Hampshire Reports Fourth Quarter 2014 Results

Guía de Regalos

Provides 2015 and 2016 Outlook

NEW YORK–(BUSINESS WIRE)–Hampshire Group, Limited (OTC Markets:HAMP) today announced its results
for the fourth quarter ended December 31, 2014.

“The announcement of our fourth quarter and full year 2014 results
represents Hampshire Group’s emergence from a very challenging period in
our Company’s history,” stated Paul Buxbaum, Chief Executive Officer of
Hampshire Group. “While the financials in this news release are dated,
this announcement reflects our intention to publicly disclose
Hampshire’s results from the past several quarters as soon as possible.
We expect to resume a normal schedule of quarterly SEC filings and
earnings announcements after we file the remaining 2015 results in the
coming months. Most importantly, we believe that we are now well
positioned to deliver improved financial performance in 2016, as
discussed later in this release.”

Fourth Quarter 2014 Compared to Fourth Quarter 2013:

  • Sales were $29.7 million compared to $35.0 million.
  • Gross profit margin was 12.7% compared to 16.6%.
  • SG&A expenses were $9.6 million compared to $7.4 million.
  • Adjusted EBITDA was a loss of $4.8 million compared to positive
    Adjusted EBITDA of $0.6 million (see the Non-GAAP Reconciliation table
    in the Selected Unaudited Financial Data section of this news release).
  • Loss from continuing operations was $20.2 million, or $2.38 per
    diluted share, compared to a loss from continuing operations of $8.9
    million, or $1.05 per diluted share.
  • The 2014 and 2013 losses included non-cash charges of $14.7 million
    and $7.6 million, respectively.

Mr. Buxbaum continued, “As disclosed early this year, multiple factors
unfolded late in the fourth quarter of 2014 that impacted our results
for the period and year. These included the mid-December customer
cancelations of seasonal merchandise, and the subsequent selling off of
that seasonal merchandise at lower than expected prices, as well as
operational issues at a key fabric supplier to our Honduras factory that
resulted in late shipments by the supplier of poor quality material. We
have since sold our Rio Garment division, including the Honduras
facility.

“The challenges continued into 2015,” stated Mr. Buxbaum. “During the
first quarter, labor issues related to slowdowns and bottlenecks at west
coast shipping ports stranded thousands of Hampshire Group’s finished
garments on cargo ships that were unable to dock and unload. This
prevented us from delivering these products and recognizing the
associated sales, and materially constrained our liquidity.

“We are pleased to report that, in the wake of the numerous hurdles we
have faced in the past year, we believe that Hampshire Group is now
firmly on the road to delivering improved profitability and enhanced
shareholder value. Over the course of 2015, we have achieved three
critical milestones that position us well for 2016 and beyond. First, as
previously mentioned, we divested our underperforming Rio Garment
division, which provided a much needed cash infusion and eliminated a
significant management distraction. Secondly, we negotiated a favorable
amendment to the lease of our New York City headquarters, which we
expect will reduce our cash outflows by approximately $16 million over
the next eight years. Finally, we took major steps in rationalizing our
operating cost structure, which is now more appropriately aligned with
the size of our business and should provide us with higher operating
leverage on expected rising sales.”

Fourth Quarter 2014 Business Overview

Sales for the fourth quarter of 2014 decreased compared to the prior
year as stronger volume and higher selling prices for our Hampshire
Brands business was offset by lower volumes and reduced pricing for
private label t-shirts at our Rio Garment division, which we divested in
September of 2015 (effective for financial and accounting purposes April
10, 2015).

Gross profit was $3.8 million, down from $5.8 million, due to the lower
Rio Garment sales. Hampshire Brands delivered stronger profitability as
a result of sourcing and manufacturing synergies, as well as a favorable
mix shift.

Selling, general and administrative expenses increased to $9.6 million
in the fourth quarter of 2014 from $7.4 million in the prior year
quarter, reflecting a $1.4 million vendor receivable charge and the
reversal of an incentive accrual in 2013. SG&A as a percentage of sales
increased to 32.4% in the fourth quarter of 2014 from 21.1% as a result
of lower sales.

