UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the quarterly period ended March 29, 1997.
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from ______ to______.
Commission File No. 33-47577
HAMPSHIRE GROUP, LIMITED
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 06-0967107
(State of Incorporation) (I.R.S. Employer Identification No.)
POST OFFICE BOX 2667
215 COMMERCE BOULEVARD
ANDERSON, SOUTH CAROLINA 29621
(Address, Including Zip Code, of Registrant's Principal Executive Offices)
(Registrant's Telephone Number, Including Area Code) (803) 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 practicable date.
Title of Each Class Number of Shares Outstanding
Of Securities May 7, 1997
----------------------------- ----------------------------
Common Stock, $.10 Par Value 3,862,143
1
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HAMPSHIRE GROUP, LIMITED
INDEX TO FORM 10-Q
March 29, 1997
PART I - FINANCIAL INFORMATION Page
Item 1 - Financial Statements
Consolidated Balance Sheet as of March 29, 1997, March 30, 1996
and December 31, 1996 3
Consolidated Statement of Operations for the three months
ended March 29, 1997 and March 30, 1996 5
Consolidated Statement of Cash Flows for the three months
ended March 29, 1997 and March 30, 1996 6
Notes to Consolidated Financial Statements 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 12
Item 4 - Submission of Matters to a Vote of Security Holders 12
Item 6 - Exhibits and Reports on Form 8-K 12
Signature Page 13
2
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<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
HAMPSHIRE GROUP, LIMITED
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
ASSETS
<CAPTION>
March 29, March 30, December 31,
1997 1996 1996
(Unaudited) (Unaudited)
----------- ----------- ------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $11,080 $ 3,098 $20,385
Accounts receivable trade - net 14,293 14,442 13,101
Other receivables 788 653 412
Inventories 22,284 23,855 14,873
Deferred tax asset 1,631 409 1,631
Other current assets 762 448 704
------- ------- -------
Total current assets 50,838 42,905 51,106
Property, plant and equipment - net 13,255 13,325 13,596
Deferred tax asset 3,640 962 3,640
Intangible assets - net 3,083 4,195 3,161
Other assets 591 123 427
------- ------- -------
$71,407 $61,510 $71,930
======= ======= =======
<FN>
(The accompanying notes are an integral part of these financial statements.)
</FN>
</TABLE>
3
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<TABLE>
HAMPSHIRE GROUP, LIMITED
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND COMMON STOCKHOLDERS' EQUITY
<CAPTION>
March 29, March 30, December 31,
1997 1996 1996
(Unaudited) (Unaudited)
----------- ----------- ------------
<S> <C> <C> <C>
Current liabilities:
Current portion of long-term debt $ 2,599 $ 2,476 $ 2,618
Notes payable to related parties 375 375 877
Accounts payable 5,120 4,649 3,722
Accrued liabilities 7,015 7,172 6,876
------- ------- -------
Total current liabilities 15,109 14,672 14,093
Long-term debt 5,989 8,167 6,643
Notes payable to related parties 500 1,375 625
------- ------- -------
Total liabilities 21,598 24,214 21,361
------- ------- -------
Redeemable, convertible preferred
stock, at redemption value:
Series A 1,550 1,550 1,550
Series D 1,642 1,744 1,744
------- ------- -------
Total preferred stock 3,192 3,294 3,294
------- ------- -------
Common stockholders' equity:
Common stock, 392 379 389
Additional paid-in capital 24,043 23,071 23,853
Retained earnings 22,785 10,825 23,111
Treasury stock (603) (273) (78)
------- ------- -------
Total common stockholders' equity 46,617 34,002 47,275
------- ------- -------
$71,407 $61,510 $71,930
======= ======= =======
<FN>
(The accompanying notes are an integral part of these financial statements.)
</FN>
</TABLE>
4
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<TABLE>
HAMPSHIRE GROUP, LIMITED
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
<CAPTION>
Three Months Ended
----------------------
March 29, March 30,
1997 1996
--------- ---------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales $23,580 $26,430
Cost of goods sold 18,889 21,552
------- -------
Gross profit 4,691 4,878
Commission revenue - 41
------- -------
4,691 4,919
Selling, general & administrative
expenses 4,783 5,181
------- -------
Loss from operations (92) (262)
Other income (expense):
Interest expense (221) (279)
Miscellaneous (11) 107
------- -------
Loss before income taxes (324) (434)
Benefit (provision) for income taxes 64 (92)
------- -------
Net loss (260) (526)
Preferred dividend requirements (44) (48)
------- -------
Net loss applicable to common stock ($ 304) ($ 574)
======= =======
Net loss per common share ($0.07) ($0.15)
====== ======
Weighted average number of shares
outstanding 3,851 3,751
====== ======
<FN>
(The accompanying notes are an integral part of these financial statements.)
</FN>
</TABLE>
5
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<TABLE>
HAMPSHIRE GROUP, LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<CAPTION>
Three Months Ended
----------------------
March 29, March 30,
1997 1996
--------- ---------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ($ 260) ($ 526)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 923 960
Loss on sale of assets (2) (2)
Net change in operating assets and liabilities:
Receivables (1,468) 2,392
Inventories (7,410) (4,475)
Other current assets (55) (63)
Accounts payable 1,396 (67)
Accrued liabilities 143 (1,224)
Other - 50
------- -------
Net cash used in operating activities (6,733) (2,955)
------- -------
Cash flows from investing activities:
Capital expenditures (544) (872)
------- -------
Proceeds from sales of property and equipment 40 -
Cash used for investments (267) -
------- -------
Net cash used in investing activities (771) (872)
Cash flows from financing activities:
Repayment of long-term debt (672) (574)
Repayment of related party debt (627) (2,000)
Treasury stock purchased (548) (273)
Proceeds from issuance of common stock 90 94
Redemption of preferred stock - (308)
Payment of preferred stock dividends (44) (48)
------- -------
Net cash used by financing activities (1,801) (3,109)
------- -------
Net decrease in cash and cash equivalents (9,305) (6,936)
Cash and cash equivalents at beginning of period 20,385 10,034
------- -------
Cash and cash equivalents at end of period $11,080 $ 3,098
======= =======
<FN>
(The accompanying notes are an integral part of these financial statements.)
