</PAGE>
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 30, 1996
Commission file Number 33-47577
HAMPSHIRE GROUP, LIMITED
(Exact name of registrant as specified in its charter.)
Delaware 06-0967107
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
215 Commerce Blvd., Anderson, SC 29621
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(864) 225-6232
Indicate by check mark whether the registrant(1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
and (2) has been subject to such filing requirements for the past
90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date:
Class: Common Stock, $.10 Par Value - 3,760,605 shares
outstanding as of April 30, 1996.
Page 1
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<PAGE>
HAMPSHIRE GROUP, LIMITED AND SUBSIDIARIES
INDEX TO FORM 10-Q
MARCH 30, 1996
PART I - FINANCIAL INFORMATION PAGE
Item 1 - Financial Statements
Consolidated Balance Sheet as of March 30, 1996,
April 1, 1995 and December 31, 1995 . . . . . . . 3-4
Consolidated Statement of Operations for
the three months ended March 30, 1996 and
April 1, 1995 . . . . . . . . . . . . . . . . . . 5
Consolidated Statement of Cash Flows for
the three months ended March 30, 1996 and
April 1, 1995 . . . . . . . . . . . . . . . . . . 6
Consolidated Statement of Changes in Common
Stockholders' Equity for three months
ended March 30, 1996 . . . . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . 8-9
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . 10-12
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings . . . . . . . . . . . . . . . . . 13
Item 4 - Submission of matters to a vote of
Security Holders . . . . . . . . . . . . . . . . . 13
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . 13
Signature Page . . . . . . . . . . . . . . . . . . . . . . . 14
Page 2
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<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
HAMPSHIRE GROUP, LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
ASSETS
<CAPTION>
Mar. 30, Apr. 1, Dec. 31,
1996 1995 1995
-------- -------- --------
(Unaudited)
<S> <C> <C> <C>
Current assets
Cash and cash equivalents $ 3,098 $ 6,638 $10,034
Accounts receivable trade-net 14,442 8,946 16,761
Other receivables 653 211 722
Inventories 23,855 16,409 19,380
Deferred tax asset 409 216 409
Other current assets 448 628 235
------- ------- -------
Total current assets 42,905 33,048 47,541
Property, plant and equipment - net 13,325 7,688 13,469
Deferred tax assets 962 1,157 962
Intangible assets - net 4,195 2,326 4,320
Other assets 123 206 146
------- ------- -------
$61,510 $44,425 $66,438
======= ======= =======
<FN>
The accompanying notes are an integral part of these financial statements.
Page 3
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<PAGE>
<TABLE>
HAMPSHIRE GROUP, LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND COMMON STOCKHOLDERS' EQUITY
<CAPTION>
Mar. 30, Apr. 1, Dec. 31,
1996 1995 1995
-------- ------- --------
(Unaudited)
<S> <C> <C> <C>
Current liabilities
Current portion of long-term debt $ 2,476 $ 1,304 $ 2,627
Notes payable to related parties 375 2,125
Accounts payable 4,649 4,093 4,714
Accrued liabilities 7,172 5,126 8,400
------- ------- -------
Total current liabilities 14,672 10,523 17,866
Long-term debt 8,167 5,764 8,590
Notes payable to related parties 1,375 1,625
------- ------- -------
Total liabilities 24,214 16,287 28,081
------- ------- -------
Redeemable, convertible preferred
stock, at redemption value
Series A 1,550 1,550
Series D 1,744 2,052 2,052
------- ------- -------
Total preferred stock 3,294 2,052 3,602
------- ------- -------
Common stockholders' equity
Common stock, 3,785,605, 3,530,124
and 3,771,624 shares issued and
3,760,605, 3,530,124 and 3,771,624
outstanding 379 353 377
Additional paid-in capital 23,071 21,210 22,979
Treasury stock (273)
Retained earnings 10,825 4,523 11,399
------- ------- -------
Total common stockholders' equity 34,002 26,086 34,755
------- ------- -------
$61,510 $44,425 $66,438
======= ======= =======
<FN>
The accompanying notes are an integral part of these financial statements.
