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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

Commission File No. 0-26608

CUTTER & BUCK INC.
(Exact name of registrant as specified in its charter)

701 N. 34^th Street, Suite 400
Seattle, Washington 98105
(Address of principal executive offices, including zip code)

(206) 622-4191
(Registrant's telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common Stock, No Par Value

        Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o    No ý

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /x/

        The aggregate market value as of September 25, 2002 of the voting stock held by non-affiliates of the Registrant was approximately $31,184,247 based upon the closing price as reported by NASDAQ. As of such date, there were 10,603,276 shares outstanding of the Registrant's Common Stock, no par value per share.

CUTTER & BUCK INC.

Form 10-K

For the fiscal year ended April 30, 2002

PART I

Item 1. Business

Restatement Information

        In consultation with our independent auditors, we restated our audited financial statements for the years ended April 30, 2000 and 2001, and our unaudited financial statements for each of the quarters in those years and for the quarters ended July 31, 2001, October 31, 2001 and January 31, 2002. We have also restated the selected financial data for 1998 and 1999. We initially announced our intention to restate certain financial statements on August 12, 2002. That announcement was made after our new Chairman and Chief Executive Officer, appointed April 2002, discovered certain accounting irregularities. In early August, shortly after her discovery, the Board of Directors appointed a Special Committee to investigate these irregularities. The preliminary conclusion of the Special Committee was that approximately $5.8 million of shipments to three distributors made on a consignment basis during fiscal year 2000 had been recorded as sales of inventory for that year. Subsequent to that announcement, the Special Committee continued its investigation to confirm whether any additional accounting irregularities had occurred. The Special Committee was assisted in its investigation by our regular outside legal counsel, special independent legal counsel, a forensic accounting firm and our independent auditors.

        Upon completion of the Special Committee's restatement investigation, our restatement was expanded to include adjustment of certain other transactions related to the timing of revenue recognition and accounting errors discovered at our European subsidiary encompassing the fiscal years 2000 and 2001 and each of the periods noted above. We have also recorded a cumulative effect adjustment to retained earnings for amounts related to 1998 and 1999 of $250,541. Since the restatement adjustments related primarily to the timing of the recognition of revenue, the restatement had an insignificant impact on our shareholders' equity as of April 30, 2002. All adjustments fell into the following categories:

        Restatement of distributor transactions:    In the fourth quarter of fiscal 2000 we made shipments of product to three distributors on a consignment basis and improperly recorded these shipments as sales. Some of this product was sold by the distributors during fiscal 2001 and cash was remitted to us. At the end of fiscal 2001 the unsold product was returned to us and recorded as sales returns. The fiscal 2000 financial statements are being restated to reverse these sales and the fiscal 2001 financial statements are being restated to record sales by the distributors on a cash basis and to reverse the sales returns.

        Restatement of premature shipments:    We generally ship our product to arrive on customer specified delivery dates. In certain instances, we shipped product to customers well in advance of the date originally specified by the customer. We have restated our financial statements for the fiscal years 1998 through 2001 to record sales in the period that the customer requested the goods to be received taking into account a normal time to assure receipt in accordance with customer specified terms.

        In addition, on certain occasions we shipped product to third parties where it was held until the customer specified dates, or shipped product in ways that assured slow delivery. We have restated for all such sales to record the sales upon substantive transfer of the product to the customer.

        Restatement of European operations:    Certain accounting errors were discovered during the process of closing our European operations. We have restated our financial statements for fiscal years 2000 and 2001 to adjust for an understatement of accrued expatriate compensation and overstatement of recoverable value added taxes.

        Income Taxes:    We have recorded the income tax effects of the restatements in each year using the marginal federal and state income tax rates.

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        The effect of the restatement on the consolidated financial statements is summarized as follows:

        Additional information related to the restatement of our financial statements for the periods mentioned above is set forth in Note 1 to Notes to Consolidated Financial Statements in Part IV Item 14(a)(1).

        Since the discovery of the matters discussed above, we have taken remedial steps to improve our accounting procedures and internal controls to mitigate the risk of recurrence of such matters as follows:

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Termination of employment of those individuals who appear to have been responsible for these activities;



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Clarification and strengthening of our revenue recognition policy and communication of that policy throughout the Company; and



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Completion of a comprehensive review of our European subsidiaries as part of their closure.

In addition, our new CEO is actively professing ethics, business integrity and individual responsibility to all our employees.

Recent Development

        Internal investigation.    As previously announced, we conducted an internal investigation into accounting irregularities occurring in the fiscal years ended April 30, 2000 and April 30, 2001. The investigation was expanded to cover the fiscal years 1998 through the third quarter of 2002. As a result of our internal investigation, we are restating our financial results for those periods in order to correct inaccurate reporting of certain transactions and to properly reflect the treatment of sales entries that should have been recorded in different periods.