</FN>
</TABLE>
6
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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
necessarily 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, 1996, included in
the Company's Annual Report on Form 10-K.
Net loss per share is computed by dividing net loss by the weighted average
number of common and dilutive common equivalent shares outstanding during the
period. Conversion of the convertible preferred stock into common stock has not
been assumed because inclusion would be antidilutive.
Certain accounts previously reported have been reclassified to conform to
classifications used in 1997.
REVOLVING CREDIT FACILITY
- -------------------------
The Company is in process of renewing its principal credit facility which will
extend through May 31, 1998. The credit facility consists of a $20 million line
of credit and an $8 million letter of credit facility, not to exceed $25 million
in the aggregate. Advances under the line of credit are limited to the lesser
of: (1) the amount available set forth above; or (2) the sum of (i) 85% of the
eligible accounts receivable and (ii) a seasonal adjustment of $6 million during
the period from March 1 to October 31.
Advances under the facility bear interest, at the option of the Company, at the
bank's prime rate or a fixed rate of LIBOR plus 1.5% and are secured by the
trade accounts receivable of Hampshire Designers and are guaranteed by Hampshire
Group, Limited. Letters of credit issued under the facility are secured by the
inventory shipped pursuant to the letters of credit.
7
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<TABLE>
INVENTORIES
- -----------
A summary of inventories by component is as follows:
<CAPTION>
(in thousands)
March 29, March 30, December 31,
1997 1996 1996
-------- -------- -----------
<S> <C> <C> <C>
Finished goods $14,390 $15,667 $8,767
Work-in-progress 7,793 8,030 6,063
Raw materials and supplies 4,591 4,517 4,176
------- ------- ------
26,774 28,214 19,006
Less-LIFO reserve (4,490) (4,359) (4,133)
------- ------- ------
Net inventories $22,284 $23,855 $14,873
======= ======= =======
</TABLE>
8
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<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 29, 1997 and March 30, 1996:
<CAPTION>
(in thousands)
Three Months Ended
-----------------------
March 29, March 30,
1997 1996
-------- --------
<S> <C> <C>
Net sales:
Sweaters $18,850 $20,735
Hosiery 4,730 5,695
------- -------
$23,580 $26,430
======= =======
Gross profit:
Sweaters $ 4,244 $ 3,987
Hosiery 447 891
------- -------
$ 4,691 $ 4,878
======= =======
Commission revenue:
Sweaters $ - $ 41
======= =======
Operating profit (loss):
Sweaters $ 702 $ 91
Hosiery (330) 47
------- -------
372 138
Less - Corporate expenses (464) (400)
------- -------
Loss from operations $ (92) $ (262)
======= =======
</TABLE>
9
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended March 29, 1997 Compared With Three Months Ended March 30,
1996.
The Company's net sales for the quarter ended March 29, 1997 were $23,580,000,
as compared with $26,430,000 for the quarter ended March 30, 1996. The decrease
of $2,850,000 was attributable to reduced sales in both the sweater and hosiery
segments.
Sweater segment net sales were $18,850,000 for the three months ended March 29,
1997, as compared with $20,735,000 for the three months ended March 30, 1996.
The 9% decrease resulted from shipments of close-out sales of women's products
in January 1996 from the year 1995 and shipments in December 1996 of close-out
sales for 1996, as requested by the customer; and the close-out sales prior to
the consolidation of two men's sweater manufacturing facilities in the first
quarter of 1996. These reductions were partially offset by higher sales of
imported products sold under the labels Designers Originals Sport(R) and
Designers Original Studio(R).
Hosiery segment net sales were $4,730,000 for the three months ended March 29,
1997, as compared to $5,695,000 for the three months ended March 30, 1996. The
16.9% decrease was principally attributable to the loss of a major customer
resulting from their decision to reduce the number of vendors.
Gross profit for the three months ended March 29, 1997 was $4,691,000 compared
with $4,878,000 for the three months ended March 30, 1996. The decrease was
principally due to a decrease in the segment sales; however, as a percent of net
sales the gross margin increased to 19.9% from 18.5%.
Sweater segment gross profit increased by $257,000 for the three months
ended March 29, 1997 as compared with the same period for 1996. As a percentage
of net sales, gross profit was 22.5% for the three months ended March 29, 1997
versus 19.2% for the three months ended March 30, 1997. The improved performance
year to year resulted from the reduction of low margin close-out sales and the
absence of the start-up costs for Mycrolon(R) products which were incurred in
the prior year.
Hosiery segment gross profit for the three months ended March 29, 1997
decreased $444,000 from the same period last year. The decrease was primarily
attributable to the 16.9% decrease in net sales. As a percentage of net sales,
gross profit was 9.5% for the three months ended March 29, 1997 as compared with
15.6% for the three months ended March 30, 1996.
Selling, general and administrative expense for the three months ended
March 29, 1997 were $4,783,000, as compared with $5,181,000 for the same period
in 1996. The decrease of $398,000 was due principally to reduced selling,
general and administrative expenses on reduced sales.
Loss from operations for the three months ended March 29, 1997 totaled
$92,000 as compared with a loss of $262,000 for the same period in 1996. The
reduction was due principally to improved gross margin on sweater sales and
reduced selling, general and administrative expenses.