Page 4
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<PAGE>
<TABLE>
HAMPSHIRE GROUP, LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
<CAPTION>
Three months ended
----------------------
Mar. 30, Apr. 1,
1996 1995
--------- --------
(Unaudited)
<S> <C> <C>
Net sales $26,430 $14,111
Cost of goods sold 21,552 11,079
------- -------
Gross profit 4,878 3,032
Commission revenue 41 73
------- -------
4,919 3,105
Selling, general and administrative expenses 5,181 3,315
------- -------
Loss from operations (262) (210)
Interest expense (279) (157)
Interest income 112 143
Other (5) 7
------- ------
Loss before income taxes (434) (217)
Provision for income taxes (92) (51)
------- ------
Net loss (526) (268)
Preferred dividend requirements (48) (31)
------- ------
Net loss applicable to common stock ($ 574) ($ 299)
======= ======
Loss per common share ($.15) ($.08)
==== ====
Weighted average number of shares outstanding 3,751 3,531
===== =====
<FN>
The accompanying notes are an integral part of these financial statements.
Page 5
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<PAGE>
<TABLE>
HAMPSHIRE GROUP, LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<CAPTION>
Three months ended
--------------------------
Mar. 30, 1996 Apr. 1, 1995
------------- ------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ($ 526) ($ 268)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 960 607
Gain on sale of assets (2)
Net change in operating assets and liabilities,
net of effects of acquired businesses:
Receivables 2,392 2,001
Inventories (4,475) (5,123)
Other current assets (63) (84)
Accounts payable (67) 1,545
Accrued liabilities (1,224) (362)
Other 50 (81)
------- -------
Net cash used in operating activities (2,955) (1,765)
------- -------
Cash flows from investing activities:
Capital expenditures (872) (331)
Proceeds from sales of property and equipment 513
Cash used for business acquisitions (2,084)
------- -------
Net cash used in investing activities (872) (1,902)
------- -------
Cash flows from financing activities:
Net borrowings under lines of credit (27)
Proceeds from issuance of long-term debt 320
Repayment of related party debt (2,000)
Repayment of long-term debt (574) (669)
Treasury stock purchased (273)
Proceeds from issuance of common stock 94
Redemption of preferred stock (308)
Payment of preferred stock dividends (48) (31)
------- -------
Net cash used by financing activities (3,109) (407)
------- -------
Net decrease in cash and cash equivalents (6,936) (4,074)
Cash and cash equivalents at beginning of period 10,034 10,712
------- -------
Cash and cash equivalents at end of period $ 3,098 $ 6,638
======= =======
Supplemental disclosure of non-cash transactions:
Issuance of stock under the Common Stock Purchase Plan $522
<FN> ==== ====
The accompanying notes are an integral part of these financial statements.
Page 6
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<PAGE>
<TABLE>
HAMPSHIRE GROUP, LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES
IN COMMON STOCKHOLDERS' EQUITY
(In thousands, except share data)
(Unaudited)
<CAPTION>
Additional
Common Stock Paid-in Retained Treasury
Shares Amount Capital Earnings Stock Total
------ ------ --------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at
Dec. 31, 1995 3,771,624 $377 $22,979 $11,399 $34,755
Shares issued
under Stock
Option Plan 13,981 2 92 94
Purchase of
treasury stock (25,000) ($273) (273)
Net loss for
period (526) (526)
Dividends on
preferred stock (48) (48)
--------- ----- ------- ------- ------ -------
Balance at
March 30, 1996 3,760,605 $379 $23,071 $10,825 ($273) $34,002
========= ===== ======= ======= ====== =======
<FN>
The accompanying notes are an integral part of these financial statements.
