UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Earliest Event Reported April 28, 2000
Date of Report July 10, 2000
Commission File No. 000-20201
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HAMPSHIRE GROUP, LIMITED
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE 06-0967107
---------------------- ----------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
215 COMMERCE BOULEVARD
ANDERSON, SOUTH CAROLINA 29625
(864) 225-6232
(Address, Including Zip Code, and Telephone Number, Including
Area Code of Registrant's Principal Executive Offices)
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<PAGE>
Introductory Note
This Form 8-K/A is being filed to amend the Company's current report on Form 8-K
filed on May 11, 2000.
Item 2 is amended and restated in its entirety as follows:
Item 2. Disposition of Assets.
------------------------------
On April 28, 2000 (the "Closing Date"), Hampshire Group, Limited (the
"Company") concluded a transaction whereby it sold all of its sweater
manufacturing assets to Glamourette/OG, Inc., a Puerto Rican corporation
("Glamourette/OG"), with its principal executive offices at Guaynabo, Puerto
Rico. Glamourette/OG is a subsidiary of Olympic Mills Corporation, a Delaware
corporation ("Olympic Mills"), both of which are unrelated to the Company.
The assets sold include the sweater manufacturing facilities of the
Company's subsidiary Glamourette Fashion Mills, Inc., located in Quebradillas,
Puerto Rico and the machinery and equipment of San Francisco Knitworks, Inc.,
located in San Francisco, California, Natalie Knitting Mills, located in
Chilhowie, Virginia and Winona Knitting Mills, located in Winona, Minnesota, and
certain of the machinery and equipment on consignment to a contract manufacturer
located in Mexico. In addition to the machinery and equipment, assets sold
include the inventories, other than finished goods, and certain other assets of
the respective operations.
The sales price for the machinery and equipment was $10,468,000 consisting
of $4,000,000 cash and a non-interest bearing promissory note in the amount of
$8,000,000, discounted to $6,468,000, at 8.75% per annum, and due April 28, 2005
("the 8.75% Note"). The 8.75% Note is payable over a five- year period by a
deduction of $0.67 per sweater purchased from Glamourette/OG or is payable in
cash. The 8.75% Note is partially collateralized by the machinery and equipment
which was sold pursuant thereto and by the pledge of the common stock of
Glamourette/OG, Inc. Of the proceeds received approximately $754,000 was used to
pay off loans outstanding against the machinery and equipment sold.
In order to avoid interruption of supply, Glamourette/OG took possession of
only the Puerto Rico facility on the Closing Date. The Asset Purchase Agreement
provides that the Company will continue to operate the three domestic
manufacturing facilities for varying periods of up to ten months. During the
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<PAGE>
transition period, the Company will continue to pay all related operating
expenses and as compensation for the use of the machinery and equipment, will
credit the 8.75% Note for $0.67 per sweater manufactured in the domestic
manufacturing facilities.
The inventories in Puerto Rico on the Closing Date, including work in
process, raw materials and supplies totaling approximately $2,321,000, were sold
to Glamourette/OG at cost and were paid 50% in cash, with the balance paid by
deduction of 50% of the purchase price of sweaters shipped to the Company in May
and June 2000, after deduction of the $0.67 to be applied as a reduction of the
8.75% Note.
Concurrently, the Company purchased a 1% equity interest in Glamourette/OG,
Inc. for $40,000, which purchase price was paid in full by a reduction from the
8.75% Note. The Company has an option to put its 1% interest at anytime to
Olympic Mills at cost and Olympic Mills has a right to purchase the Company's 1%
interest at cost at any time after the 8.75% Note is paid in full.
Collection of the 8.75% Note is largely conditional on a long term "supply
agreement" whereby the Company can purchase manufactured sweaters from
Glamourette/OG at a defined price for up to five years and/or 1,000,000 dozen
sweaters. Due to the competitive market in the sweater industry and potential
changes to international trade policies, the Company has established a $1.6
million allowance against the final year of the 8.75% Note.
The sale of the manufacturing equipment to a third party was part of
management's plan to exit all manufacturing activities and to purchase from
third parties 100% of its sweater requirements. Subsequent to this sale
transaction and related exit of the manufacturing activities, the Company
expects to continue to provide the same product lines, to the same customers, at
a volume consistent with normal growth. Since the Company does not anticipate
any significant change in its financial performance as a result of the sale of
its manufacturing equipment, additional pro forma financial information has not
been provided.