        SEC and NASDAQ.    As previously announced, we have received letters of inquiry from the Securities and Exchange Commission and the NASDAQ Stock Market regarding the circumstances leading up to the restatement of our financial results. We are cooperating with those agencies concerning their inquiries.

        NASDAQ delisting.    We filed a Form 8-K on August 16, 2002 announcing we had received a letter from the NASDAQ informing us that we were in violation of NASDAQ Rule 4310(c)(14), which requires us to maintain at least three years of audited financial statements, and NASDAQ Rules 4330 and 4330(c), which relates to public interest concerns. NASDAQ has determined that we are in violation of these rules, at least partially as a result of our restatement and as a result of our delay in filing our Annual Report on Form 10-K for the fiscal year ended April 30, 2002 and our Quarterly Report on Form 10-Q for the quarter ended July 31, 2002. We also indicated we would request a

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hearing on this matter. The hearing was held on September 20, 2002, and there has been no decision on delisting to date.

        Recent litigation.    As more fully described in Part I, Item 3—Legal Proceedings, on September 13, 2002, a complaint was filed in the United States District Court for the Western District of Washington. The complaint is brought purportedly on behalf of all persons who purchased our common stock during the period from June 23, 2000 to August 12, 2002. The complaint alleges liability under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder on the grounds that we and other defendants falsely reported our results for the fiscal years 2000-2002 through improper revenue recognition.

        Also as more fully described in Part I, Item 3—Legal Proceedings, on September 18, 2002, another complaint was filed in the United States District Court for the Western District of Washington. It is brought purportedly on behalf of all persons who purchased our common stock on the open market during the period from July 30, 2000 to August 12, 2002 excluding certain of our affiliates. The complaint alleges liability under Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, on the grounds that we and other defendants falsely reported our financial results during the period through improper revenue recognition.

        Also as more fully described in Part I, Item 3—Legal Proceedings, on October 7, 2002, another complaint was filed in the United States District Court for the Western District of Washington. It is brought purportedly on behalf of all persons who purchased our common stock on the open market during the period from June 23, 2000 to August 12, 2002, excluding certain of our affiliates. The complaint alleges liability under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, on the grounds that we and the other defendants falsely reported our financial results during the period through improper revenue recognition.

        Indemnification claims.    Our former CEO, Harvey N. Jones, COO, Martin J. Marks and CFO, Stephen S. Lowber, have each notified us that they are claiming the right to be indemnified under our Articles of Incorporation for expenses related to the SEC and NASDAQ investigations and, if applicable, to the recent litigation described above.

Overview

        We design and market distinctive men's and women's sportswear and outerwear under the Cutter & Buck brand. We sell our products through golf pro shops and resorts, corporate accounts, specialty retail stores, international distributors and licensees and other distribution channels. Our goal is to become one of the most recognized and respected brands of sportswear and outerwear in the world. Our products feature distinctive designs and rich detailing using predominantly natural fiber textiles. We market our products as lifestyle collections targeted to men and women who seek classic American styles updated with the latest textile and fashion innovations. We have established a strong brand following with upscale golfers, and are using that awareness and loyalty to expand into a well-known fashion brand.

        During the first quarter fiscal year 2003, we realigned our management structure into Strategic Business Units (SBUs): Golf, Corporate, Fashion (formerly specialty retail stores), Consumer Direct (includes Company-owned retail stores and e-commerce, formerly included in "Other"), International and Other. We believe the SBU structure will allow us to more intensively manage our business and serve our customers.

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Company Strengths

        We believe that the following strengths have contributed to our past success and may provide us with a competitive advantage:

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Distinctive quality products. Our garments feature original Cutter & Buck designs manufactured to a high standard for our industry. We use fine-gauge combed cotton, virgin wools and performance microfibers, with unique trims, distinctive colors and special fabric finishes. Each season, we obtain new fabrications from our worldwide suppliers and introduce new collections unique to our industry.



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Upscale brand identity. Cutter & Buck is a nationally-recognized premium lifestyle brand, built on quality products and strong imagery. In our sporting collections, our marketing themes revolve around golf, tennis, fishing, water sports and other leisure pursuits designed to appeal to many of our target customers. We reinforce our upscale brand image at the store level with specialized fixturing that presents our lines as distinctive collections. Our fashion collections target our upscale consumers in casual business settings or relaxed weekend environments. We believe that our consumers are seeking a refined level of sophistication with all their casual purchases, and our designs, manufacturing standards and marketing for both sport and fashion collections are structured accordingly.



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Multi-channel distribution strategy. To protect the integrity of the Cutter & Buck brand and to support long-term sales growth and brand awareness, we predominantly distribute our products through golf pro shops and resorts, corporate accounts, specialty retail stores, and our fourteen Company-owned retail stores. We believe that these channels complement one another, since they target similar consumers and use similar merchandising and pricing practices that feature Cutter & Buck as a leading premium apparel brand.