Interest expense for the three months ended March 29, 1997 decreased to
$221,000 as compared with $279,000 for the same period ended March 30, 1996. The
decreases were attributable to reduced debt.
10
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SEASONALITY
- -----------
Approximately two-thirds of sweater sales occur in the second half of the
year. The hosiery segment sales are not highly seasonal.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The primary liquidity and capital requirements of the Company are to fund
working capital for current operations consisting of funding the buildup 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. Excess cash in the business, in management's opinion
approximately $5 million, will be invested in assets not used directly in the
operations of the business of the Company. The primary sources to meet the
liquidity and capital requirements include funds generated from operations,
revolving credit lines and long-term equipment financing.
Net cash used in operations for the three months ended March 29, 1997
totaled $6,733,000 of which the primary use was to build inventory for shipments
later in the year. Capital expenditures for 1997 are currently planned to be
approximately $3,000,000, of which $544,000 has been expended through March 29,
1997. The planned expenditures are primarily for manufacturing equipment and
facility improvements.
The net cash used in financing activities for the three months ended March 29,
1997 was $1,801,000. The principal use was the repayment of debt of $1,299,000.
Other uses were the purchase of investment of $267,000 and the purchase of
common stock in the amount of $548,000 for funding of employee benefit programs
and redemption of preferred stock.
At March 30, 1997, the Company is in process of renewing its principal
credit facility which will extend through May 31, 1998. The credit facility
consists of a $20 million line of credit and an $8 million letter of credit
facility, not to exceed $25 million in the aggregate. The Company also has two
other credit facilities of $5 million in the aggregate with no balance
outstanding at March 30, 1997. The Company had letters of credit outstanding at
March 30, 1997 in the aggregate amount of $2,150,000.
The Company believes its cash flow from operations and borrowings under its
credit lines will provide adequate resources to meet its operational needs and
capital requirements for the foreseeable future.
11
<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 during the
quarter.
Item 5 is not applicable and has been omitted.
Item 6 - Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit Description
No.
------- ------------------------------------------------
(10)(D) Form of Hampshire Group, Limited Voluntary
Deferred Compensation Plan for Directors and
Executives
(11) Statement Re Computation of Loss Per Share
(27) Financial Data Schedule
b) Reports on Form 8-K filed during the quarter.
None.
12
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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)
Date: May 9, 1997 /s/ Ludwig Kuttner
--------------------- -------------------------------
Ludwig Kuttner
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 9, 1997 /s/ Charles W. Clayton
--------------------- -------------------------
Charles W. Clayton
Vice President, Secretary, Treasurer and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
13
EXHIBIT (10)(D)
HAMPSHIRE GROUP, LIMITED
VOLUNTARY DEFERRED COMPENSATION PLAN
FOR DIRECTORS AND EXECUTIVES
EFFECTIVE JANUARY 1, 1997
1
<PAGE>
TABLE OF CONTENTS
ARTICLE I Definitions . . . . . . . . . . . . . . . . . 1
ARTICLE II Participation . . . . . . . . . . . . . . . . 4
ARTICLE III Deferred Compensation Account Credits . . . . . 5
ARTICLE IV Deferred Compensation Accounts . . . . . . . . 5
ARTICLE V Vesting . . . . . . . . . . . . . . . . . . . . 6
ARTICLE VI Payment of Deferred Compensation; Withdrawals . 6
ARTICLE VII Funding . . . . . . . . . . . . . . . . . . . . 8
ARTICLE VIII Administration . . . . . . . . . . . . . . . . 9
ARTICLE IX Amendment and Termination . . . . . . . . . . . 10
ARTICLE X General Provisions . . . . . . . . . . . . . . 10
EXHIBIT 1 Election Form . . . . .. . . . . . . . . . . . 12
-i-
2
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HAMPSHIRE GROUP, LIMITED
VOLUNTARY DEFERRED COMPENSATION PLAN
FOR DIRECTORS AND EXECUTIVES
ARTICLE I
Definitions
-----------
Section 1.1 As used in this Plan, the following terms shall have the
meanings hereinafter set forth:
Beneficiary means any person(s) or legal entity(ies) designated by the
Participant or otherwise in accordance with Section 10.7.
Board means the Board of Directors of the Company.
Bonus means the bonus paid by an Employer to a Key Employee during any Plan
Year excluding any bonus prepaid on a monthly basis.
Committee means the Committee appointed by the Board which administers the
Plan in accordance with Article VIII hereof.
Common Stock means the common stock of Hampshire Group, Limited, par value
$0.10 per share.
Company means Hampshire Group, Limited, a Delaware corporation, and its
successors and assigns.
Deferred Compensation Account means one or more accounts established and
maintained under the Plan to reflect deferrals made by a Participant hereunder.
Director means a member of the Board who is not also a Key Employee.
Disability means disability as defined under the long-term disability plan
of the Company, as amended from time to time.
Effective Date means January 1, 1997.
Employer means the Company and any subsidiary or affiliate thereof which
shall be designated by the Committee as a participating employer under the Plan.
Financial Hardship means severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the Participant or
a dependent, loss of the Participant's property due to casualty, or other
3
<PAGE>
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. The circumstances that will
constitute a Financial Hardship will depend upon the facts of each case and will
be determined by the Committee in its sole discretion; but distributions may not
be made to the extent that such hardship is or may be relieved (i) through
reimbursement or compensation by insurance or otherwise or (ii) by liquidation
of the participant's assets, to the extent the liquidation of such assets would
not itself cause severe financial hardship.1
401(k) Plan means the Hampshire Group, Limited and Subsidiaries 401(k)
Retirement Savings Plan, as amended from time to time.
