In other news last week, Cutter & Buck said they will pay as much as $7 million to settle two shareholder lawsuits that were triggered by the restatement of its financial results. The suits were filed last year after new CEO Fran Conley reported that former management has padded sales figures for the year 2000. CBUK was forced to restate results for fiscal 2000, 2001, and 2002.
The original complaint stated that the company booked $5.8 million worth of product sales as revenue when in fact the products were sent to a distributor under a consignment agreement. The distributor returned the unsold portion of the products at the end of the period.
Since most of the restatement relates to timing of revenue recognition on sales, the decline in CBUK’s cumulative net income or net worth for the three years ended April 30, 2002 was less than 1.0%. Profits were reduced by 6.0% for the period.
The company has agreed to pay $4.0 million in cash now and shareholders could receive up to $3.0 million more if CBUK wins a lawsuit against its former D&O insurance carrier, Genesis Insurance Company, which cancelled CBUKs coverage after the restatements.
The settlement applies to shareholders who held the stock between June 23, 2000, and August 12, 2002.
CBUK also announced that it expects to reach an agreement soon with the SEC over the same restatement issues. Cutter & Buck brought the issue to the attention of the SEC in 2002 and now expects that, based on communications with the staff of the Securities and Exchange Commission, the matter will be resolved with no penalties or fines levied against the company.