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Dedicated sales force. As of April 30, 2002, we employed 107 salespeople who present seasonal collections to buyers and service accounts throughout the year. We believe that our business is relationship-driven and having our own sales force enables us to build a long-term growing business with our accounts.

Products

        We custom design our products in-house featuring high-quality materials, such as fine-gauge combed cotton, virgin wools and performance microfibers. Our products are finished with unique trims, special fabric finishes and washes and extra needlework. They are manufactured in factories selected for their ability to ensure high quality in their production process.

        Our designs incorporate distinctive colors and are merchandised as color- and design-coordinated collections rather than isolated categories. We offer two lines a year, spring and fall, composed of a Fashion line and a complementary Classics line. Classics are predominantly solid-color garments with multi-season appeal. We rely on the styling, detailing, color and quality of our fabrics to distinguish our Classics products from competitive products. We generally price our Classics at levels lower than our Fashion line, which permits our customers to offer Cutter & Buck products at a range of price points. Higher per-item volumes for Classics products allow us to achieve production efficiencies and lower costs. Classics products are sold throughout the year through all of our distribution channels and represent a predominant amount of sales through the corporate channel.

        Our Fashion products are designed to incorporate innovations in color, fabric and styling and tend to remain available for only one season. We develop proprietary fabrications and artwork for our complex prints and distinctive trim components in cooperation with experienced suppliers worldwide. Fashion products currently represent a majority of sales in both the golf and specialty retail store channels.

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        We present each season's collections to our customers in several groups of distinct, coordinated merchandise. These groups are available for delivery to customers during sequential time periods for the fall and spring collections. Customer-initiated product reorders can often extend the delivery period for a season by up to three months. The product mix changes seasonally, including, for example, more sweater styles in fall collections and more short-sleeve shirts in spring collections. We consider our ability to offer merchandise collections a strategic advantage since our customers generally prefer to purchase compatible assortments rather than assembling coordinated merchandise from various brands that do not share common colors and themes.

        A substantial percentage of our products that are shipped to the golf distribution channel are embroidered with golf club names or logos. Sales to the corporate channel also involve embroidery of corporate logos. We have established an in-house embroidery operation to reduce costs, shorten delivery time and enhance quality control of our embroidered products.

Product Design, Development and Sourcing

        We believe that updated, traditional sportswear and outerwear for men and women is an established and growing category within the apparel industry. Changes of color, fabric and body shapes in this category tend to be gradual, thereby allowing our product lines to evolve season to season. This provides stability in the design environment and consistency in our product offerings.

        Our design staff, determines product strategy, color and fabric selection and assortment of styles for each season's collections, which is accomplished over a three- to four-month period. Due to the length of our production and sales cycles, we generally strive to complete the design process and place orders for product samples at least 10 to 14 months prior to the first delivery of products to our customers.

        The design staff is responsible for creating innovative products for our two seasonal collections. During the design process, our manufacturing sources develop new seasonal textiles as directed by the merchandising and design teams. This enables us to source a wide variety of textile and printed artwork designs, many of which we acquire for our exclusive use. Our partnerships with key suppliers enhances our ability to develop distinctive and innovative apparel. Currently, we source our production from factories in Asia, North and South America and Turkey. We do not have formal long-term contracts with any of our suppliers or agents.

        Our in-house embroidery operation substantially reduces our reliance on independent embroiderers. This operation is intended to reduce costs, shorten delivery time and enhance quality control of our embroidered products. In addition to our in-house embroidery operations, we occasionally contract with a number of independent domestic embroiderers during peak embroidery production and shipping periods. Our in-house embroidery manufacturing operation handled substantially all of the embroidered logo requirements of our golf pro shops in fiscal 2002.

        We could experience difficulty satisfying our production requirements if any of our significant suppliers or manufacturers were to have an interruption of business or were unable or unwilling to meet our production needs or if we modified the terms of payment to suppliers such that some suppliers chose to discontinue doing business with us. We could also experience delays in shifting production to other manufacturers or agents because of the complex fabrication, unique trims and extensive detailing of our products.

        We have experienced production delays in the past, and production delays may occur in the future. We may also experience delays in shipping from time to time, whether due to third-party strikes, or otherwise. Delays in shipments, inconsistent garment quality and other factors beyond our control could materially harm our relationships with our customers, our reputation in the industry and our business, financial condition and operating results.

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        Our operations are also affected by economic, political, governmental and labor conditions in the countries where our products are manufactured. Changes in economic policies or political conditions in those countries could result in disruption of trade, new or additional currency or exchange controls or the imposition of other restrictions and could increase the prices we pay for our products. Foreign and domestic suppliers of our garments are subject to increasing scrutiny and public sensitivity to ensure their compliance with applicable laws, including laws affecting working conditions and pay. Lawsuits have targeted both suppliers and companies that purchase goods from foreign and domestic suppliers for manufacturers' failure to comply with those laws. We have adopted SA8000, an international, independently-monitored code of conduct to help to ensure proper compliance with laws, regulations and the principles of human dignity.