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Item 5 is hereby added to this Form 8-K to read as follows:
Item 5. Other Events
--------------------
The following presents the Company's unaudited balance sheet before the sale of
the manufacturing equipment and shutdown and exit of its manufacturing
activities (the "Transaction"), as described in Item 2 hereto, the effect of the
Transaction, and the unaudited balance sheet immediately thereafter:
<TABLE>
HAMPSHIRE GROUP, LIMITED
UNAUDITED CONSOLIDATED BALANCE SHEET
(in thousands)
ASSETS
<CAPTION>
Balance Sheet
after the
Balance Sheet Effect of the Transaction
April 28, 2000 Transaction April 28, 2000
---------------- ------------- --------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $18,863 $ 4,407 (1) $23,270
Available-for-sale securities 253 - 253
Accounts receivable trade-net 7,491 - 7,491
Other accounts receivable 1,894 1,160 (2) 3,054
Inventories 23,566 (1,974) (2) 21,592
Deferred tax asset 4,185 - 4,185
Other current assets 524 - 524
------- -------- -------
Total current assets 56,776 3,593 60,369
Property, plant and equipment-net 9,075 (4,811) (5) 4,264
Real property investments-net 17,801 - 17,801
Long-term investments-net 4,913 - 4,913
Note receivable-Glamourette/OG - 4,828 (3) 4,828
Trading securities held in
retirement trust 2,342 - 2,342
Deferred tax asset 1,969 602 (7) 2,571
Intangible assets-net 2,396 (819) (4) 1,577
Other assets 789 40 (3) 829
------- -------- -------
Total assets $96,061 $ 3,433 $99,494
======= ======== =======
<FN>
(The accompanying notes are an integral part of this unaudited balance sheet)
</FN>
</TABLE>
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<TABLE>
HAMPSHIRE GROUP, LIMITED
UNAUDITED CONSOLIDATED BALANCE SHEET
(in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
Balance Sheet
after the
Balance Sheet Effect of the Transaction
April 28, 2000 Transaction April 28, 2000
---------------- ------------- --------------
<S> <C> <C> <C> <C>
Current liabilities:
Current portion of long-term debt $1,031 $ (468) (1) $ 563
Accounts payable 2,080 - 2,080
Accrued expenses and
other liabilities 2,619 3,414 (6,7) 6,033
------- -------- -------
Total current liabilities 5,730 2,946 8,676
Long-term debt 23,666 (286) (1) 23,380
Deferred compensation 2,440 - 2,440
------- -------- -------
Total liabilities 31,836 2,660 34,496
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Commitments and Contingencies
Stockholders' equity:
Common stock 418 - 418
Additional paid-in capital 27,762 - 27,762
Retained earnings 37,119 773 37,892
Accumulated other comprehensive
loss (395) - (395)
Treasury stock (679) - (679)
------- -------- -------
Total stockholders' equity 64,225 773 64,998
------- -------- -------
Total liabilities
and stockholders' equity $96,061 $ 3,433 $99,494
======= ======== =======
<FN>
(The accompanying notes are an integral part of this unaudited balance sheet)
</FN>
</TABLE>
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In addition to the sale of the manufacturing equipment, net of the
allowance on the 8.75% Note previously discussed, the Company's plan to
discontinue and exit its manufacturing activities gives rise to certain other
asset impairment, shutdown and exits costs, summarized as follows:
<TABLE>
HAMPSHIRE GROUP, LIMITED
UNAUDITED ESTIMATED EFFECTS ON CONSOLIDATED STATEMENT OF OPERATIONS
RESULTING FROM THE TRANSACTION
APRIL 28, 2000
(in thousands)
<CAPTION>
Effect on
Consolidated
Statement
of Operations
--------------
<S> <C> <C>
Cost of goods sold $ (347) (2)
------
Gross margin 347
------
Gain on sale of manufacturing equipment,
net of allowance on 8.75% Note 4,912 (8)
------
Severance and benefit commitments 1,332 (6)
Asset impairment, including goodwill 1,674 (4,5)
Future lease obligations and other commitments,
net of estimated subleases 480 (6)
Professional fees 100 (6)
------
Total asset impairment and costs to exit
manufacturing activities 3,586
------
Gain from the transaction before income tax provision 1,673
Income tax provision 900 (7)
------
Net gain from the transaction, net of income taxes $ 773
======
<FN>
(The accompanying notes are an integral part of this unaudited schedule)
</FN>
</TABLE>
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL SCHEDULES
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Note (1) Cash and long-term debt at closing - Hampshire received $5,161,000 cash
at closing of which $754,000 was used to repay outstanding loans collateralized
by the equipment sold.