We incurred a total of $14.7 million in non-cash charges during the
fourth quarter of 2014, including $11.5 million associated with the
impairment of Rio Garment intangible assets, charges related to our New
York headquarters lease totalling $1.3 million, and impairment of fixed
assets and goodwill related to Rio Garment of $1.4 million and $0.5
million, respectfully.

Cash Flow and Financial Position at December
31, 2014:

  • The Company concluded the quarter ended December 31, 2014 with $1.8
    million in cash and cash equivalents as compared to $1.4 million as of
    December 31, 2013.
  • Working capital (excluding discontinued operations) declined to $6.5
    million at the conclusion of the quarter ended December 31, 2014 from
    $21.3 million as of December 31, 2013.
  • The Company had borrowings of $3.0 million on its term loan and $16.1
    million on its revolving credit facility.

Outlook

Mr. Buxbaum continued, “We expect to report fourth quarter and full year
2015 results in March 2016, which will also include the results for the
first three quarters of the year. Based on our forecast for the balance
of the year, we expect to report pro forma* 2015 net sales of $64.0 to
$65.0 million and an Adjusted EBITDA loss of $1.0 to $1.5 million.
Looking ahead to 2016, we anticipate material improvement in our
financial performance, with solid demand for our Dockers® and James
Campbell lines combining with our rationalized cost structure to
generate higher net sales of $65.0 to $67.0 million and positive
Adjusted EBITDA of $0.5 million to $1.5 million.”

*Excludes results from Rio Garment

About Hampshire Group

Hampshire Group, Limited (www.hamp.com),
along with its wholly-owned subsidiary, Hampshire Brands, Inc. is a
provider of fashion apparel across a broad range of product categories,
channels of distribution and price points. The Company specializes in
designing and marketing men’s sportswear to department stores, chain
stores and mass market retailers under licensed brands, our own
proprietary brands and the private labels of our customers.

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 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 certain factors that affect the Company’s
business. Risks and uncertainties that could cause actual results to
differ materially from those anticipated in our forward looking
statements include, but are not limited to, the following: there is
doubt about our ability as a going concern due to the February 29, 2016
maturity date of our credit facility, potentially insufficient
liquidity, our history of losses, our stockholders’ deficit and our
auditor issuing a going concern opinion for the year ended December 31,
2014; risks from the sale of Rio Garment S.A.; matters related to our
Audit Committee investigation; identified material weaknesses in our
internal controls; restricted ability to borrow under our credit
facility; a prolonged period of depressed consumer spending; use of
foreign suppliers for raw materials and manufacture of our products;
lack of an established public trading market for our common stock;
decreases in business from or the loss of any one of our key customers;
financial instability experienced by our customers; chargebacks and
margin support payments; loss of or inability to renew certain licenses;
change in consumer preferences and fashion trends, which could
negatively affect acceptance of our products by retailers and consumers;
failure of our manufacturers to use acceptable ethical business
practices; failure to deliver quality products in a timely manner;
problems with our distribution system and our ability to deliver
products; labor disruptions at ports, our suppliers, manufacturers or
distribution facilities; failure, inadequacy, interruption or security
lapse of our information technology; failure to compete successfully in
a highly competitive and fragmented industry; challenges integrating any
business we have acquired or may acquire; potential impairment of
acquired intangible assets; unanticipated expenses beyond the amount
reserved on our balance sheet or unanticipated cash payments related to
the ultimate resolution of income and other possible tax liabilities;
significant adverse changes to international trade regulations; loss of
certain key personnel which could negatively impact our ability to
manage our business; risks related to the global economic, political and
social conditions; fluctuation in the price of raw materials adversely
affecting our results of operations; energy and fuel costs are subject
to adverse fluctuations and volatility; and cyber security risks related
to breaches of security pertaining to sensitive company, customer,
employee and vendor information.

