Stockholder Rights Plan
      16




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##### Table of Contents



Amended By Laws
  (i)
    
    In order for a stockholder to make a proposal or nomination at a
meeting of the stockholders, the stockholder must provide notice to
us not less than ninety (90) days nor more than one hundred twenty
(120) days prior to the first anniversary of the preceding years
annual meeting of stockholders, subject to certain exceptions in the
event that the date of the meeting is changed by more than thirty
(30) days from such anniversary date, no annual meeting was held the
prior year, or there is a special meeting of the stockholders.(ii)
    
    Any stockholder seeking to have the stockholders take corporate
action by written consent must request that the Board fix a record
date, in which case the Board must adopt a resolution fixing the
record date within ten (10) days after the date on which such a
request is received.
 Special Costs
  Legal and Compliance
Matters
   17




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##### Table of Contents



Amended and Restated Revolving Credit Facility
      Dispositions, Discontinued Operations, and
Related Matters
  Dispositions, Discontinued Operations, and Related Matters
   18




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##### Table of Contents



(In thousands)
    
    September 27, 2008
    
    
    December 31, 2007Accounts receivable, net
    
    $
    
    
    
    $
    13,504Other receivables
    
    
    43
    
    
    
    264Inventories, net
    
    
    
    
    
    
    4,664Other current assets
    
    
    23
    
    
    
    377Fixed assets, net
    
    
    
    
    
    
    284Intangible assets, net
    
    
    
    
    
    
    1,270Other assets
    
    
    104
    
    
    
    45Assets of discontinued operations
    
    $
    170
    
    
    $
    20,408Accounts payable
    
    $
    996
    
    
    $
    3,166Accrued expenses and other liabilities
    
    
    214
    
    
    
    3,198Other long-term liabilities
    
    
    276
    
    
    
    54Liabilities of discontinued operations
    
    $
    1,486
    
    
    $
    6,418
  Three Months Ended
    
    
    Nine Months EndedSeptember 27,
    
    
    September 29,
    
    
    September 27,
    
    
    September 29,(In thousands)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    
    
    
    $
    18,348
    
    
    $
    16,607
    
    
    $
    45,307Gross profit (loss)
    
    $
    
    
    
    $
    4,619
    
    
    $
    4,077
    
    
    $
    11,074Income (loss) on discontinued
operations before income taxes
    
    $
    (105
    )
    
    $
    239
    
    
    $
    (417
    )
    
    $
    (2,730
    )Loss on sale of business
    
    
    (28
    )
    
    
    
    
    
    
    (3,680
    )
    
    
    Provision (benefit) for income taxes
    
    
    
    
    
    
    107
    
    
    
    (1,623
    )
    
    
    (1,193
    )Income (loss) from discontinued
operations, net of taxes
    
    $
    (133
    )
    
    $
    132
    
    
    $
    (2,474
    )
    
    $
    (1,537
    )
  19




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##### Table of Contents



Restructuring and Cost Reduction Plan
   Three Months Ended
    
    
    Nine Months Ended(In thousands)
    
    September 27, 2008
    
    
    September 27, 2008Personnel reductions
    
    $
    50
    
    
    $
    482Other costs
    
    
    46
    
    
    
    55Total
    
    $
    96
    
    
    $
    537
  Three Months Ended September 27, 2008Personnel
    
    
    Other(In thousands)
    
    Reductions
    
    
    Costs
    
    
    TotalBeginning of period
    
    $
    134
    
    
    $
    
    
    
    $
    134Costs charged to expense
    
    
    50
    
    
    
    46
    
    
    
    96Costs paid or settled
    
    
    (100
    )
    
    
    (21
    )
    
    
    (121
    )End of period
    
    $
    84
    
    
    $
    25
    
    
    $
    109
 Nine Months Ended September 27, 2008Personnel
    
    
    Other(In thousands)
    
    Reductions
    
    
    Costs
    
    
    TotalBeginning of period
    
    $
    
    
    
    $
    
    
    
    $
    Costs charged to expense
    
    
    482
    
    
    
    55
    
    
    
    537Costs paid or settled
    
    
    (398
    )
    
    
    (30
    )
    
    
    (428
    )End of period
    
    $
    84
    
    
    $
    25
    
    
    $
    109
   20




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##### Table of Contents



RESULTS OF CONTINUING OPERATIONS
 Quarterly Comparison  Three Months Ended September 27, 2008 and September 29, 2007
 Net Sales
  Quarterly Rate/VolumePercentage(Dollars in thousands)
    
    Dollars
    
    
    of 2007Net sales quarter ended September 29,
2007
    
    $
    85,236
    
    
    
    100.0
    %Volume
    
    
    (10,594
    )
    
    
    (12.4
    %)Average selling prices
    
    
    6,320
    
    
    
    7.4
    %Net sales quarter ended September 27,
2008
    
    $
    80,962
    
    
    
    95.0
    %
  Gross Profit
  Selling, General, and Administrative Expenses
 Restructuring and Cost Reduction Plan,
 Special Costs
 Legal and Compliance
Matters
 Other Income (Expense)
 Legal and
Compliance Matters
 Income Taxes
    21