        Fashion trends can change rapidly, and our business is particularly sensitive to such changes because we typically design and arrange for the manufacture of our apparel substantially in advance of sales of our products to consumers. With the introduction of our women's line, we have added a consumer base that is typically more sensitive to changes in fashion and as our women's line becomes a greater part of our business as a whole, fashion obsolescence becomes an even greater risk for us. We cannot assure you that we will accurately anticipate shifts in fashion trends, or in the popularity of golf, and adjust our merchandise mix to appeal to changing consumer tastes in apparel in a timely manner. If we misjudge the demand for our products or are unsuccessful in responding to changes in fashion trends or in market demand, we could experience insufficient or excess inventory levels, missed market opportunities or higher markdowns, any of which could substantially harm our business or our brand image.

Distribution and Sales

        Our products are distributed through golf pro shops and resorts, corporate accounts, specialty retail stores, international distributors and licensees and other distribution channels. Each of these channels sells Classics and Fashion products from our seasonal collections. We believe that these channels are complementary, since they have compatible merchandising and pricing practices and broaden the visibility and reach of the Cutter & Buck brand among our target consumers.

        Domestic.    We primarily sell to our distribution channels through an exclusive sales force. We also use multi-line sales representatives for certain geographic areas and markets. At the end of fiscal 2002, our exclusive golf sales force consisted of 28 field sales representatives and 12 independent sales representatives. We also employed 37 sales representatives who sell to major corporations, either directly or through promotional products companies, and 30 additional company and independent sales representatives who sell to specialty retail stores and the big and tall market. Each sales representative is responsible for serving targeted accounts in a specific geographical territory through merchandise consultation and training, and is responsible for meeting specific account growth and average-order-size goals. Sales representatives present our collections each season at national and regional trade shows and at customers' stores through pictorial workbooks, looseleaf promotional materials and full sample lines.

        International.    Until April 30, 2002, our subsidiaries in the Netherlands and Germany were marketing and selling our products in Europe. On April 26, 2002, we entered into a licensing arrangement with Eurostyle Ltd. to serve this market and closed these subsidiaries effective April 30, 2002. In addition, we have six renewable contracts with international distributors to sell our products in Australia, New Zealand, the Philippines, the United Arab Emirates, Saudi Arabia, Bahrain, Qatar, Kuwait, Oman, South Africa, Singapore, Malaysia, Japan and Korea. These distribution agreements range in terms from three to five years and allow distributors to purchase our products at reduced cost for resale to their respective retail customers. The products offered for distribution in these territories are identical to the products offered in the United States and these distributors often use our marketing technique of offering the products in collections.

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        We also have licensees that have contracted for the right to manufacture and market Cutter & Buck designs in specified international markets, including Hong Kong, China and Canada. Cutter & Buck license agreements generally have three-year terms and require these licensees to pay us royalties as a percentage of net sales. Most of these agreements also contain annual royalty minimums, and all agreements give us final control over product design and quality. These licensing arrangements enable us to broaden the geographic distribution and type of products bearing the Cutter & Buck name in a cost-effective manner.

Retail Operations

        We opened our first Company-owned retail store in October 1998 in Seattle, Washington. Since then we have opened thirteen additional stores. These stores showcase the men's and women's fashion collections as well as tournament-licensed Cutter & Buck merchandise from the U.S. Open, PGA Championship and Ryder Cup. We believe each store's environment evokes the casual sporting atmosphere of an upscale golf clubhouse, complete with historic photos and antique sporting equipment. Collections of business casual dress for men, upscale weekend wear as well as golf wear for men and women are displayed on tables and in wall units. We believe that the stores offer a compelling assortment of our products to the upscale casual wear consumer in a relaxed, friendly environment.

        Our stores provide opportunities for introducing the Cutter & Buck brand to a wider audience not previously familiar with our full range of products due to the relatively small size of most golf pro shops and specialty retail stores. Our existing stores range in size from approximately 3,500 square feet to 5,000 square feet.

        During the third quarter of fiscal year 2002, we began implementing a restructuring plan which included refining our retail strategy. We engaged a consultant to assist us in this process and performed an evaluation of the recoverability of the assets relating to our Company-owned retail stores. We concluded from the results of this evaluation that a significant impairment of retail store long-lived assets had occurred. As a result, we decided to close three under-performing stores during the first quarter of fiscal 2003 and adjust the net book value of another two stores to their estimated fair value. We will continue to evaluate the performance of our stores, and adjust these estimates as necessary.

        There are many risks associated with retailing, including risks related to managing retail operations, negotiating reasonable rental terms for our store locations, managing our relationships with specialty retailers who currently sell our products and competing with other retailers. We have limited experience in managing retail operations. If we are unable to successfully implement our retail strategy our business, financial condition and operating results may be materially harmed.

