“While the fourth quarter did not fully meet our expectations and our sales were down slightly for the year, we are pleased that our gross margins were up and, consequently, we were able to show improved gross profit dollars and a relatively flat pre-tax income before restatement costs for the year,” said Tom Wyatt, Chief Executive Officer. “We accomplished this while incurring additional costs associated with improving our products, increasing marketing, implementing a new Enterprise Resource Planning (ERP) system, and complying with Sarbanes-Oxley.”

For the quarter ended April 30, we had the following results:

                                                     2005           2004
  In millions, except percentage
   and per share data
  Net Sales                                          $34.9          $38.4
  Gross Profit                                       $16.8          $17.6
  Gross Margin                                       48.0%          45.9%
  Net Income                                          $2.8           $5.6
  Earnings Per Share                                 $0.25          $0.49


  For the year ended April 30, we had the following results:


                                                    2005           2004
  In millions, except percentage
   and per share data
  Net Sales                                         $126.6         $128.4
  Gross Profit                                       $60.6          $58.6
  Gross Margin                                       47.9%          45.6%
  Net Income                                          $8.6           $7.9
  Earnings Per Share                                 $0.75          $0.71

Net income for the quarter was $2.8 million, or $0.25 per share, on sales of $34.9 million. Sales were down in CBUK's two largest business units, corporate and golf, and up in the specialty retail and international channels.

Corporate sales in the fourth quarter were down 2% which, we believe in part, reflects a very strong fourth quarter last year. Combined, the third and fourth quarters were up 5% over last year.

Golf sales were down 17% in the fourth quarter. We remain focused on this business unit and believe we are taking the appropriate steps to turn the golf business around. According to Wyatt, “Since my arrival at the company, there has been an intensive focus on our product. We are very pleased with our spring 2006 line and believe that it will begin to have a positive impact on golf sales. This line begins shipping in November, and won't impact sales until the fourth quarter of fiscal year 2006. Based on initial feedback we are receiving on the spring line, we believe we have the right product to begin turning our golf sales around.”

Sales were up 7% for the quarter in the specialty retail channel and 5% in the international channel. For the year, sales in the specialty channel were up 4% and international sales were up 16%. “We believe both of these channels represent continued growth opportunities for the company,” said Wyatt. Sales were down in the “Other” business unit primarily as a result of a 57% reduction in liquidation sales during the quarter compared to the prior year. “The reduction in liquidation sales is due to continued strength in our inventory management, thereby decreasing our need to liquidate distressed inventory,” said Ernie Johnson, Chief Financial Officer.


Our gross margin continued to show year-over-year increases during the quarter, rising to 48.0% compared to 45.9% during the fourth quarter last year. For the year, our gross margin was 47.9%, a 230 basis point improvement over the prior year. We expect our gross margin to remain strong, yet decline slightly in fiscal year 2006. We are looking at a range of 45% to 48% as we concentrate on top line growth in fiscal year 2006.

Operating expenses for the quarter, excluding restatement and restructure related expenses, increased $1.2 million year-over-year. For the year, those expenses increased by $2.8 million over the prior year. As noted throughout the year, we were incurring additional expenses for our marketing initiatives, information system upgrades and replacements, and compliance with the Sarbanes-Oxley Act. These increased expenses are expected to continue, at reduced levels, through fiscal 2006.

“Overall, our balance sheet remains solid with cash and investments totaling $40.6 million and $82.7 million of working capital at the end of the fourth quarter,” said Johnson.

During the fiscal year, we generated $5.4 million in free cash flow (defined as cash provided by operating activities less purchases of fixed assets). Accounts receivable averaged 45 days' sales outstanding during the quarter compared to 42 days for the same period last year. Our inventory averaged 137 days of sales compared to 102 days during the prior year.

Cutter & Buck announced that its board of directors approved a $0.07 per share quarterly dividend. In addition, the board approved a special cash dividend of $15 million, equal to $1.34 per share and also increased the company's share repurchase authorization to $10 million.

The regular quarterly dividend of $0.07 a share will be payable on August 2, 2005 to shareholders of record on July 19, 2005. The payment of the special dividend is subject to shareholder approval of stock plan amendments that will allow certain adjustments to employee stock-based compensation awards to offset the impact of this dividend. If shareholders approve these amendments at the annual meeting, the special dividend will be payable on November 16, 2005 to shareholders of record on November 2, 2005.

During the fourth quarter, we repurchased 52,900 shares of our common stock at an average price of $13.60, for a total cost of $719,000. From the inception of our stock repurchase program through the end of April 2005, we repurchased a total of 271,926 shares of our common stock at an average price of $12.25. Since the end of the quarter, the company has purchased another 72,297 shares at an average price of $12.14, representing an additional cost of $878,000. So to date, we have spent $4.2 million repurchasing shares; leaving $1.8 million remaining of the initial $6.0 million share repurchase authorization. The board of directors believes that share repurchases, at attractive prices, are an accretive way to return excess capital to shareholders. Therefore, the board has approved an $8.2 million increase in the remaining stock repurchase authorization to $10.0 million, which will be available as of today for share repurchases at times and prices that management believes are advantageous for our shareholders.

“The special dividend and expanded stock repurchase plan represent $25 million of capital the company plans to return to our shareholders. This is a sign of our current sound financial condition and the board's confidence in the company's ability to generate profitable growth in the future,” said Johnson.

As we look at our current trends and the steps we are taking to generate profitable growth in the future, we believe our golf business will take longer to turnaround than we originally thought. As we look at fiscal year 2006, we project a modest increase in total sales. However, our continuing investments in marketing, product design and quality, information systems and improving the price-value relationship of our products will likely result in a moderate decrease in net income for the year.

CEO Tom Wyatt concluded, “While our challenge with the golf channel continues, I believe we are aggressively addressing the problem. This month, we are introducing our 'Signature Collection' of refined knit shirts that are a part of our spring 2006 collection that begins shipping in November. We have expanded both our CB ProTec line of performance wear and our year-round offering of golf classics. We are extremely excited about these changes and are receiving favorable comments from our customers who have previewed these new and updated products. We also believe these new products will help us achieve positive results in all our sales channels.”