Page 7
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<PAGE>
HAMPSHIRE GROUP, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
- ---------------------
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
In the opinion of the management of the Company, the unaudited consolidated
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for the
interim periods presented. The results of operations for interim periods
are not indicative of the results that may be expected for a full year due
to the seasonality of the business. These interim consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended December 31, 1995, included
in the Company's Annual Report on Form 10-K.
Net loss per share is computed by dividing net loss applicable to common
stock by the weighted average number of common and dilutive common equivalent
shares outstanding during the period. Conversion of the convertible pre-
ferred stock into common stock has been assumed only if such conversion are
dilutive.
Certain accounts previously reported have been reclassified to conform to
classifications used in 1996.
INVENTORIES
- ------------
A summary of inventories by (In thousands)
component is as follows: Mar. 30, Apr. 1, Dec. 31,
1996 1995 1995
---------- --------- ---------
Finished goods $15,667 $12,111 $10,954
Work-in-progress 8,030 5,768 7,341
Raw materials and supplies 4,517 2,673 5,082
------- ------- -------
28,214 20,552 23,377
Less-LIFO reserve (4,359) (4,143) (3,997)
------- ------- -------
Net inventories $23,855 $16,409 $19,380
======= ======= =======
REVOLVING CREDIT FACILITY
- -------------------------
The Company has renewed its principal credit facility for its subsidiaries
through March 30, 1997. This facility, which is limited to $25 million in
the aggregate, makes available to the Company $21 million in revolving credit
and $6 million in letters of credit. Advances under the revolving credit
line are limited to the lesser of (i) the sum of 85% of the eligible
accounts receivable plus a seasonal over-advance, not to exceed $6 million,
during the period March 1 to October 31, or (ii) $21 million.
Page 8
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<PAGE>
Notes to Financial Statements (Continued)
Loans under the facility bear interest at the prime rate and are secured by
accounts receivable of the subsidiaries and are guaranteed by the Company.
Letters of credit issued under the facility are secured by the inventory
shipped pursuant to the letter of credit.
STOCK OPTION AND PURCHASE PLANS
- -------------------------------
In February 1996, pursuant to the Hampshire Group, Limited 1992 Stock Option
Plan, the Company granted to certain key employees options to acquire 34,966
shares of the Company's common stock at a price of $11.00 per share, the fair
market value as of the date of the grant. Also the Company granted to its
Chief Executive Officer options to acquire 7,500 shares of the Company's
common stock at a price of $12.10 per share, which was 110 percent of the
fair market value as of the date of the grant. The options vest ratably
as of December 31, 1996-1999.
CAPITALIZATION
- --------------
The Company is obligated to redeem the Series D Convertible Preferred Stock
in twenty equal quarterly installments commencing April 1, 1996. During
March 1996, the Company redeemed the three installments due in 1996.
In March 1996, the Company purchased 25,000 shares of its common stock in the
open market. This purchase was as part of a plan to purchase up to
100,000 shares of its stock to be used primarily to fund certain employee
benefit plans.
Page 9
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<PAGE>
<TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS SEGMENT DATA
- ---------------------
Set forth below are the Company's results of operations by business segment
for the three months ended March 30, 1996 and April 1, 1995.
<CAPTION>
(In thousands)
Three months ended
----------------------
Mar. 30, Apr. 1,
1996 1995
--------- ---------
<S> <C> <C>
Net sales
Sweaters $20,735 $ 9,340
Hosiery 5,695 4,771
------- -------
$26,430 $14,111
======= =======
Gross profit
Sweaters $ 3,987 $ 2,449
Hosiery 891 583
------- -------
$ 4,878 $ 3,032
======= =======
Commission revenue
Sweaters $ 41 $ 73
======= =======
Operating profit (loss)
Sweaters $ 91 $ 278
Hosiery 47 (156)
------- -------
138 122
Less - Corporate expenses (400) (332)
------- -------
Loss from operations $ (262) $ (210)
======= =======
Page 10
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<PAGE>
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended March 30, 1996 Compared With Three Months Ended
April 1, 1995.
