Cutter & Buck Inc. saw its loss for the fiscal third quarter ended January 31, 2003 widen to $9.7 million, or 91 cents a share, compared with a loss of $8.5 million, or 80 cents a share a year ago. Sales rose 4% to $34.6 million.

“We entered our fourth quarter with a strong balance sheet,” said Ernie Johnson, CFO. “With $68 million in working capital and $73 million in shareholders equity, we have ample resources for our business. In addition, we are very pleased with the decrease in inventory, from $48 million a year ago to $38 million in January; and in accounts receivable, which decreased from $23 million to $16 million. We believe the quality of these receivables is high in spite of the economic climate.”

“These financial results reflect four major activities,” said Fran Conley, CEO. “We are running a wholesale sportswear business, shutting down our own retail stores, restructuring other businesses, and dealing with the legacy of restating our earnings. Our wholesale business includes designing, sourcing, and selling high quality sportswear to golf and specialty retailers, to corporations, and to our international distributors and licensees. This is our main business, accounting for 86% of our sales for the last nine months. However, the other three activities also affected our financial results, and we look at each of these activities in order to get a clearer view of our operating results and the trends. That is why we are presenting in Table B supplementary data showing the results of each of these activities, and we will discuss each below.

“Our strategy is simple: to improve the performance of our wholesale* business, while disposing of unprofitable businesses and resolving pending litigation,” continued Conley. “We have made progress in implementing that strategy.”

In the wholesale* business, before the charges for restatement and restructuring, the Company decreased operating costs and improved margins, so that both the quarter and the nine months show improved performance over last year, in spite of lower sales. For the nine months the wholesale* business before the charges produced $1.9 million pre-tax income, as compared with a pre-tax loss of $1.8 million last year. For the quarter, which is Cutter & Buck’s seasonally low quarter, the wholesale* business before the charges produced a pre-tax loss of $1.7 million, compared to a pre-tax loss of $3.1 million last year. (Table B) The company believes that this wholesale business will continue to be profitable on an annual basis, before any restructuring or restatement charges.

Within this wholesale* business, Cutter & Buck experienced a decrease in sales of 12% for the 9 months and 10% for the quarter. “Wed prefer to see growth,” continued Conley, “but given both company-specific and industry-wide events, we believe that these sales results show the continuing strength of the brand.” Company-specific events include some retailer concerns related to the recent restatement. Industry-wide events include the ongoing weakness both in retail and in travel; the latter has a significant impact on the golf business in general, and on corporations demand. “It is noteworthy that in spite of all of these factors, our business with corporations grew during the quarter,” said Conley.

“We are satisfied with our progress in disposing of our retail stores,” said Conley. The liquidation sales in the stores went well, and the company has reached agreements with a majority of the stores landlords, with six deals not yet finalized. “We currently expect that the costs of the shutdown will be at the low end of our previous estimates, which were: $12 to $15 million pre-tax charges, after-tax charges of $10 to $13 million, and an after-tax cash impact of $5 to $7 million,” said Conley. As Table B shows, for the nine months year to date the retail stores show a pre-tax loss of $10 million (which includes both operating and shutdown). $9 million of this pre-tax loss was recorded in the January quarter.

“We believe that the bulk of the company’s restructuring is now behind us,” said Conley. The nine months restructuring charges were $3.8 million, compared with $4.9 million last year. Most of this year’s charge is the previously reported abandonment of unneeded warehouse space.

To date, the Company has incurred $2.5 million in costs related to the October restatement of its financial history. $1.3 million of these costs were incurred in the January quarter. The Company expects that the costs related to the restatement will exceed $5 million, but cannot estimate the specific amounts or timing. Costs of restatement include the costs of dealing with governmental investigations and lawsuits, as well as retention incentives for certain employees. At present, the SEC is continuing its investigation. The securities class action lawsuits have been combined into one, and a lead plaintiff has been named. The derivative lawsuit to recoup costs associated with the restatement is still pending. Cutter & Buck is seeking legal redress against Genesis, the company which carried and then attempted to rescind our D&O coverage.

Footnote * “Wholesale” refers to our business designing, sourcing, and selling high quality sportswear to golf and specialty retailers, to corporations, and to our international distributors and licensees.

                                Cutter & Buck
                             FINANCIAL HIGHLIGHTS
                                   Table A
               Condensed Consolidated Statements of Operations
  (unaudited, unless otherwise stated)(in thousands, except per share data)

                                  Three Months Ended     Nine Months Ended
                                      January 31,            January 31,
                                   2003        2002       2003        2002
                                            (restated)             (restated)

    Net sales                    $34,583     $33,283    $110,539   $118,312
    Cost of sales                 19,720      22,217      63,614     73,009
    Gross profit                  14,863      11,066      46,925     45,303
    Operating expenses:
      Selling, general and
       administrative             15,762      15,784      44,432     50,508
      Restructuring and asset
       impairment                   (45)       4,879       3,845      4,879
      Costs to close retail
       stores                      9,556       2,503       9,556      2,503
      Restatement expenses         1,275          --       2,529         --
      Total operating expenses
                                  26,548      23,166      60,362     57,890
    Operating loss              (11,685)    (12,100)    (13,437)   (12,587)
    Other expense                   (95)       (336)       (321)    (1,280)
    Loss before income taxes    (11,780)    (12,436)    (13,758)   (13,867)
    Income tax benefits          (2,080)     (3,934)     (2,752)    (4,532)
    Net loss                    $(9,700)    $(8,502)   $(11,006)   $(9,335)