Installments means substantially equal payments payable semi-annually as of
the last day of June and December and as of the anniversary thereof in each
succeeding year over a period certain not to exceed eight (8) years, commencing
not later that two (2) years following the Participant's Separation from
Service, as elected by a Participant in accordance with Section 6.1, but subject
to Section 6.4 hereof.
Key Employee means an employee of an Employer who is (i) a member of a
select group of management or highly-compensated employees and (ii) designated
by the Committee as eligible to participate in the Plan.
Net Realizable Value means (i) if the share of Common Stock is to be
disposed of in the open market, the net value realized upon the sale of the
share, net of the brokerage fee, or (ii) if the share is to be retained in the
trust for the Stock Purchase Plan, net realizable value shall mean the last
quoted bid price on the National Association of Securities Dealers Automated
System (NASDAQ) on the date immediately preceding the date of determination, or
if not quoted on that day, then on the last preceding date on which the Common
Stock is quoted. If the Common Stock is not quoted on NASDAQ or listed on an
exchange, or representative quotes are not otherwise available, the net
realizable value shall mean the amount determined by the Committee to be the
fair market value of the Common Stock based upon a good faith attempt to value
the Common Stock accurately.
Notional Fund means the investment funds available under the 401(k) Plan
designated by the Committee from time to time and shall not be less than three
such funds, but shall not include the Hampshire Group, Limited Common Stock
Fund.
Participant for any Plan Year means a Key Employee or a Director who elects
to participate in the Plan in accordance with Article II hereof.
Plan means the Hampshire Group, Limited Voluntary Deferred Compensation
Plan for Directors and Executives, as embodied herein and as amended from time
to time.
- ---------------------------
1. This definition, along with the hardship distributIon clause in Section
6.8, constitue the IRS's view of allowable hardship distributions from
non-qualified deferred compensation plans.
4
<PAGE>
Plan Year means the calendar year, with the first Plan Year beginning on
January 1 and ending on December 31, 1997.
Qualified Stock Equivalents shall mean (i) with respect to the first Stock
Divestiture Date, up to seventy-five percent (75%) of the number of Common Stock
Equivalents which were credited to the Stock Deferral Account in respect to
compensation earned by a Participant in calendar years at least two years prior
to the Stock Divestiture Date (Common Stock Equivalents credited in respect of
1995 Bonus deferral and earlier years will be included in Qualified Stock
Equivalents on December 31, 1997), and which have not been distributed from his
Stock Deferral Account, and (ii) with respect to each subsequent Stock
Divestiture Date, up to seventy-five percent (75%) of the number of shares of
Common Stock Equivalents of the Participant that would have been credited to the
Participant's Stock Deferral Account on the Stock Divestiture Date had no Stock
Divestitures taken place, less all previous Stock Divestitures. Stock
Divestitures shall first be deducted from Common Stock Equivalents credited
under the Stock Purchase Plan for the year designated by the Participant, and
all Common Stock Equivalents credited during that year shall be applied to the
Stock Divestiture before a second year is designated. If the Participant does
not designate a specific year for divestitures, the Stock Divestitures shall be
applied on a first-in, first-out basis. Common Stock Equivalents credited to the
Participant's Stock Deferral Account for which a distribution election is in
effect within one year or less, shall not be included in Qualified Stock
Equivalents.
Salary means the base salary paid to a Key Employee for any Plan Year by
the Employer plus any bonus prepaid on a monthly basis.
Separation from Service means termination of a Participant's employment
with his Employer for any reason, unless such termination is in connection with
the transfer of the Participant to another Employer.
Stock Deferral Account means a Participant's deferral account under the
Hampshire Group, Limited Stock Purchase Plan for Directors and Executives.
Stock Divestiture Date means December 31, 1997 and June 30, 1998 and each
subsequent June 30th and December 31st, or such other date(s) as determined by
the Committee from time to time.
Stock Purchase Plan means the Hampshire Group, Limited and Affiliates
Common Stock Purchase Plan for Directors and Executives, as amended from time to
time.
Trust means a grantor trust, of which the Company is the grantor, within
the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the
United States Internal Revenue Code of 1986, as amended, and shall be construed
accordingly.
Trustee shall mean the trustee of the Trust.
5
<PAGE>
Wherever any words are used herein in the masculine gender, they shall be
construed as though they were also used in the feminine gender in all cases
where they would so apply, and wherever any words are used herein in the
singular form, they shall be construed as though they were also used in the
plural form in all cases where they would so apply.
ARTICLE II
Participation
-------------
Section 2.1 To participate in the Plan:
(a) Prior to the December 15th preceding a Plan Year, or such other date(s)
as determined by the Committee, each Key Employee and each Director may
irrevocably elect to participate in the Plan for such Plan Year by delivering
written notice to the Committee; which notice must specify, subject to the
provisions of Sections 2.2, 6.1 and 6.2, (i) in the case of a Key Employee, the
percentage of Salary and Bonus and the number of Qualified Stock Equivalents to
be deferred and the time and form of payment, and (ii) in the case of a
Director, the number of Qualified Stock Equivalents to be deferred; provided,
however, that (x) the Committee may establish procedures and forms which are
applicable to all Key Employees and Directors under which Key Employees and
Directors may elect to participate in the Plan on a prospective basis as of some
other date(s) specified in such procedures; and (y) a Key Employee's election
with respect to Salary and Bonus shall remain in effect for subsequent Plan
Years unless revoked or changed by delivery of written notice to the Committee
by the Key Employee prior to the December 15th preceding the Plan Year with
respect to which such revocation or change is effective.
(b) Prior 15th day of the month preceding a quarter-end, or such other
date(s) as determined by the Committee, each Key Employee and each Director may
elect to change his Notional Fund election, both for current deferral and any
portion of the balance in his Deferred Compensation Account, and to specify the
number of Qualified Stock Equivalents to be deferred as of June 30th and
December 31st of such Plan Year by delivering written notice to the Committee.