The Company's net sales for the quarter ended March 30, 1996 were $26,430,000,
as compared with $14,111,000 for the quarter ended April 1, 1995. The
$12,319,000 increase was comprised of $11,395,000 increase in sweater segment
sales and a $924,000 increase in hosiery segment sales.
Sweater segment net sales were $20,735,000 for the three months ended March
30, 1996 compared with $9,340,000 for the three months ended April 1, 1995.
Approximately 50% of the increase resulted from sales of recently acquired
sweater businesses; approximately 38% of the increase resulted from volume
increases in the existing business; and price increases and a shift in
product mix to higher priced items contriubted approximately 12% of the
increase.
The hosiery segment net sales were $5,695,000 for the three months ended
March 30, 1996, as compared with $4,771,000 for the three months ended April
1, 1995. The increase was principally attributable to a unit volume increase
of approximately 19.7%.
Gross profit for the three months ended March 30, 1996 was $4,878,000
compared with $3,032,000 for the three months ended April 1, 1995. The in-
crease was principally attributable to increased sweater segment sales and
improved operating efficiencies of the hosiery segment sales.
Sweater segment gross profit increased by $1,538,000 for the three months
ended March 30,1996, as compared with the same period for 1995. As a
percentage of net sales, however, gross profit was 19.2% for the three months
ended March 30, 1996 versus 26.2% for the three months ended April 1,1995.
The reduction, as a percentage of net sales, was primarily due to lower gross
margins on sales of the acquired sweater businesses.
Hosiery segment gross profit for the three months ended March 30, 1996
increased $308,000 compared with the same period last year. The
increase was primarily attributable to the 19.7% volume increase contributing
to improved manufacturing efficiencies. As a percentage of net sales, gross
profit was 15.6% versus 12.2% for the three months ended April 1, 1995.
Segue (America) Limited, a subsidiary of Hampshire Designers, Inc., acts as
agent for certain of its customers in arranging for the importation of
sweaters for which it receives commission revenue which totaled $41,000 and
$73,000 for the three months ended March 30, 1996 and April 1, 1995,
respectively.
Selling, general and administrative expenses for the three months ended
March 30, 1996 were $5,181,000 compared with $3,315,000 for the same
period in 1995. The increase of $1,866,000 was due principally to increases
in fixed expenses and selling commissions arising from the recently acquired
sweater businesses. As a percentage of net sales, selling, general and
administrative expenses decreased to 19.6% for the first quarter of 1996
versus 23.5% in 1995.
Page 11
<\PAGE>
<PAGE>
Loss from operations for the three months ended March 30, 1996 totaled
$262,000 compared with a loss of $210,000 for the same period in 1995.
The increase was directly attributable to expenses of the acquired sweater
businesses.
Interest expense for the three months ended March 30, 1996 increased by
$122,000 compared with the three months ended April 1, 1995. The
increase was primarily attributable to long-term borrowings utilized in
the acquisition of The Winona Knitting Mills, Inc.
The provisions for income taxes reflects state income taxes on taxable
earnings and income taxes on the earnings of the Puerto Rican subsidiary.
SEASONALITY
- -----------
Two-thirds of net sales of the Company occur in the last half of the year.
The sweater segment sales are more seasonal than the hosiery segment.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The primary liquidity and capital requirements of the Company are to
funding working capital for current operations consisting of funding for the
build-up in inventories and accounts receivable which reach their maximum
requirements in the third quarter, servicing long-term debt and funding
capital expenditures for machinery and equipment. The primary sources to
meet the liquidity and capital requirements include funds generated by
operations, revolving credit lines and long-term equipment financing.
Net cash used in operations for the three months ended March 30, 1996
totaled $2,955,000 of which the primary use was to build inventory for ship-
ment later in the year, offset by a reduction in receivables.