Marketing and Merchandising

        We portray our brand image of an American casual lifestyle by creating seasonal merchandise collections that are theme- and color-related for both our Classics and Fashion offerings. In our Classics collections, themes we commonly use in marketing are golf, tennis, fishing, water sports and other sporting activities which reinforce our image. We believe that, by featuring these sports and leisure activities, our products will appeal not only to participants, but also to those who identify with these types of lifestyles. Our name and logo are generally featured prominently on our products and displays to reinforce the Cutter & Buck brand in the mind of the consumer. The marketing of our fashion collections portrays our target consumers in appealing casual settings involving family and enjoyable leisure activities.

        We currently advertise in targeted consumer publications and produce photographic renditions of our new product lines for national distribution to existing wholesale customers. We also produce a catalog of our Classics products to be viewed by wholesale customers for in-stock reordering purposes. In addition, we have an Internet home page on the World Wide Web at http://www.cutterbuck.com,

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where we sell our products, provide information and pictures of our products and respond to inquiries from retail consumers.

        Our merchandise is sold and shipped to customers in collection groups in order to reinforce the overall conceptual strength of our product offerings. Our distinctive in-store fixturing program showcases these collections and enhances our brand image at the point of sale. The fixtures are designed to display assorted elements of our collections and allow the consumer to easily assemble and purchase coordinated outfits of shirts, pants, shorts, sweaters, sweatshirts and outerwear. We also offer customers logos and signage in order to complement the fixturing and create an environment that enhances the Cutter & Buck brand image. We have concept shop partnerships with a number of our customers, which are extensions of our fixturing program, offered to our higher-end, potentially best-performing golf pro shops and resort customers on a very selective basis. In a concept shop partnership, we team with customers that meet a higher minimum order requirement.

        To address the special needs of pro shops, tournament organizers and corporate customers, our in-house embroidery service work with these customers to embroider the customer's name or logo on our garments. The customary placement of the Cutter & Buck logo on the sleeve, cuff, or on the back of the garment allows us to accommodate more easily the typical desire of pro shops, tournaments and corporations to have their name or logo embroidered on the garment's left chest.

Information Systems

        We employ a fully integrated, real-time management information system that is specifically designed for the wholesale apparel industry. The system includes important features such as manufacturing resource requirements planning, production scheduling, detailed product tracking, standard costs system planning and control, and detailed perpetual inventory systems. As original purchases are tracked through various factory production phases by our production personnel, sales are tracked by our merchandisers in order to compare purchases against availability, thereby allowing us to react quickly to changes and trends. Our product development team utilizes sophisticated computer-aided design software to meet their design, collaboration and specification package requirements. We also have a remote-order entry system for our sales force, allowing them to monitor and use to reserve inventory for all styles, as well as establish sales plans and communicate order specifics. Customer service personnel receive this uploaded information daily and have access to real-time inventory availability.

        This comprehensive information system serves users in each of our operating areas, and is also used to create costing models, specification sheets and embroidery layout sheets. The manufacturing module integrates with the general ledger accounting and financial module. Our information system also provides detailed product gross margin information that assists us in managing product profitability. The system runs on IBM's RS6000 hardware and the AIX operating system, which allows for the fast processing of critical information and has the capability of serving a much greater number of users as we grow. During fiscal 2002, we continued to expand the relational database capabilities of our management information system to allow us to create specialized management reports and access critical decision support data.

        We have implemented a warehouse management system that was specifically designed for the apparel industry. This system provides a wide variety of modular applications that can be added as our needs evolve. As of April 30, 2002, we have installed the following system components: a radio frequency network and hand-held devices to support bar coding and tracking the real-time movement of inventory from receiving, order picking, embroidery production, order packing and order shipment; a cycle counting inventory management module; an automated customer return authorization and receiving control system; and automated tools to support our distribution center employee productivity and accuracy. This system was designed for and runs on an IBM AS/400 platform.

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        To support our Company-owned retail stores and e-commerce business, we installed an integrated retail management and point of sale system. The purpose of this investment was to provide daily information to meet retail management's needs for a system that addresses sales tracking and management, profitability, inventory management, merchandising, and financial controls and reporting. Using the same retail system for our e-commerce business allows our web sales operation to mirror that of our brick-and-mortar stores and gain efficiencies through shared and integrated processes. We have also expanded our electronic data interchange capabilities to meet the needs of our department store customers.

        During fiscal 2002, we focused on improving internal customer support through the following resources: business process analysis and management of concurrent application development projects; enhancing decision support with additional data warehouse development; providing direction and strategy for new enterprise-level systems; enabling external customer care through extranet enhancements and supply-chain collaboration; and continuing necessary infrastructure upgrades and system integration extensions.