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##### Table of Contents



Year-to-Date Comparison  Nine Months Ended September 27, 2008 and September 29, 2007
 Net Sales
  Year To Date Rate/VolumePercentage(Dollars in thousands)
    
    Dollars
    
    
    of 2007Net sales nine months ended September 29, 2007
    
    $
    158,513
    
    
    
    100.0
    %Volume
    
    
    (12,095
    )
    
    
    (7.6
    %)Average selling prices
    
    
    7,204
    
    
    
    4.5
    %Net sales nine months ended September 27, 2008
    
    $
    153,622
    
    
    
    96.9
    %
  Gross Profit
  Selling, General, and Administrative Expenses
  Special Costs
  Other Income (Expense)
 Legal and
Compliance Matters
 Income Taxes
    22




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
      Amended
and Restated Revolving Credit Facility
 Amended and Restated Revolving Credit Facility
 Legal and Compliance Matters
  OFF-BALANCE SHEET ARRANGEMENTS
  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   23




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##### Table of Contents



RECENT ACCOUNTING PRONOUNCEMENTS
     Level 1
 Level 2
 Level 3
  Fair Value Measurements at Reporting Date UsingQuoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets
    
    
    Observable
    
    
    Unobservable(In thousands)
    
    for Identical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    September 27,Description
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    2008Cash and cash equivalents
    
    $
    437
    
    
    $
    
    
    
    $
    
    
    
    $
    437
    24




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##### 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
   25




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##### Table of Contents



PART IIOTHER INFORMATION
 
 Item 1. Legal Proceedings.
 Commitments and Contingencies Legal and Compliance Matters
  
 Item 1A. Risk Factors.
  Legal and Compliance Matters
  Our stockholders rights plan may adversely affect existing stockholders.
   We face risks related to the current global credit crisis.
   26




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##### Table of Contents



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
    
    
    ProgramsJune 29  August 2, 2008
    
    
    
    
    
    $
    
    
    
    
    August 3   August 30, 2008
    
    
    2,390,340
    
    
    
    5.00
    
    
    
    August 31  September 27, 2008
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    2,390,340
    
    
    $
    5.00
    
    
    
    
    
    
    
    1,036,490
 Legal
and Compliance Matters
   27




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##### Table of Contents



Item 6. Exhibits.
 (a) The following exhibits are filed as part of this Report:
 3.1
    
    
    Certificate of Designation of Series A Junior Participating Preferred Stock, as filed
with the Secretary of State of Delaware on August 13, 2008 (incorporated by reference to
Exhibit 3.1 to the Companys Current Report
(File No. 000-20201) on Form 8-K filed on
August 15, 2008).3.2
    
    
    Amended and Restated Bylaws of Hampshire Group, Limited (incorporated by reference to
Exhibit 3.2 to the Companys Current Report (File No. 000-20201) on Form 8-K filed on
August 15, 2008).4.1
    
    
    Rights Agreement, dated as of August 13, 2008, between Hampshire Group, Limited and
Mellon Investor Services LLC, as Rights Agent (incorporated by reference to Exhibit 4.1 to
the Companys Current Report (File No. 000-20201) on Form 8-K filed on August 15, 2008).10.1
    
    
    Employment Agreement by and between Hampshire Group, Limited and Michael S. Culang,
dated July 30, 2008 (incorporated by reference to Exhibit 10.1 to the Companys Current
Report (File No. 000-20201) on Form 8-K filed on August 4, 2008).10.2
    
    
    Stock Purchase and Settlement Agreement and Mutual Releases, dated as of August 4,
2008, by and among Ludwig Kuttner, Beatrice Ost-Kuttner, Fabian Kuttner, K Holdings LLC and
Hampshire Group, Limited (incorporated by reference to Exhibit 10.1 to the Companys
Current Report (File No. 000-20201) on Form 8-K filed on August 5, 2008).10.3
    
    
    Amendment No. 2 to Amended and Restated Credit Agreement and Guaranty, dated as of
August 4, 2008, by and among Hampshire Group, Limited, Hampshire Designers, Inc.,
Item-Eyes, Inc., Shane Hunter, Inc. SB Corporation, the Banks party thereto and HSBC Bank
USA, National Association, as Agent for the Banks (incorporated by reference to Exhibit
10.2 to the Companys Current Report (File No. 000-20201) on Form 8-K filed on August 5,
2008).31.1
    
    
    Certification of Chief 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 Chief 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 Chief 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 Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  28




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##### Table of Contents



SIGNATURES
  Hampshire Group, LimitedDate: November 3, 2008
    By:
    /s/ Michael S. CulangMichael S. CulangChief Executive Officer and President
(Principal Executive Officer)/s/ Jonathan W. NorwoodJonathan W. NorwoodVice President and Chief
Financial Officer
(Principal Financial and Accounting Officer)  29




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##### Table of Contents



INDEX TO EXHIBITS
 EXHIBITNUMBER
    
    DESCRIPTION31.1
    
    
    Certification of Chief 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 Chief 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 Chief 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 Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002