The change in election shall be effective the first day of the following
quarter, or in the case of the transfer of a balance, shall be effective on the
date the trade is finalized.
(c) Paragraph (a) of this Section 2.1 notwithstanding, (i) each Key
Employee will have 30 days following the adoption of the Plan, by delivering
written notice to the Committee otherwise consistent with Section 2.1(a), and
(ii) a Key Employee who is first designated by the Committee as eligible to
participate in the Plan during any Plan Year will have 30 days following the
date of notification of eligibility, to elect to defer Salary and Bonus for such
Plan Year by written notice to the Committee otherwise consistent with Section
2.1(a).
6
<PAGE>
(d) Notwithstanding the above, upon application of any Participant and
approval thereof by the Committee in their sole discretion, the Participant may
at any time during a Plan Year revoke, by reason of Financial Hardship, his
election to participate in the Plan for such Plan Year. Upon such revocation,
any amount withheld for credit to his Deferred Compensation Account for such
year shall be paid to him without interest as soon as practicable thereafter.
Section 2.2 Participants may defer any whole number percentage of their
Salary and Bonus paid in the calendar year, from five percent (5%) to thirty
percent (30%), in the case of Key Employees, and any whole number of Qualified
Stock Equivalents; provided, however, that (i) no more than twenty percent (20%)
of a Participant's total annual compensation may be deferred for any Plan Year,
and (ii) the maximum number of Qualified Stock Equivalents which may be deferred
for any Plan Year shall be seventy-five percent (75%) of Qualified Stock
Equivalents available under the Participant's Stock Deferral Account with
respect to the Stock Divestiture Date immediately preceding such Plan Year, such
amount to be determined in accordance with the definition of Qualified Stock
Equivalents set forth above.
Section 2.3 A Participant shall cease to be a Participant on the date of
his Separation from Service. Notwithstanding the above, compensation earned
prior to Separation from Service which is to be paid subsequently, shall be
eligible for deferral in accordance with the Participant's duly filed election
form; except that if the Separation from Service is the result of termination
for cause, the Participant's balance may be paid at the sole discretion of the
Committee in a lump-sum payment within six months of the Separation from
Service.
ARTICLE III
Deferred Compensation Account Credits
-------------------------------------
Section 3.1 The Committee shall cause to be credited to each Participant's
Deferred Compensation Account for a Plan Year the amounts of Salary and Bonus
which he elected to defer in accordance with Article II. Such amounts shall be
so credited on a quarterly basis as of the end of each calendar quarter during
the Plan Year.
Section 3.2 Within ten (10) days following each Stock Divestiture Date, the
Commit- tee shall cause to be credited to a Participant's Deferred Compensation
Account for a Plan Year an amount equal to the number of Qualified Stock
Equivalents chosen to be deferred by the Participant on such Stock Divestiture
Date, multiplied by the Net Realizable Value of one share of Common Stock on
such Stock Divestiture Date.
Section 3.3 Notwithstanding any provisions herein to the contrary, the
Committee in its sole discretion may suspend any and all deferrals under the
Plan for such period of time as it determines, but in any event all deferrals
under the Plan shall be suspended after December 31, 2001 for compensation
earned subsequent to that date; provided however, that no action taken shall
adversely affect the rights of any Participant hereunder to amount due and
payable to such Participant at the time such action is taken, unless the
Participant otherwise consents thereto.
7
<PAGE>
ARTICLE IV
Deferred Compensation Accounts
------------------------------
Section 4.1 The Committee shall establish and maintain a Deferred
Compensation Account for each Participant and, in the case of Key Employees,
shall maintain separate sub-accounts within each Deferred Compensation Account
for (i) deferrals of Salary and Bonus, and (ii) deferrals of Qualified Stock
Equivalents.
Section 4.2 Amounts credited to a Deferred Compensation Account shall be
periodically adjusted for notional investment experience. In each case such
notional investment experience shall be determined by treating the Deferred
Compensation Account as though an equivalent dollar amount had been invested and
reinvested in one or more of the Notional Funds. The Notional Funds used as a
basis for determining notional investment experience with respect to any
Deferred Compensation Account shall be designated by the Participant by
delivering to the Company written instrument of election approved by the
Committee, and may be changed prospectively by similar delivered written
election before the 15th day of the month preceding a quarter-end, to be
effective as of the first day of the new quarter following such election as
presented in Section 2.1(b) hereof.
Section 4.3 The Committee may from time to time limit the Notional Funds
available for purposes of such election. If at any time any Notional Fund that
has previously been designated by a Participant as a notional investment shall
cease to exist or shall be unavailable for any reason, or if the Participant
fails to designate one or more Notional Funds pursuant to this Section 4.2, the
Committee may, at its discretion and upon notice to the Participant, treat any
amounts notionally invested in such Notional Fund (whether representing past
amounts credited to a Participant's Deferred Compensation Account or subsequent
deferrals or both) as having been invested in any such Notional Fund as the
Committee may from time to time designate, in all cases only until such time as
the Participant shall have made another investment election in accordance with
the foregoing procedures. Deferred Compensation Accounts shall continue to be
adjusted for notional investment experience until distributed in full in
accordance with the distribution method elected by the Participant pursuant to
Article VI hereof.
ARTICLE V
Vesting
-------
Section 5.1 A Participant shall be fully vested at all times in his
Deferred Compensation Account for any Plan Year.