Capital expenditures for 1996 are currently planned to be about $3,000,000,
of which $872,000 has been expended through March 30, 1996. The planned
expenditures are primarily for manufacturing equipment, facility
improvements and the expansion of the sweater distribution center.
The net cash used in financing activities for the three months ended
March 30, 1996 was $3,109,000. The principal use was the repayment of debt
of $2,574,000. Other uses were the redemption of preferred stock and the
purchase of common stock as more fully discussed in the Notes to the
Consolidated Financial Statements.
At March 30, 1996, the Company had a revolving credit facility of $21 million,
all of which was unused. The line also provides for letters of credit
totaling $6 million of which $29,000 were outstanding on March 30, 1996.
The facility runs through March 31, 1997 and may not exceed $25 million at
any time. The Company has other credit facilities totaling $8 million of
which $3 million is limited to use for international letters of credit.
The Company believes its cash flow from operations and borrowings under its
credit lines will provide adequate resources to meet its capital requirements
and operational needs for the foreseeable future.
Page 12
</PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
The Company is from time to time involved in litigation incidental to the
conduct of its business. The Company believes that no currently pending
litigation to which it is a party will have a material adverse effect on its
consolidated financial condition or results of operations.
Item 2 and 3 are not applicable and have been omitted.
Item 4 - Submission of matters to a vote of security holders.
There were no matters submitted to a vote of security holders for the
quarter ended March 30, 1996.
Item 5 is not applicable and has been omitted.
Item 6 - Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit No. Description Page No.
----------- ------------------------------------------------ ---------
(11) Statement Re Computation of Income
(Loss) Per Share 15
(27) Financial Data Schedule 16
b) Reports on Form 8-K filed during the quarter.
None.
Page 13
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HAMPSHIRE GROUP, LIMITED
(Registrant)
May 9, 1996 /s/ Ludwig Kuttner
- ----------- --------------
Date Ludwig Kuttner
President and Chief Executive Officer
May 9, 1996 /s/ Charles W. Clayton
- ----------- ------------------
Date Charles W. Clayton
Vice President, Secretary, Treasurer,
Chief Financial Officer and
Principal Accounting Officer
Page 14
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<PAGE>
<TABLE>
HAMPSHIRE GROUP, LIMITED AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF INCOME (LOSS) PER SHARE
(In thousands, except per share data)
<CAPTION>
Three months ended
------------------------------
Mar. 30, 1996 Apr. 1, 1995
(Unaudited)
<S> <C> <C>
Weighted average number of common and
common equivalent shares outstanding
Common stock 3,751 3,530
Accrued shares earned under Directors'
and Executives' Stock Purchase Plan 1
----- -----
3,751 3,531
===== =====
Net loss ($526) ($268)
Less - preferred dividend requirements (48) (31)
---- ----
Net loss applicable to common stock ($574) ($299)
==== ====
Net loss per share applicable to common stock ($.15) ($.08)
==== ====
Page 15
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</PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEETS AND THE CONSOLIDATED STATEMENT OF
INCOME FILED AS PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-30-1996
<CASH> 3,098
<SECURITIES> 0
<RECEIVABLES> 15,879
<ALLOWANCES> 784
<INVENTORY> 23,855
<CURRENT-ASSETS> 42,905
<PP&E> 30,989
<DEPRECIATION> 17,664
<TOTAL-ASSETS> 61,510
<CURRENT-LIABILITIES> 14,672
<BONDS> 9,542
3,294
0
<COMMON> 379
<OTHER-SE> 33,623
<TOTAL-LIABILITY-AND-EQUITY> 61,510
<SALES> 26,430
<TOTAL-REVENUES> 26,471
<CGS> 21,552
<TOTAL-COSTS> 21,552
<OTHER-EXPENSES> 5,074
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 279
<INCOME-PRETAX> (434)
<INCOME-TAX> 92
<INCOME-CONTINUING> (526)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (526)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
</PAGE>
</TABLE>