Cash received for sale of manufacturing equipment $4,000,000
Cash received for sale of Puerto Rico inventory 1,161,000
----------
Total cash received 5,161,000
Less: repayment of outstanding equipment loans (754,000)
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Total net cash received $4,407,000
==========
Note (2) Other accounts receivable - Pursuant to the Asset Purchase Agreement,
50% of the Puerto Rico inventory sold is to be collected by deduction against
future payments to Glamourette/OG for production. Such deductions were
substantially made by June 30, 2000.
Production inventory sold $1,974,000
Manufacturing and office supplies sold 347,000
----------
2,321,000
Less: cash received for sale of Puerto Rico inventory 1,161,000
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Balance due $1,160,000
==========
Note (3) Note receivable from Glamourette/OG and other assets - $8 million note
receivable from Glamourette/OG, less a $40,000 equity investment in
Glamourette/OG, discounted for interest at 8.75% per annum to $6,428,000. A
reserve has been provided for approximately 25% of the discounted note
receivable in the amount of $1.6 million.
Note receivable - Glamourette/OG $7,960,000
Less: interest discount at 8.75% (1,532,000)
Less: note receivable reserve (1,600,000)
----------
Note receivable - Glamourette/OG $4,828,000
==========
Note (4) Intangible assets - net - Intangible asset impairment is based on the
Company's analysis of the intangible assets to the assets sold.
Book value - goodwill $2,396,000
Less: goodwill asset impairment (819,000)
----------
Book value - goodwill after impairment charge $1,577,000
==========
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Note (5) Property, plant and equipment - The following summarizes the net book
value of the property and equipment sold, and the impairment of property at such
manufacturing facilities.
Property, plant and equipment - sold $23,046,000
Accumulated depreciation - on assets sold (19,090,000)
-----------
Net assets - sold (note 8) 3,956,000
Impairment of property, plant and equipment at
manufacturing facilities 855,000
-----------
Total adjustment of property, plant and equipment $ 4,811,000
===========
Note (6) Accrued expenses and other liabilities - Accrual for expenses and costs
related to the Company's exit of its manufacturing activities.
Severance and benefit commitments $ 1,332,000
Future lease obligations and other commitments,
net of estimated sublease income 480,000
Professional fees 100,000
-----------
Total projected shutdown and exit expenses 1,912,000
Income taxes payable (note 7) 1,502,000
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Total accrued expenses and other liabilities $ 3,414,000
===========
Note (7) Income tax provision, deferred tax assets and income tax payable - The
income tax effects of this transaction, including an estimated $180,000 tollgate
tax related to Puerto Rico, are summarized as follows:
Puerto Rico US Consolidated
Total income tax provision $600,000 $300,000 $ 900,000
======== ======== ==========
Income taxes payable (note 6) $600,000 $902,000 $1,502,000
======== ======== ==========
Deferred tax asset $ - $602,000 $ 602,000
======== ======== ==========
Note (8) Gain on sale of property and equipment - Calculated as follows:
Total sales price of property and equipment $10,468,000
Less: note receivable reserve (1,600,000)
Less: book value of net assets sold (note 5) (3,956,000)
-----------
Gain on sale of property and equipment $ 4,912,000
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Item 7 is amended and restated in its entirety as follows:
Item 7. Financial Statements and Exhibits
(c) Exhibits
(10)(V)* Asset Purchase Agreement between Glamourette Fashion Mills, Inc.,
San Francisco Knitworks, Inc., and Hampshire Designers, Inc. (as "Seller")
and Glamourette/OG, Inc. (as "Purchaser"), dated April 28, 2000
___________________
* Previously Filed
<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)
Date: July 10, 2000 /s/ Ludwig Kuttner
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Ludwig Kuttner
President and Chief Executive Officer
(Principal Executive Officer)
Date: July 10, 2000 /s/ Charles W. Clayton
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Charles W. Clayton
Vice President, Secretary, Treasurer
and Chief Financial Officer
(Principal Financial and Accounting Officer)