8
<PAGE>
ARTICLE VI
Payment of Deferred Compensation; Withdrawals
---------------------------------------------
Section 6.1 Subject to the limitations set forth in Section 6.4, at the
time a Key Employee first elects to become a Participant in the Plan, he shall
elect in writing to the Committee, on a form attached hereto, to have the
portion of his Deferred Compensation Account which is attributable to deferrals
of Salary and Bonus and earnings credited thereon paid either:
(A) In a lump sum or in such number of Installments as are
indicated on such election;
(B) On (or, in the case of Installments, commencing on) any date on or
after such Participant's Separation from Service, but not later than two years
following the date of such Separation from Service. This distribution shall be
subject to Section 2.3 hereof providing the Separation from Service is a result
of termination for cause.
Section 6.2 Further, at the time a Key Employee first elects to become a
Participant in the Plan, he shall elect in writing delivered to the Committee,
on the form attached hereto, to have the portion of his Deferred Compensation
Account attributable to (i) dividend and capital gain distributions of
investments in Notional Funds which, in the aggregate on a per share basis,
exceed four (4%) of the per share value of the respective fund as of the current
year-end and (ii) realized gains resulting from the liquidation of investment(s)
in Notional Funds:
(A) Distributed by the Company to the Participant in the same Plan Year, or
(B) Held in his Deferred Compensation Account less twenty percent (20%) of
such amounts (or a percentage equal to the Company's current income tax rate, if
greater) which will be retained by the Company to pay estimated current income
taxes payable on the dividends and taxable capital gains.
Section 6.3 Amounts retained by the Company to pay estimated current income
taxes on dividends and taxable gains shall be credited to the Participants
Deferred Compensation Account as a non-invested balance and such amounts shall
be distributed in full to the Participant in accordance with regular
distribution election as provided for in Section 6.1 above. Such non-invested
balances shall not accrue any interest nor earnings and shall be the last
amounts distributed to the Participant in any distribution.
Section 6.4 Notwithstanding anything herein to the contrary, (i) in the
case of an election for a lump-sum distribution, such distribution shall be made
in full not later than December 31, 2004 and (ii) in the case of an election for
a distribution in Installments such Installments shall commence not later than
December 31, 2002.
9
<PAGE>
Section 6.5 Notwithstanding anything herein to the contrary, in the case of
an election for distribution in Installments, if initially the portion of a
Participant's Deferred Compensation Account which is attributable to deferrals
of Salary and Bonus and earnings credited thereon is less than $50,000, the
number of Installments elected by the Participant shall be adjusted to not more
than eight (8) semi-annual distributions; and if initially the portion of his
Deferred Compensation Account which is attributable to deferrals of Salary and
Bonus and earnings credited thereon is less than $25,000, the number of
Installments elected by the Participant shall be adjusted to not more than four
(4) semi-annual distributions, in each case commencing on the designated
commencement date.
Section 6.6 The election made by a Participant pursuant to Section 6.1 and
Section 6.2 may not be changed unless the Committee specifically consents to
such a change in its sole discretion.
Section 6.7 The portion of each Participant's Deferred Compensation Account
which is attributable to the deferral of Qualified Stock Equivalents and
earnings credited thereon shall be paid at the time or times and in the same
manner as was chosen by the Participant with respect to such Qualified Stock
Equivalents in the deferral application filed with the Company pursuant to the
Stock Purchase Plan.
Section 6.8 If a Participant fails to deliver to the Committee a timely
payment election in accordance with procedures established by the Committee and
on the form provided by the Committee, a Participant shall have the amount
credited to his Deferred Compensation Account paid to him in a single lump sum
on a date which is within six-months following his Separation from Service.
Section 6.9 Plan payments shall be considered cash compensation to the
Participant when paid, subject to all applicable federal, state and local income
taxes and withholding; and at the election of the Participant the distribution
shall be made in like-kind.
Section 6.10 Amounts paid under the Plan shall not be eligible for further
deferral under the Plan.
Section 6.11 If a Participant dies, at the request of his Beneficiary, the
Beneficiary shall be entitled to receive, as soon as administratively
practicable after the date of the Participant's death, the payment of his
Deferred Compensation Account in a lump-sum payment, less any applicable
federal, state and local income taxes and withholding, if any.
Section 6.12 Notwithstanding anything herein to the contrary, a Participant
may request and receive a hardship distribution, provided the Participant is
able to demonstrate, to the satisfaction of the Committee in their sole
discretion, that he has suffered a Financial Hardship. A hardship distribution
10
<PAGE>
request must be made on the form provided by the Committee and is subject to the
rules established by the Committee governing hardship distributions. The amount
distributed cannot exceed the lesser of (a) the Participant's Deferred
Compensation Account, or (b) the amount necessary to satisfy the Participant's
Financial Hardship. No hardship distribution may be made prior to the time the
Committee approves the distribution.
Section 6.13 All payments shall be subject to the provisions of Section
10.4 hereof.
Section 6.14 Any payment made to a Participant or his Beneficiary or estate
pursuant to the terms of the Plan shall constitute a complete discharge of the
obligations of the Company and the Committee with respect thereto.
ARTICLE VII
Funding
-------
Section 7.1 The Board of Directors of the Company shall cause the Trust to
be created, shall appoint the Trustee and shall authorize the appropriate
officers of the Company to execute all necessary trust agreements and other
instruments necessary therefor; provided, however, that (i) the terms of the
Trust shall be consistent with the status of the Plan as "unfunded" for purposes
of ERISA and (ii) the Trust shall conform to the terms of the model grantor
trust contained in Revenue Procedure 92-64,1992-33 I.R.B. 11.
Section 7.2 Not later than ten (10) days following each quarter on which
amounts are credited to Deferred Compensation Accounts, the Company shall
contribute to the Trust cash equal to the amounts so credited.
Section 7.3 At each time payment of all or a portion of each Participant's
Deferred Compensation Account is due pursuant to an election made in accordance
with Article II (or pursuant to the death of a Participant in accordance with
Section 6.6), the Committee shall instruct the Trustee to distribute cash from
the Trust directly to such Participant or his Beneficiary in an amount equal to
the portion of his Deferred Compensation Account which is so payable. In the
absence of such an instruction to the Trustee by the Committee, a Participant
may directly instruct the Trustee to make such distribution, and the Trustee
shall do so if it determines that such distribution is in accordance with the
Participant's Article II election. If the Trustee fails to make any distribution
from the Trust required hereunder, the Company shall make such distribution
directly to the Participant entitled thereto from its general assets. If any
payment is made to a Participant by the Company pursuant to the preceding
sentence, the Participant shall be deemed to have assigned to the Company his
rights to receive such payment from the Trust, and the Company shall be
subrogated to all rights of the Participant therein.
11
<PAGE>
ARTICLE VIII
Administration
--------------
Section 8.1 The Plan shall be administered by a three member Committee
appointed by the Board which shall consist of one member of the Compensation
Committee of the Board, the Chief Executive Officer of the Company and the
individual designated as the administrator.
Section 8.2 The complete authority to control and manage the operation and
administration of the Plan and the responsibility for carrying out its
provisions is vested in the Committee.
Section 8.3 The Committee shall from time to time establish rules of
administration and interpretation of the Plan. The determination of the
Committee as to any disputed questions shall be conclusive and binding on all
parties, including the Participant, his Beneficiary, the Company and each
Employer.
Section 8.4 Any act which the Plan authorizes or requires the Committee to
do may be done by a majority of its members. The action of such majority,
expressed by a vote at a meeting or in writing without a meeting, shall
constitute the action of the Committee and shall have the same effect for all
purposes as if assented by all members of the Committee.
Section 8.5 The members of the Committee may authorize one or more of their
members to execute or deliver any instrument, make any payment or perform any
other act which the Plan authorizes or requires the Committee to do.
Section 8.6 The Committee may employ counsel and other agents and may
procure such clerical, accounting, and other services as they may require in
carrying out the provisions of the Plan. No member of the Committee shall
receive any compensation for his services as such. All expenses of administering
the Plan, including but not limited to, fees of accountants and counsel, shall
be paid by the Company up to $10,000 annually and any other costs are to be paid
by the Plan by prorating the amount to the individual Participants based on
aggregate investment in the Plan of each.
Section 8.7 The Company shall indemnify and save harmless each member of
the Committee against all expenses and liabilities arising out of membership on
the Committee, excepting only expenses and liabilities arising from his own
gross negligence or willful misconduct, as determined by the Board of Directors.
ARTICLE IX
Amendment and Termination
-------------------------
Section 9.1 The Company, by action of the Committee, may at any time or
from time to time modify or amend any or all of the provisions of the Plan or
may at any time terminate the Plan; provided, however, that no action taken
shall adversely affect the rights of any Participant hereunder to amounts due
and payable to such Participant at the time such action is taken, unless the
Participant otherwise consents thereto.
12
<PAGE>
ARTICLE X
General Provisions
------------------
Section 10.1 No Participant, Key Employee or employee of the Company or any
Employer shall have any right to any payment or benefit hereunder except to the
extent provided in the Plan.
Section 10.2 The employment rights of any Participant shall not be
enlarged, guaranteed or affected by reason of any of the provisions of the Plan.
Section 10.3 Assignment, pledge or other encumbrance of any payments or
benefits under the Plan shall not be permitted or recognized and to the extent
permitted by law, no such payments or benefits shall be subject to legal process
or attachment for the payment of any claim of any person entitle to receive the
same.
Section 10.4 The Company shall have the right to retain or to use any
amounts payable under the Plan to satisfy or otherwise offset amounts the
Participant owes to the Company.
Section 10.5 If the Committee determines that any person to whom a payment
is due hereunder is a minor or incompetent by reason of physical or mental
disability, the Committee shall have the power to cause the payments then due to
such person to be made to another for the benefit of the minor or incompetent,
without responsibility of the Company or the Committee to see to the application
of such payment, unless claim prior to such payment is made therefor by a duly
appointed legal representative. Payments made pursuant to such power shall
operate as a complete discharge of the Company and the Committee.
Section 10.6 The validity of the Plan or any of its provisions shall be
determined under, and it shall be construed and administered according to the
laws of the state in which the administrative offices of the Company are
maintained, which currently is South Carolina. In the event of a dispute with
results in a Participant filing suit against the Company, Employer, Board of
Directors, Committee or officers of the Company, the Participant shall have
agreed that the party which the decision is rendered against shall pay the legal
expenses of the prevailing party. Further, the Participant shall waive his right
to a jury trial.
Section 10.7 Each Participant may designate, in writing and on a form
provided by the Committee, any person(s) or legal entity(ies), including his
estate, as his Beneficiary under the Plan; provided, however, that a Participant
may designate a trust as his Beneficiary only with the prior written approval of
the Committee. A Participant may at any time revoke his designation of a
13
<PAGE>
Beneficiary or change his Beneficiary at any time prior to his death by
delivering to the Committee the appropriate beneficiary designation form. If no
person or legal entity shall be designated by a Participant as his Beneficiary
or if no designated Beneficiary survives him, his Beneficiary shall be his
estate. To be effective, any designation or revocation of Beneficiary must be on
the appropriate form provided by the Committee and on file with the Committee
prior to the date of the Participant's death. The provisions of the Plan shall
be binding on the Participant, the Company, and their respective heirs,
executors, administrators, successors and assigns.
ADOPTED, this 6th day of December 1996, by the unanimous vote of the Board
of Directors of Hampshire Group, Limited.
