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HAMPSHIRE GROUP, LIMITED
STOCK SYMBOL: HAMP FOR IMMEDIATE RELEASE
CONTACT: Citigate Sard Verbinnen
Paul Caminiti/Victoria Hofstad/Chris Kittredge
212/687-8080
HAMPSHIRE TO RESTATE FINANCIAL STATEMENTS
Anderson, SC, December 13, 2006. Hampshire Group, Limited (NASDAQ: HAMP) today
announced that it will restate annual and quarterly financial statements for the
years 2003 through 2005 as well as for the fiscal quarter ended April 1, 2006
based on the preliminary findings of the previously announced investigation by
the Audit Committee of its Board of Directors. The Company is reviewing its
financial statements for the fiscal year ended December 31, 2002, which may
require adjustments as well. The Audit Committee has discussed these preliminary
findings with Deloitte & Touche LLP, the Company's independent registered public
accounting firm. All of the Company's financial statements and related reports
of the Company's independent registered public accounting firm, earnings press
releases and similar communications, including reports on internal controls,
issued by the Company relating to the aforementioned periods should no longer be
relied upon. The Company anticipates filing amendments to the required reports
with the Securities and Exchange Commission during the first quarter of 2007.
The Audit Committee's investigation determined that Hampshire will have to make
certain adjustments related to the previously announced $1.45 million of expense
reports submitted by the former CEO, Ludwig Kuttner, a substantial portion of
which were fraudulent or not substantiated in accordance with Hampshire's
policies. As part of the Audit Committee investigation, the Company also
undertook a review of its accounting and disclosure policies and internal
controls. Hampshire expects, as a result of this review, to make certain other
adjustments to its historical financial statements primarily related to income
tax expenses, tax contingency accruals, non-accountable plan reimbursements for
certain executives, and certain executive benefit plans.
The Audit Committee investigation is continuing. There can be no assurance that
additional issues will not be identified in the course of the investigation, and
these issues may be material. If identified, the matters could further delay the
issuance of the financial statements or result in additional restatements.
As a result of the required restatements, Hampshire will not be able to file
with the SEC its Quarterly Report on Form 10-Q for the quarter ended July 1,
2006 by December 15, 2006 and its Quarterly Report on Form 10-Q for the quarter
ended September 30, 2006 by December 29,
2006, both of which are currently conditions to the continued listing of
Hampshire's common stock on the Nasdaq Global Market. Hampshire has notified
Nasdaq that it will be unable to file its reports with the SEC by the agreed
upon deadlines. While Hampshire intends to seek an extension of these deadlines
as well as appeal to the Nasdaq Listing and Hearings Review Council for further
relief, there can be no assurances that Nasdaq will grant a further exception or
that Hampshire's common stock will not be delisted from The Nasdaq Stock Market
during the pendency of any future proceedings.
In addition, Hampshire will not be able to deliver to its credit facility
lenders its financial statements for the quarters ended July 1, 2006 and
September 30, 2006 by December 31, 2006, as previously agreed. Failure to
deliver these financial statements to the lenders by December 31, 2006 will
result in a default under the credit facility unless a waiver is obtained.
Hampshire has notified its lead lender regarding its request for a waiver, but
there can be no assurance that the lenders will grant Hampshire's request. As of
December 12, 2006, Hampshire had cash on hand of approximately $40.9 million and
$33.6 million in letters of credit outstanding under its credit facility. No
other borrowings are outstanding under the credit facility. Based on its most
recent borrowing base calculation as of December 2, 2006, Hampshire has a total
availability of $95.0 million under the credit facility excluding outstanding
letters of credit. With the exception of letters of credit, Hampshire does not
expect to require any borrowings to fund operations prior to May 2007.
Hampshire is currently evaluating claims it has against Mr. Kuttner, including
claims for misappropriation, breach of duty of loyalty and, pursuant to the
Sarbanes-Oxley Act, disgorgement of bonuses and net gain on stock sales.
Hampshire is cooperating with ongoing investigations of the SEC and the US
Attorney.
Hampshire Group, Limited is a diversified apparel company, believed to be the
largest supplier of women's and men's sweaters in North America and a leading
supplier of women's related separates.
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Cautionary Disclosure Regarding Forward-Looking Statements
This press release contains forward-looking statements, within the meaning of
the Private Securities Litigation Reform Act of 1995, that reflect the Company's
current views with respect to future events. Such statements are subject to
certain risks and uncertainties which could cause actual results to differ
materially from those projected. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to publish revised forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrences of unanticipated events. Readers are also urged to
review and consider carefully the various disclosures made by the Company in its
Form 10-K and other Securities and Exchange Commission filings, which advise
interested parties of the factors that affect the Company's business.