Order Booking Cycle and Backlog

        We typically receive our orders for a season over the period beginning when samples are first shown to customers. We begin to take orders for our fall collections in January, generally for delivery between May and October and for our spring collection in July, generally for delivery between November and April. Our domestic backlog, which consists of open, unfilled customer orders from the golf, corporate and specialty retail distribution channels, was approximately $24.3 million as of April 30, 2002. We expect to fill between 90% and 95% of those orders. For various reasons endemic to the apparel industry, including occasional sold out inventory positions, credit issues and other customer-related issues, we typically do not ship all of our backlog. Backlog is generally shipped within nine months.

Competition

        The sportswear segment of the apparel industry is highly competitive. Our two primary distribution channels, golf pro shops and corporate accounts, are highly fragmented, with no single brand representing more than 10% of the market. We encounter substantial competition in all of our distribution channels from other apparel companies and distributors of promotional products and apparel. We believe that our ability to compete effectively is based primarily on product differentiation, product quality, production flexibility and distribution capabilities, all of which enhance our brand. Many of our competitors are significantly larger and more diversified than we are and have substantially greater resources available for developing and marketing their products. We cannot assure you that we will be able to maintain or increase our market share in our distribution channels at the expense of existing competitors and other apparel manufacturers choosing to enter those markets.

Trademarks

        CUTTER & BUCK, the Cutter & Buck pennant logo and the Cutter & Buck tour logo are our trademarks registered in the United States. CUTTER & BUCK is registered for use on apparel and other products in over 40 countries, and the other two marks are similarly registered in over a dozen countries. We also have applied for registration in a number of other countries. We regard our name and logo as valuable assets and critical to marketing our products. Leading brands in the apparel industry have historically been subject to competition from imitators that infringe the trademarks and trade dress of the brand. Although we do not believe we have been materially harmed from infringement of our trademarks or trade dress to date, we have experienced some instances of such infringement and have taken actions to protect our rights.

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Employees

        As of April 30, 2002, we had 632 full time and 67 part time employees in the United States, of whom 107 were engaged in sales, 14 in production, 23 in merchandising and design, 74 in customer service, 11 in credit, nine in marketing, 210 in embroidery development and operations, 106 in consumer direct, 81 in distribution, 16 in information technology, seven in international and 41 in administration and finance. None of our employees is a member of a union. We consider our relations with our employees to be satisfactory.

        As of April 30, 2002, an additional nine individuals were employed by our wholly-owned subsidiaries. Of these employees, two were in customer service, one was in production, two were in credit, one was in information technology and three were in finance and administration. As of May 1, 2002, these employees were finalizing the liquidation of the subsdiaries and transitioning operations to our licensee, Eurostyle Ltd.

RISK FACTORS

        In addition to the other information in this report, including risks and uncertainties described elsewhere, the following risk factors should be considered in evaluating us and our business. The risks and uncertainties described below or elsewhere in this report are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the risks described below or elsewhere in this report occur, our business, financial condition, operating results and cash flows could be materially harmed.

        Our stock may be delisted from The NASDAQ National Market.    As a result of our decision to restate our financial results, and as a result of the discoveries of accounting irregularities underlying that decision, NASDAQ notified us that our common stock no longer met the requirements for listing on its National Market and was to be delisted on August 23, 2002. We appealed that decision in a hearing on September 20, 2002. To date, the NASDAQ Hearings Department has not issued a decision as to whether to delist our common stock. While we believe that, upon completing the restatement of our financial results, we will be in compliance with all requirements for continued listing, there can be no assurance that our common stock will remain listed on NASDAQ. If our common stock is delisted, the value of our common stock will likely decline, shareholders may experience a significant decrease in the liquidity of our common stock, and we may experience increased difficulty in obtaining the capital necessary to operate our business.

        Shareholder lawsuits    Following the announcement of our decision to restate our financial results, we have received notice of three lawsuits filed against us by certain of our current and former shareholders. As described in Part I, Item 3—Legal Proceedings, these suits generally allege that the Company and certain of its former executive officers issued false and misleading statements during fiscal years 2000 to 2002, and that these statements constitute violations of federal securities laws. In addition, the indemnification provisions contained in the Company's Articles of Incorporation may require the Company to indemnify its former executive officers against the allegations contained in these suits. If we choose to settle these suits without going to trial, we may be required to pay the plaintiffs a substantial sum in the form of damages. Alternatively, if these cases go to trial and the Company is ultimately adjudged to have violated federal securities laws, we may incur substantial losses as a result of an award of damages to the plaintiffs. Regardless of the ultimate outcome of these suits, however, litigation of this type is expensive and will require that we devote substantial Company resources and executive time to defend these proceedings. Moreover, the mere presence of these lawsuits may materially harm our business for the same reasons set forth in the following risks.

        Our business has been adversely affected by our decision to restate our financial results.    Following the announcement of our decision to restate our financial statements, we have experienced a decrease in

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bookings. Our management believes that this decrease may represent fears by customers that we will become unreliable in supplying our products or that our brand image will be harmed. If our customers lose confidence in our ability to supply quality products reliably, our business may be materially harmed.

