Hampshire Group said it will restate its results for the years 2003 through 2005, as well as for the fiscal quarter ended April 1, 2006, to make certain adjustments related to a former executive’s fraud. The company, known for its Geoffrey Beene, Dockers, and Levi’s brands, had previously announced that a substantial portion of expense reports totaling $1.45 million, and submitted by former CEO Ludwig Kuttner, were “fraudulent or not substantiated in accordance with Hampshire’s policies.”
In a regulatory filing, Hampshire said it is currently evaluating claims it has against Kuttner, including claims for misappropriation, breach of duty of loyalty and, under the Sarbanes-Oxley Act, disgorgement of bonuses and net gain on stock sales. The company, which generates $334 million in revenues, also assured investors that it is cooperating with ongoing investigations being conducted by the Securities and Exchange Commission and the U.S. Attorney’s Office.
As part of an audit committee investigation, the company said it also undertook a review of its accounting and disclosure policies and internal controls. As a result of the internal review, Hampshire said it will 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.
Hampshire also warned that the restatement could force the company to delist its stock on the Nasdaq Global Market. That’s because Hampshire will not be able to file its July 1 quarterly report by the Nasdaq’s December 15 deadline, or meet the exchange’s December 29 deadline for its September 30 quarterly report. Both deadlines are currently conditions to the continued listing of its stock. Hampshire said it plans to seek an extension of the deadlines as well as appeal to the Nasdaq Listing and Hearings Review Council.
In addition, the company said it will not be able to deliver to its credit facility lenders its financial statements for the quarters ended July 1, and September 30, by December 31, as previously agreed. Failure to deliver these financial statements by year-end will result in a default unless a waiver is obtained.