 

Hampshire Group, Limited

Selected Financial Data (Unaudited)

       
Three Months Ended December 31, Year Ended December 31,
(In thousands, except per share data) 2014   2013 2014   2013
Net sales $ 29,720 $ 34,979 $ 91,471 $ 105,054
Cost of goods sold 25,949 29,163 73,850 85,134
Gross profit 3,771 5,816 17,621 19,920
Selling, general and administrative expenses 9,642 7,381 31,678 31,922
Lease litigation settlement (6,113)
Loss on lease obligation 334 4,894 408 5,414
Impairment of goodwill 460 2,099 460 2,099
Impairment of certain intangible assets 11,539 11,539
Impairment of fixed assets 2,375 612 2,375 612
(Loss) income from operations (20,579 ) (9,170 ) (28,839 ) (14,014 )
Other income (expense):
Interest income 1
Interest expense (527 ) (474 ) (1,354 ) (792 )
Other, net 72 49 288 229
(Loss) income from continuing operations before income taxes (21,034 )

(9,595

)

(29,905 ) (14,576 )
Income tax benefit

(836

)

(719

)

(1,080

)

(1,744

)

Loss from continuing operations (20,198 ) (8,876 ) ( 28,825 ) (12,832 )
(Loss) income from discontinued operations, net of taxes

(999

)

62 (3,208 )
Net loss $ (20,198 )

$ (9,875

)

$(28,763 ) $ (16,040 )
 
Basic (loss) income per share:
Loss from continuing operations $ (2.38 ) $ (1.05 ) $ (3.40 ) $ (1.65 )

(Loss) income from discontinued operations, net of taxes

(0.12

)

 

0.01 (0.41

)

Net loss $ (2.38 ) $ (1.17 ) $ (3.39 ) $ (2.06 )
 
Diluted (loss) income per share:
Loss from continuing operations $ (2.38 ) $ (1.05 ) $ (3.40 ) $ (1.65 )
(Loss) income from discontinued operations, net of taxes (0.12 ) 0.01 (0.41 )
Net loss $ (2.38 ) $ (1.17 ) $ (3.39 ) $ (2.06 )
 
Weighted-average number of common shares outstanding:
Basic 8,496 8,452 8,481 7,793
Diluted 8,496 8,452 8,481 7,793
                             
NON-GAAP RECONCILIATION (UNAUDITED):
Net loss $ (20,198 ) $ (9,875 ) $ (28,763 ) $ (16,040 )
Interest expense, net 527 474 1,354 791
Income tax benefit (836 ) (719 ) (1,080 ) (1,744 )
Depreciation and amortization 828 901 3,202 3,660
EBITDA (19,679 ) (9,219 ) (25,287 ) (13,333 )
Restructuring costs 6 129 343 1,486
Stock-based compensation 207 351 1,101 444
Lease litigation settlement (6,113 )
Loss on lease obligation 334 4,894 408 5,414
Impairment of goodwill 460 2,099 460 2,099
Impairment of fixed assets 2,375 612 2,375 612
Impairment of certain intangible assets 11,539 11,539
(Income) Loss from discontinued operations, net of taxes 999 (62 ) 3,208
Obsolete inventory write-down at Rio 779 779
Adjusted EBITDA $ (4,758 ) $ 644 $ (9,123 ) $ (5,404 )
                             
 

The Company believes that supplementing its financial statements
prepared in accordance with United States generally accepted accounting
principles (“GAAP) with certain non-GAAP financial measures, as defined
by the Securities and Exchange Commission (the “SEC”), provides a more
comprehensive understanding of the Company’s results of operations. Such
measures include EBITDA and Adjusted EBITDA and should not be considered
an alternative to GAAP financial measures, but instead should be read in
conjunction with the GAAP financial measures. With respect to our
expectations concerning Adjusted EBITDA for 2015 and 2016,
reconciliation of such measures and expectations to the closest
corresponding GAAP measure on a forward-looking basis is not available
without unreasonable efforts due to the nature of the estimates we
provide. Readers are urged to review and consider carefully the various
disclosures made by the Company in its Form 10-K for the year ended
December 31, 2014 and other SEC filings, which advise interested parties
of certain factors that may affect the Company’s business.

             
SELECTED BALANCE SHEET DATA (Unaudited):        
As of December 31,
(excluding discontinued operations) 2014 2013
Cash and cash equivalents $ 1,758 $ 1,385
Accounts receivable, net 14,241 15,458
Inventories, net 20,553 18,607
Borrowings under credit facility and notes payable 16,114 9,187
Working capital 6,455 21,276
                 

Contacts

Investor Relations:
Hampshire Group
Benjamin C. Yogel,
212-561-1255
Lead Director
byogel@mrccapital.com