        We had a substantial loss in fiscal year 2002 and may continue to incur losses in future periods.    We incurred a net loss of approximately $10.4 million during the fiscal year ended April 30, 2002, including a restructuring and asset impairment charge of approximately $8.5 million before income tax effects. As described in Note 8 to the financial statements, as part of our restructuring we have substantially streamlined our domestic and international sales infrastructure and eliminated certain product lines. We believe these restructuring and cost-cutting initiatives will reduce overall spending. If our restructuring efforts fail to adequately reduce costs, or if our sales are less than we project, we may continue to incur losses in future periods.

        Our auditors have indicated that they believe there is a material weakness in our internal controls and procedures.    Following the Company's decision to restate its financial results, our independent auditors issued a letter to us indicating that they believe there is a material weakness, as defined in authoritative auditing literature, in our internal accounting controls. The material weakness related to lack of compliance with or circumvention of the Company's procedures and controls by employees and management at various levels. In an effort to address these concerns, the Company has begun educating both employees and management about complying with procedures and controls and setting the "tone at the top" to mitigate the risk that the events underlying the financial restatement will recur. There can be no assurance, however, that these efforts will be adequate to prevent future occurrences of the type giving rise to the restatement.

        We have recently lost several key executives who had important relationships with our suppliers, customers and employees.    During the last six months we have accepted the resignations of several of our key executives, including our former Chairman and Chief Executive Officer. Many of these executives had important relationships with our key suppliers, customers and employees. For us to execute our business plan, we must preserve and build upon the relationships with these suppliers, customers and employees in the absence of these executives. While the terms of a Transition and Release Agreement prevent our former Chairman and Chief Executive Officer from competing with or soliciting business or employees away from the Company, a court may refuse to enforce the provisions of this agreement. In addition, we do not have similar agreements with other former executives. If we are unable to preserve the relationships with our customers, suppliers and employees, or if any of our former executives choose to influence these individuals to the Company's detriment, our business may be materially harmed.

        We recently liquidated our European subsidiaries and now rely exclusively on relationships with a single distributor for our European sales.    As part of our restructuring initiatives, we recently completed the sale of substantially all our European assets to Eurostyle Ltd., a corporation formed under the laws of Ireland, and entered into a license agreement with Eurostyle. Following these transactions, we eliminated substantially all of our European sales force and commenced the liquidation of our European subsidiaries, Cutter & Buck (Europe) B.V. and Cutter & Buck GmbH. For the foreseeable future, we intend to rely exclusively on our relationship with Eurostyle for the distribution and sale of our products in Europe. We have less control over the marketing of our products by Eurostyle and there can be no assurance that we will continue to achieve historical levels of sales in Europe pursuant to this new arrangement. If we are unable to effectively sell our products through this distributorship, our business may be materially harmed.

        We are out of compliance with the terms of our credit facility.    The Company has a $35 million line of credit that is used to provide working capital financing and supports supplier financing with letters of credit. This line of credit contains certain covenants, including financial covenants. The Company is currently out of compliance with certain of these covenants, including the covenant to provide annual audited financial statements within 90 days of year end. As a result of this noncompliance, our lending banks are not obligated to make credit available to the Company under its line of credit. We are in discussions with our lenders, and are also investigating sources of alternative financing. If our lenders choose not to continue to lend to us and we are unable to find alternative sources of financing, our business could be materially harmed.

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Item 2. Properties

        We lease our principal executive offices, which are located in Seattle, Washington, under leases that cover 31,858 square feet and expire in October and November 2002. We lease an additional 17,565 square feet of office space in Renton, Washington under a lease that expires in November 2002. We lease 405,000 square feet of space for a distribution center and embroidery production facility in Renton, Washington under a lease that expires in November 2011. We lease office space for our wholly-owned European subsidiary under a lease that expires in December 2002. We lease approximately 923 square feet of space for a showroom in Dallas, Texas, and approximately 4,313 square feet of space for a showroom in New York, New York. We also lease a small apartment in New York, New York under a lease that expires October 31, 2002. We leased approximately 1,824 square feet of space for a showroom in Atlanta, Georgia until April 30, 2002.

        We currently lease all fourteen of our retail store locations. These stores range in size from approximately 3,500 square feet to 5,000 square feet. Terms generally range from five to ten years. Most of these leases contain renewal options and certain leases contain provisions for payment of additional rent based on a percentage of sales. Some leases also include early termination options which can be exercised under specific conditions. We expect to close three under-performing stores in fiscal 2003.

        In April 2002 we executed a lease for office space in Seattle, Washington that covers 44,670 square feet and expires in July 2010. We moved our principal executive offices and our offices in Renton, Washington to this space in September 2002.

        During the fourth quarter of fiscal 2002 and the first quarter of fiscal 2003, we decided to abandon 234,500 square feet of warehouse space at our distribution center. Between January 23, 2002 and September 10, 2002, we entered into three subleases which, in total, cover the entire abandoned warehouse space.