/s/ Ludwig Kuttner
- ---------------------------------------
Ludwig Kuttner
Chairman and Chief Executive Officer
/s/ Charles W. Clayton
- ---------------------------------------
Charles W. Clayton
Secretary and Chief Financial Officer
14
<PAGE>
EXHIBIT I
HAMPSHIRE GROUP, LIMITED
VOLUNTARY DEFERRED COMPENSATION PLAN
FOR DIRECTORS AND EXECUTIVES
ELECTION FORM of
------------------------------------- ---- ---- ----
(Name of Participant) (Social Security No.)
In accordance with and subject to the Hampshire Group, Limited Voluntary
Deferred Compensation Plan (the "Plan"), I hereby request to defer the receipt
of compensation for the year ending December 31, 19 as follows:
A. Amount to be Deferred: (not less than 5%, nor more than 30%)
Salary % Bonus %
B. Number of Qualified Stock Equivalents to be Deferred:
(not more than 75% of Qualified Stock Equivalents) Deferral Number Date to be
Year Shares Converted
-------- ------ ----------
-------- ------ ----------
-------- ------ ----------
C. Notional Fund for Investment: %
(not less than 40% in any one fund)
%
D. Form of Distribution for Salary and Bonus Deferral:
[ ] Lump sum (not later than two years following Separation from Service or
December 31, 2004) or,
[ ] Semi-annual installments (not to exceed 8 years) Years
E. Period of Deferral for Salary and Bonus:
Date on which payment should be made or commence
(Not later than two years following Separation from Service. Installment
distributions must commence by December 31, 2002; lump sum distributions
must be made on or before December 31, 2004.)
NOTE: Once you have selected a Period of Deferral for Salary and Bonus, it
will apply to all subsequent deferrals and may not be changed
without the specific written consent of the Committee. If you do not
select a specific date, payment will be made or commence upon Separa-
tion from Service. Deferrals of Qualified Stock Equivalents will
be paid to you in accordance with your deferral and distribution
elections made under the Stock Purchase Plan.
F. Form of Distribution for Dividends and Gains:
[ ] Lump sum in current Plan Year
or
[ ] Held in the Participant's Deferred Compensation Account less 20% (or
an amount equal to the Company's current tax rate, if greater)
returned to the Company for current taxes, until regular distribution
Initial ______
15
<PAGE>
G. Designation of Beneficiary:
I hereby designate the following as my beneficiary(ies) in the event of my
death prior to receipt of all amounts credited to my Deferred Compensation
Account, to be paid in a lump sum.
- ------------------------------------------------------- ------------------
Primary Beneficiary Name Social Security No.
Address
-----------------------------------------------
-----------------------------------------------
- ------------------------------------------------------- ------------------
Contingent Beneficiary Name Social Security No.
Address -----------------------------------------------
-----------------------------------------------
- ------------------------------------------------------- ------------------
Contingent Beneficiary Name Social Security No.
Address -----------------------------------------------
-----------------------------------------------
A Participant should contact his/her tax advisor prior to making an
election to defer compensation and should be and should make their deferral
decision based exclusively on the professional advise of such independent
advisor and not on the advise of any member of the Board or the Plan Committee.
I acknowledge that I have received a copy of the Plan and have read it and
understand its terms. I have consulted a professional tax advisor in respect to
my decision to defer compensation under the Plan or I am professionally
qualified to understand the financial consequences of my deferral election and
my investment election.
I hereby agree that if there is a dispute which results in a lawsuit, that
I will pay the legal expenses of the prevailing party. Further, I hereby waive
my right to a jury trial.
Further, I understand that, in the event of my death prior to receipt of
all amounts payable to me pursuant to the Plan, all amounts credited to my
Deferred Compensation Account will be paid to my designated Beneficiary in the
form of a lump sum payment at the request of the Beneficiary.
I understand that this election will remain in effect for future years
unless I deliver a new election, or a revocation of this election, to the
Committee by December 15th preceding the Plan Year I wish such new election or
revocation to be effective.
Signed at this day of , 19 .
- -------------------------------------- ----------------------------------
Signature of Participant Signature of Witness
Address -----------------------------------------------
-----------------------------------------------
16
<TABLE>
EXHIBIT 11
HAMPSHIRE GROUP, LIMITED
STATEMENT RE COMPUTATION OF LOSS PER SHARE
(in thousands, except per share data)
<CAPTION>
Three Months Ended
---------------------
March 29, March 30,
1997 1996
-------- --------
(Unaudited) (Unaudited)
<S> <C> <C>
Weighted average number of common and
common equivalent shares outstanding 3,851 3,751
===== =====
Net loss ($260) ($526)
Less - preferred dividend requirements (44) (48)
----- -----
Net loss applicable to common stock ($304) ($574)
===== =====
Net loss per share applicable to
common stock ($0.07) ($0.15)
===== =====
1
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS 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> 1000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-29-1997
<EXCHANGE-RATE> 1
<CASH> 11,080
<SECURITIES> 426
<RECEIVABLES> 18,654
<ALLOWANCES> (3,573)
<INVENTORY> 22,284
<CURRENT-ASSETS> 50,838
<PP&E> 34,158
<DEPRECIATION> (20,903)
<TOTAL-ASSETS> 71,407
<CURRENT-LIABILITIES> 15,109
<BONDS> 6,489
3,192
0
<COMMON> 392
<OTHER-SE> 46,225
<TOTAL-LIABILITY-AND-EQUITY> 71,407
<SALES> 23,580
<TOTAL-REVENUES> 23,580
<CGS> 18,889
<TOTAL-COSTS> 18,889
<OTHER-EXPENSES> 4,783
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 221
<INCOME-PRETAX> (324)
<INCOME-TAX> 64
<INCOME-CONTINUING> (260)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (260)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
