Hampshire Faces Default, Delisting

by MR Magazine Staff

NEW YORK – Hampshire Group Ltd. said Wednesday that further delays in the release of its financial results for the last two quarters could expose it to possible delisting by the Nasdaq Global Market and possible default under its principal credit facility.

As a result of its ongoing investigation into alleged improprieties by its former chief executive, Ludwig Kuttner, the company, among the largest suppliers of men’s and women’s sweaters in the U.S., also said it would restate results for fiscal years 2003 through 2005 and the first quarter ended April 1. Its 2002 numbers may require adjustment as well.

Hampshire noted that the investigation by the audit committee of its board of directors is ongoing and that the firm is continuing to cooperate with the Securities and Exchange Commission and the office of the US Attorney.

Hampshire placed Kuttner on administrative leave on June 22 and terminated his employment on Sept. 25. The company is exploring $1.45 million in expense reports filed by Kuttner, “a substantial portion” of which are suspected of being fraudulent or not substantiated in accordance with company policy.

Hampshire said it expects to file restatements with the SEC during the first quarter of 2007. However, it cautioned that it would not be able to issue its Form 10-Q covering its quarter ended July 1 by Dec. 15 or its report for the Sept. 30 quarter by Dec. 29, as required by Nasdaq for continued listing. Hampshire said it would seek additional extensions but couldn’t guarantee that they would be granted, as previous requests this year have been.

Additionally, Hampshire said that because figures for the two quarter won’t be delivered to its lenders by Dec. 31, as previously agreed, it will technically be in default of its financial covenants. It intends to seek a waiver but again couldn’t assure investors that one would be granted.

As of Dec. 12, Hampshire had $40.9 million of cash on hand and $33.6 million in outstanding letters of credit under its credit facility.