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Item 3. Legal Proceedings

        On September 13, 2002, a lawsuit entitled Steven Bourret v. Cutter & Buck Inc., Harvey N. Jones and Stephen S. Lowber, No. CV02-1948 was filed by Steven Bourret in the United States District Court for the Western District of Washington. The complaint is brought purportedly on behalf of all persons who purchased the Company's common stock during the period from June 23, 2000 to August 12, 2002. It names as defendants the Company, the Company's former CEO and the Company's former CFO (collectively, "Defendants"). The complaint alleges liability under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder on the grounds that the Defendants caused the Company to falsely report its results for fiscal years 2000-2002 through improper revenue recognition. It includes a claim that the suit should be certified as a class action and seeks unspecified damages, including interest.

        On September 18, 2002, a lawsuit entitled Stanley Sved v. Cutter & Buck Inc. and Harvey N. Jones, No. C02-1972 was filed by Stanley Sved in the United States District Court for the Western District of Washington. The complaint names as defendants the Company and the Company's former CEO. It is brought purportedly on behalf of all persons who purchased the Company's common stock on the open market during the period from July 30, 2000 to August 12, 2002 (the "Class Period"), excluding the Company, members of the immediate families of the Company's former CEO, any parent, subsidiary affiliate, officer or director of the Company during the Class Period and any entity in which any excluded person has a controlling interest. The complaint alleges liability under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder in connection with the events giving rise to the Company's need to restate its financial statements. It includes a claim that the suit should be certified as a class action and seeks unspecified compensatory damages, interest, costs and expenses incurred in the suit, including attorney and expert fees.

        On October 7, 2002, a lawsuit entitled Jason P. Hebert v. Cutter & Buck Inc., Harvey N. Jones and Stephen S. Lowber, No. CV02-2087 was filed by Jason P. Hebert in the United States District Court for the Western District of Washington. The complaint names as defendants Cutter & Buck Inc., the Company's former CEO and the Company's former CFO. It is brought purportedly on behalf of all persons who purchased the Company's common stock on the open market during the period from June 23, 2000 to August 12, 2002 (the "Class Period"), excluding the defendants, the directors and officers of the Company and their families and affiliates. The complaint alleges liability under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder in connection with the events giving rise to Cutter & Buck's need to restate its financial statements. It includes a claim that the suit should be certified as a class action and seeks unspecified compensatory damages, interest, costs and expenses incurred in the suit, including attorney and expert fees.

        The Company remains a party to a lawsuit related to labor issues in Saipan, Does vs. The Gap, Inc. The Company has entered into a settlement of the claims against it. This settlement is subject to court approval. The hearing for preliminary approval of the settlement occurred in February 2002. The court granted preliminary approval of the settlement in May 2002, and a hearing as to whether to grant final approval of the settlement is currently scheduled to occur on January 23, 2003.

        The Company is also party to other routine litigation incidental to its business. Management believes the ultimate resolution of these other routine matters will not have a material adverse effect on its financial position and results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

        Not Applicable.

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PART II

Item 5. Market for Registrant's Common Equity and Related Shareholder Matters.

        Our common stock is currently listed on the NASDAQ National Market under the symbol "CBUKE". We plan to apply to NASDAQ to allow us to resume trading under "CBUK". The following table sets forth, for the periods indicated, the high and low sales prices of the common stock as reported on the NASDAQ National Market.

        As of September 25, 2002, there were approximately 4,169 holders of our common stock.

        We have never declared or paid any cash dividend on our common stock and do not expect to pay any cash dividends in the foreseeable future.

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Item 6. Selected Financial Data

        As a result of the restatement of our consolidated financial statements for the fiscal years 2000 and 2001 and each of the quarters therein and the first three quarters of fiscal 2002, the appropriate information contained in this item has been restated from that which was reported previously in the Company's reports in Form 10-K and 10-Q for those periods. See Note 1 to the financial statements in Part IV, Item 14(a)(1).

(1)

The 1998 and 1999 selected financial data has been restated to record premature shipments in later periods thereby reducing 1998 net sales, cost of sales, and net income by $543, $309 and $150, respectively and reducing 1999 net sales, cost of sales and net income by $388, $230 and $101, respectively.

(2)

Reclassifications have been made to conform to EITF 00-10 "Accounting for Shipping and Handling Fees and Costs" and SAB 101 "Revenue Recognition in Financial Statements" and impacted net sales and cost of sales by the same amount to reflect the effects of freight billed to customers and changes in allowances for returned goods in accordance with these accounting pronouncements. These reclassifications resulted in increases in net sales and cost of sales of $4,761 and $2,748 in 2001 and 2000, respectively and had no effect on net income or net worth in any period. It was not practicable to determine the amount of such reclassifications applicable to 1999 and 1998.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations